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Objectives

Course readings present an important and necessary supplement to our lectures and discussions. This assignment aims to help you develop greater understandings on course materials by seriously and intellectually engaging with these reading materials. Specifically, this assignment requires you to:

· Read and reflect on readings prior to class;

· Review and critique scholarly writings;

· Bring the required readings into dialogue with other course materials;

· Summarize and present your thoughts and opinions;

· Facilitate coherent and focused discussions.

General Guidelines

Throughout the course of our class, you will write a 2-page reaction papers to course readings picked by you. The reaction paper is about 800 words in length (2 pages, double-spaced, 1 inch margins, 12-point Times New Roman font). on the day before their assigned classes. As such, you will have different due dates for your reaction papers. Students who write the reaction papers for the next day’s lecture will also take the lead in facilitating class discussions. Each discussion leader will prepare at least two questions for other students to engage with.

Reaction Paper Guidelines:

§  Overall Thesis: Introduce the overall topic of the article.

o   Example: The article is about…; The general question is….

§  Context: Describe the specific context within which the study is based. This could be a debate or a gap in previous studies, a historical or recent event, and a topic from lecture.

o   Example: The study is based on the context of XXX; The topic is related to lecture discussions on XXX.

§  Main Arguments: Summarize the general themes, key points and arguments in the article. You should also present the evidences and examples used by the author(s) in order to explain how and why the author(s) come to the conclusions.

§  Critiques: Discuss your opinion and evaluation of the work’s strengths and/or shortcomings. These could be about the topic, the arguments and the examples.

o   Example: The article contributes to my understanding on XXX; The arguments are (not) well-presented because XXX; There are flaws/ contradictions/ constraints in the argument as XXX.

§  Conclusion: End the paper by making a final statement about the reading and your evaluation.

§  Questions for Class Discussions: At the end of your reaction papers, use a separate section to include at least two questions for the class to discuss. In order to facilitate coherent and focused discussions in class, consider the following aspects when you prepare discussion questions: What are the most important contributions of the reading? What are the most controversial issues or debates presented and/or provoked by the author(s)? how do the texts relate to previous course materials we have already discussed? How could my questions help further the intellectual developments on topics related to next day’s class?

Format: 

§  2 pages long

§  Double-spaced

§  1 inch margins

§  12-point Times New Roman font

 

Grading Rubric

 

Overall Organization

Proper introduction and conclusion

5 points

Identification of the overall thesis

5 points

Identification of the context

5 points

Explanation of Main Arguments

Summarize the key points and arguments

10 points

Present the evidences and examples used by the author(s)

10 points

Critiques

Evaluate the contribution(s) of the study

5 points

Analyze the strengths and/or shortcomings

5 points

Provide at least two questions for class discussion

5 points

Total

50 points

 

Media, Culture & Society
2016, Vol. 38(4) 591 –605

© The Author(s) 2016
Reprints and permissions:

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DOI: 10.1177/0163443716643014

mcs.sagepub.com

Geopolitics of search: Google
versus China?

ShinJoung Yeo
Loughborough University London, UK

Abstract
This article focuses on the case of Google, the newly emerged US Internet industry
and global geographical market expansion. Google’s struggles in China, where Chinese
domestic Internet firm, Baidu, controls the market, have been commonly presented
in the Western mainstream media in terms of a struggle over a strategic information
infrastructure between two nation states – newly ‘emerging’ global power China
countering the United States, the world’s current hegemon and information empire.
Is China really becoming an imperial rival to the United States? What is the nature
of this opposition over this new industry? Given that the search engine industry in
China is heavily backed by transnational capital – and in particular US capital – and is
experiencing intense inter-capitalist competition, this perceived view of inter-state rivalry
is incomplete and misleading. By looking at the tussle over the global search business,
this article seeks to illuminate the changing dynamics of the US-led transnationalizing
capitalism in the context of China’s reintegration into the global capitalist market.

