Google Inc said it will end the automatic redirection of users from its China portal within the next 24 to 48 hours, while Beijing kept silent on whether the move would allow Google to keep its China business.
Google said late on Monday that it would end the automatic rerouting of China users to its Hong Kong search site, which gives unfiltered search results, after Beijing told the company its China Internet operating license would not be renewed if it continued.
China has so far declined to directly comment on Google's move, which analysts say is a sign the company wants to fight for its China presence after warning in January it might quit the country over censorship concerns and after suffering a hacker attack it said came from within China.
A senior government official on Wednesday said 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 webpage with the Google logo and search box, but clicking anywhere on the page brings them to the Hong Kong search site.
Analysts said the non-renewal of Google's ICP license would yank the company back to the years when Google had virtually no presence in China. It would also make it tougher for Google to see its other business licenses renewed.
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.
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.
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.
(Reporting by Melanie Lee and Chris Buckley; Editing by Chris Lewis)