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January 15, 2010

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China has open invite for global Net firms

CHINA'S Internet was open and welcomed international companies, a Foreign Ministry spokesperson said yesterday, two days after Google threatened to quit the country.

Ministry spokeswoman Jiang Yu told a news briefing in Beijing that China encouraged development of the Internet.

"China has tried to create a favorable environment for the Internet," she said when responding to a question on Google's possible retreat.

"China welcomes international Internet companies to conduct business within the country according to our laws. China's laws prohibit cyber crime, including hacker attacks."

David Drummond, Google's corporate development and chief legal officer, posted a statement on the company's official blog on Tuesday, indicating it may "shut down, and potentially our offices in China."

The statement said its disputes with the government and unidentified attacks targeting Google's services in China forced it to take action.

A Google pullout from China will boost its ambitious local rival Baidu Inc, which dominates the Chinese market and has international expansion plans.

'Huge positive'

Baidu has 60 percent of China's search market.

Analysts believe if Google closes China-based, Baidu might pick up many of its users and advertisers.

"It's a huge positive for Baidu," said Citigroup analyst Catherine Leung.

Baidu shares on the United States NASDAQ market jumped 13.7 percent on Wednesday to US$439.48.

Even if some Chinese users switch to Google's US site, advertisers in China might be uneasy about being associated with it after the company's statement about Web censorship, Leung said.

She said up to 80 percent of Chinese advertiser spending that now goes to might be switched to Baidu.

"If is shut down, the only real alternative is to go to Baidu," she said.

"If Baidu were able to get the majority of Google's market share ... we are looking at a player with 80 to 90 percent market share in China."

Web traffic monitoring company Alexa ranks Baidu as the world's eighth most-visited site.

The company launched its first site abroad in 2007 in Japan and analysts expect other markets to follow.


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