Keywords
Baidu, geopolitics of information, Google, information empire, search engine

Search engine technology is so seamlessly embedded in our daily lives that it masks
immense political, economical, and social battlefields. While the most frequently propa-
gated notion of the search technology is a tool for ‘universal access to knowledge’ or
‘equal information access to all’, it has grown to become an indispensable component of
the world’s cross-border information infrastructure, circulating an array of new informa-
tion, commodities, services, and culture over an extraterritorial network – the Internet.

Corresponding author:
ShinJoung Yeo, Loughborough University London, London E20 3BS, UK.
Email: S.Yeo@lboro.ac.uk

643014MCS0010.1177/0163443716643014Media, Culture & SocietyYeo
research-article2016

Crosscurrents Special Section: Media Infrastructures and Empire

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592 Media, Culture & Society 38(4)

Today, the search engine industry sits at the fulcrum of the transnational capitalist market
system. It has woven itself not only into the information and communication sectors but
also across a wide array of other industries, including automobiles, manufacturing, home
electronics, health, education, and fashion, reorganizing them into its own profit domains.
The search engine is no longer simply an information retrieval system; rather, it is an
economic infrastructure for the expansion of transnational capitalist markets, as it has
positioned itself strategically within the complex and dynamic extraterritorial network of
the Internet. Understanding this, it is necessary to ask who shapes and controls this newly
emerged critical information and communication infrastructure?

Search, this essential infrastructure for the transnational market system, is dominated
by the US-based search engine industry – mainly Google. As this new wave of the US
information industry is expanding its business profile around the globe, the United States
seems to be continuing its position of unchallenged information empire, controlling the
major information and communication infrastructure as the country maintains and
expands its political, economical, and cultural influences abroad. However, this has reo-
pened and expanded a geopolitical flash point, revealing that the vast unequal structure
of information and communication power as the US dominance of this critical informa-
tion and communication infrastructure is being heavily challenged.

One of the most contested territories for Google is China. China is an interesting case
because, not merely has it been over the last three decades the world’s fastest-growing
economic growth zone1 and Internet market by number of subscribers, but also has rein-
tegrated itself into the US-led global capitalist market system. China constitutes a glaring
exception to Google’s global market dominance: the homegrown search engine firm,
Baidu, holds almost 80% of China’s search engine market by revenue, and combined
China’s top three search engines, Baidu, Qihoo, and Sohu, command almost 90% of the
market (Mozur and Tadena, 2013).

Google’s struggles in China have been commonly couched in the mainstream media as
a battle between Google, the newly ‘emerging’ global power China as a new rival to the
current hegemon – the United States, the bearer of liberal democracy – and Baidu, repre-
senting China’s authoritarian regime. After Google’s partial withdrawal from China due
to its dispute over the 2010 censorship and hacking incident,2 the Washington Post edito-
rialized, ‘Google has taken the admirable step of embracing open and public resistance’
(Google vs. China, 2010). The Scientific American called it the ‘first great clash of the
21st century’s two emergent superpowers – Google and China’ (Moyer, 2014).

Is China really a threat to the long-standing US global dominance? Is this the signal-
ing of a new information and communication order? What is the nature of this conflict
that is roiling this important new industry? By looking at the geopolitics of search
through the case of Google and the global expansion of Internet markets – specifically in
the context of China where Google is uncharacteristically struggling to make headway
– this article shows that the understanding of Google in China exclusively as a power
struggle between two nation states to control a new strategic information and communi-
cation infrastructure is inadequate. I will instead illustrate that the structure of political
economy that animates relations between Google, the United States, the transnational
Internet industry, and China is, in fact, suggestively ambiguous by illuminating the
changing dynamics of the US-led transnationalizing capitalism.

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Infrastructure of control

While it is invisible to millions of everyday users, Google’s search business is firmly
rooted in an extensive material infrastructure, which is a precondition of geographical
expansion and capital accumulation. Today, Google has more than 70 offices in over 40
countries around the globe, offers search in more than 130 languages,3 and makes up
almost 25% of Internet traffic in North America – bigger than Facebook, Netflix, and
Twitter combined (Worstall, 2013).

