In an effort to keep its China license, Google said on Wednesday it will stop automatically redirecting China users to its uncensored Hong Kong site within the next 48 hours.
Beijing has been silent on whether a compromise system will be enough to allow Google to stay in the lucrative market -- the world's largest with nearly 400 million users, where local powerhouse Baidu Inc is the top dog.
Google said that availability of its Web search service in mainland China on Wednesday was partially blocked.
If they lose this license, the trend is moving in the wrong direction for Google, it seems likely they will have trouble with their other licenses in China as well, said T.R. Harrington, chief executive of search consulting firm Darwin Marketing.
Google unexpectedly warned in January it may quit the country over censorship concerns and after suffering a hacker attack it said came from within China.
Now, Google also faces the hurdle of needing to get a license for its popular Google Maps product in China.
China recently released new requirements for firms keen to provide online mapping services, and disclosed a preliminary list of companies allowed to get the license.
Google was not on the list, although a source familiar with the situation said the handful of approved companies was not final.
Google said it was examining the impact of the new regulations on its products.
A total of 23 domestic firms, including Baidu Inc, were given preliminary approval to have online mapping services, according to a document posted on China's State Bureau of Surveying and Mapping. (http://www.sbsm.gov.cn/article/tzgg/201006/20100600067124.shtm)
A senior government official said on Wednesday he did not know the specific details of Google's new approach, but reiterated the government's long-standing position that foreign companies operating in the country must respect local rules.
We've long said that to develop in China, you must abide by Chinese laws, Wang Chen, head of the Information Office of the State Council told reporters. Our stance is very clear in those statements.
Every China-based website needs an Internet Content Provider (ICP) license from China's Ministry of Industry and Information Technology, which must be renewed on a yearly basis. Google's ICP license ends in 2012 but comes up for renewal on Wednesday.
Without the license, Google would not be able to run a search website in China. Some users visiting Google.cn now get a Web page with the Google logo and search box, but clicking anywhere on the page brings them to the Hong Kong search site.
A special web page operated by Google which provides information about the status of the company's various services in China said that Web search in the country was partially blocked on Wednesday. According to the Google site, the last time Web search in China was partially blocked was on June 20.
A Google spokesman said that Google's Suggest feature, which automatically produces a drop-down list of potential search results as a user types a query, appeared to be blocked for users in mainland China.
Normal searches that do not use query suggestions are unaffected, the statement said.
On Wednesday, France's antitrust regulator accused Google of a lack of transparency over its keyword advertising service and ordered it to clarify conditions for the product within four months.
Analysts said the non-renewal of Google's ICP license would in China yank the company back to the years when Google had virtually no presence in the country. It would also make it tougher for Google to see its other business licenses renewed.
China's search market was worth 7.15 billion yuan ($1.05 billion) in 2009, with search leader Baidu Inc dominating at around 60 percent while Google had 30 percent.
Edward Yu, chief executive of technology research firm Analysys International, said Google China's search traffic and revenue had stabilized in the second-quarter and advertisers were returning to the company.
However, Yu said Google not getting its ICP license would be disastrous for its search business in China. It is unclear how China will respond to Google's landing page reminding users to click through to its unfiltered search site.
It is possible China could block the URL of the landing site.
It's the worst case scenario, if users can't access Google.cn and there is no reminder page for them to click through to Google Hong Kong, there will be an impact on traffic and in turn advertisers, Yu said.
(Additional reporting by Chris Buckley and Alexei Oreskovic in San Francisco; Editing by Emma Graham-Harrison, Anshuman Daga and Derek Caney)