Early on, Google understood the importance of network infrastructure in order to
operate myriad products – Google search, maps, docs, voice, YouTube, and so on –
around the clock and establish its market dominance over the Internet. Since 2005,
Google has been acquiring the unused fiber optic cable called ‘dark fiber’ left dormant
by the dot-com crash of the late 1990s and early 2000s (Rowinski, 2013). Securing as
much dark fiber as possible is a strategic move because the company can use this fiber to
build its own Internet backbone to serve its digital services instead of relying on other
telecom firms. The company has, to date, built 13 mega data centers including those in
Taiwan, Singapore, Finland, Belgium, Ireland, Chile, and the Netherlands and has an
unknown number of collocation sites where it rents data center space around the world.
Google also owns a large private global backbone network including some 100,000 route
miles of fiber optic cables, bigger than its rival US telecom giant Sprint’s US continental
network of 40,000 miles (Fitzgerald and Ante, 2013). Google’s massive commercial
infrastructure, as revealed by Edward Snowden’s trove of leaked National Security
Agency (NSA) documents, also works hand-in-glove with the US global surveillance
regime, feeding untold amounts of data to NSA’s programs4 (see Guerses et al. in this
Special Issue).

To further Google’s reach and connect geographically dispersed markets, Google is
literally going underwater, participating in building several submarine cables. These
include Unity, a Trans-Pacific submarine communication cable between Japan and the
United States;5 a Southeast Asia–Japan Cable (SJC) system called ‘Faster’ which con-
nects China, Hong Kong, the Philippines, Singapore, and Brunei with Japan and then
runs to the United States;6 and a newly launched US–Brazil submarine cable project.7
With this expansive material infrastructure in hand, Google is establishing its informa-
tion and communication control and seeking to extend its territory of profit.8 However,
despite Google’s gargantuan infrastructure, technical and labor capabilities, and finan-
cial resources, it has not been able to conquer the world’s largest Internet market in terms
of number of subscribers and the world’s leading growth zone: China.

In China, 632 million people are logged on and spend an average of 25.9 hours a week
online (Roberts, 2014). According to the report by China Internet Network Information
Center (2015), as of 2014, the country had a little over 47.9% Internet penetration rate
and still has much fertile ground where digital capital can dig. By comparison, the United
States has about 279 million Internet users and has almost 87% Internet penetration.9
China’s Internet economy is larger than that of the United States in terms of percentage
of gross domestic product (GDP), with Internet-related economic activities expected to
reach 22% of the incremental GDP growth expected through 2025 – translating to
$2.28 trillion of China’s GDP (Dobbs et al., 2014). The US capital, including Google,

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594 Media, Culture & Society 38(4)

desperately wants a piece of the burgeoning Internet sector in the world’s fastest-grow-
ing economy.

In 2006, when Google first entered the meteoric Chinese market, the center of the
debate in the US mainstream media was whether Google would compromise its ‘do no
evil’ corporate principle, and whether Google’s services, even in a limited or censored
form, would help to ‘democratize’ China. Despite Google’s self-styled corporate moral
high ground, the Washington Post revealed that Google’s business interests were at the
center of the company’s motivation, considering that ‘the opportunity in China proved
too important to resist’ (Dean and Delaney, 2005).

For 5 years, before its partial withdrawal from mainland China, Google aggressively
built strategic partnerships with major Chinese firms like China Mobile, Qihoo, and Sina
and invested large amounts of capital in research and development (R&D). However,
Google struggled to gain a foothold, while Baidu was able to increase its visibility and
maintain its competitive advantage. Google’s dismal revenue generation in China is
often attributed to China’s state policy heavily favoring domestic capital and censorship
by Google itself and the mainstream media, but this offers only a partial answer. To fully
understand Google and other US Internet firms’ hindrance in China, we must look at the
wider context of China’s reintegration into the global capitalist economy.

China: Google’s exception

By the 1980s, China had begun to open its information and communication sectors to
transnational capital. But as Zhao asserts, with its entry into the World Trade Organization
(WTO), China accelerated its integration into the global market system by reorganizing
and expanding its information and communication provision. Unlike most other regions
of the world, China has succeeded in building a national information and communication
industry that is now tightly interwoven into the US-led global information-based capital-
ism (Zhao, 2003: 54).

In the process of shifting to a more state-capital-oriented economy, Chinese Party
State industrial policy has prioritized its information and communication sectors, treat-
ing them as pillar industries of strategic importance and key economic sectors to link to
global capitalism (Hong, 2011; Zhao, 2008). In the 1970s, the post-Mao Chinese
Communist party launched a national campaign centered on four areas of ‘moderniza-
tion’ – agriculture, industry, national defense, and science and technology. Former
Chinese President Jiang Zemin once stated, ‘None of the four modernizations would be
possible without informatization’ (People’s Daily, 2002). By the 1990s, China had imple-
mented extensive industrial reform policies to develop its domestic information and
communication sectors, including the building of special economic zones and state-
funded technology parks, supporting homegrown software and hardware information
technology (IT) firms, and investing in state-sponsored large-scale IT infrastructure ini-
tiatives (Hong, 2011; Hughes and Wacker, 2003; Zhao, 2007).

Liberalizing its information and communication sectors was thus central to Chinese
industrial policy reform and key to substantial investment by foreign capital over the last
2 decades. Through the terms of WTO accession, many domestic and foreign firms have
been able to pursue their mutual interests by giving foreign firms access to the highly

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Yeo 595

lucrative and growing Chinese market, and in exchange giving Chinese firms access to
foreign capital (Zhao, 2008: 153). This process is carefully orchestrated by the Chinese
Party State, which restricts and controls inflows of foreign capital penetration in its stra-
tegic industries, including information and communication as a way to nurture its domes-
tic markets (Schiller, 2011; Zhao, 2005).

Joint ventures, Joint R&D, and a complex quasi-legal structure called Variable Interest
Entities (VIEs) are common vehicles for Chinese firms to access foreign capital and
foreign capital to access the Chinese Internet market. Many leading Chinese Internet
firms use VIEs as a workaround in which foreign investment is deployed to draw foreign
capital into restricted industries without directly controlling ownership.10 Via a series of
complex contractual agreements with Chinese subsidiaries, VIEs enable the overseas-
listed company to effectively run its operations inside China.

The VIE structure is referred to as the Sina-model structure because it was first
deployed in 2000 by Chinese Internet company Sina. Major Chinese Internet compa-
nies like Baidu, Alibaba, Tencent, Tudou, Sohu.com, and JD.com have been listed on
the stock markets in the United States, Hong Kong, and Shanghai using the VIE struc-
ture (Shaw and Chow, 2011). In 2011, the law firm Cadwallader reported in the
Financial Times that 42% of Chinese companies listed on the US stock exchange were
using the VIE structure, with thousand more unlisted companies operating in the same
way (Hille, 2011).

The Chinese Party State is well aware that many of its Internet firms use VIEs to draw
in foreign capital, and that foreign capital uses VIEs to invest in the restricted Chinese
Internet industry. Yet, for a long time, the Chinese government has maintained an ambig-
uous policy stance toward them, neither declaring VIEs illegal nor attempting to clamp
down on the system and practice. On the flip side, according to a report by the US–China
Economic and Security Review Commission, the US shareholders in Chinese Internet
firms face ‘major risk’ since they do not have ownership control in the event that Chinese
courts declare those contractual agreements illegal (Rosier, 2014). One might question
why the Chinese Party State doesn’t take action against VIEs to restrict foreign capital
into Chinese strategic industries? Why do the US investors continue to invest in Chinese
Internet firms in this manner?

For the Chinese government, this ambiguous stand allows for state control at arm’s
length while effectively maneuvering between national and transnational capital and
controlling the flow of foreign capital into strategic industries. Meanwhile, the US gov-
ernment’s calling the VIE structure illegal is an attempt to nudge China to further open
the Chinese Internet market. At the same time, there is an unspoken understanding among
transnational capitalists that the Chinese state is unlikely to take any measures that will
negatively affect major Internet firms because too many firms are using VIEs, which
involves massive financial stakes across the sector (Pearson, 2012). Alibaba’s CEO Jack
Ma, in his talk at the China 2.0 conference in 2011 at the Stanford University Graduate
School of Business, assured the audience that the People’s Republic of China (PRC)
would not regulate the VIE structure given that so many Chinese Internet firms com-
monly operate as VIEs.11 Ma was correct. In early 2015, Chinese Ministry of Commerce
released a draft revising its Foreign Investment Law favoring transnational capital by
legalizing VIEs in which foreign shareholders are allowed to operate in Internet

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industries along with telecommunications and education industries (Cover, 2015). The
change from the Chinese state was intended to ensure foreign capital’s continued invest-
ment into China’s Internet sectors, signaling transnational capital that it is welcome by
the state and safe to operate in China.

Thus, the rise of Chinese Internet firms like Baidu needs to be understood within the
context tightly interwoven with the interests of both transnational and domestic capital
and domestic and transnational capital classes. However, China is unique in that despite
being fueled by transnational capital, the Chinese Party State has grown its own robust
domestic information and communication industry which is at the center of its economic
development – something that post-World War II (WWII), Western Europe has failed to
achieve – yet intentionally creates seemingly ambiguous regulatory structures that give
Chinese Internet firms access to foreign capital.

Both China and the US recognize that transnational capital is so inexorably tied into
the Chinese Internet industry that it would be hard to untangle these interests without
harming both domestic and foreign capital, including the financial interests of party-state
elites. This is not an accidental outcome. Rather, it is the direct result of Chinese state
policy as it shifts to a more market-oriented economy, ingesting transnational capital as
one of its primary tactics to integrate China into the global economy. Given the extent of
absorption of transnational capital into China’s Internet sectors, Google and other
Internet firms’ struggles in China are more akin to escalated inter-transnational capitalist
rivalries attempting to capture newly lucrative markets in economic growth zones.

Baidu rises

To understand Google in China, we thus have to make better sense of its inter-transna-
tional rivalry with Baidu. Baidu typifies the Chinese Internet industry developed and
nurtured by Chinese economic policy and the entanglements of transnational capital and
transnational class interests. Baidu was co-founded in 2000 by Robin Li and Eric Xu,
Chinese nationals educated in the United States. In 1999, the two raised $1.2 million in
seed money from Silicon Valley venture capital firms Integrity Partners and Peninsula
Capital (Barboza, 2006). With that seed money, Baidu was incorporated in the Cayman
Islands using the VIE structure. In 2005, Goldman Sachs and Piper Jaffray (PJC), along
with Credit Suisse First Boston (CS), underwrote Baidu’s Initial Public Offering (IPO),
committing the banks to purchase a certain amount of Baidu shares at an agreed-upon
price and listing it on the NASDAQ stock exchange. It was the biggest NASDAQ IPO
since the dot-com boom of 2000. At the time of its IPO, the Silicon Valley venture capital
firm Draper Fisher Jurvetson – which had also invested in Yahoo!, Skype, and others –
owned nearly a third of Baidu (Barboza, 2014). Soon after its IPO, Baidu secured another
$10 million from Draper Fisher Jurvetson and IDG Technology Venture (Barboza, 2006).
As of 2014, 84% of Baidu’s shares were held by 574 financial institutions including the
US private equity and sovereign wealth funds.

Baidu, as part of its accumulation and competitive strategy, is aggressively building
partnerships with foreign companies including Viacom, Dell, Google’s competitor Bing,
and Uber as well as with other domestic IT companies. Baidu’s domestic competitors
include Qihoo, Tencent, and Alibaba,12 which all took similar paths as they grew through

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transnational capital and transnational integration. The Chinese Internet service sector,
fueled by transnational capital, has been fiercely competitive, dynamic, and unstable as
firms have diversified their accumulation strategies and attempted to move into each
other’s territories. China’s Internet giants Baidu, Alibaba, and Tencent are flexing their
muscles to maintain dominance in their own domains as well as exerting power to hori-
zontally diversify to extend into the entire Internet space. Yet, similar to the US Internet
firms, their dominant positions are far from unwavering, facing intense domestic compe-
tition as Chinese Internet firms actively search for inroads into overseas markets.

Baidu’s CEO Robin Li stated that international expansion is an ‘important way’ for
the company to spur future growth, as the company searches for profit territories outside
China. Baidu is accelerating its global expansion with strategic alliances, with a goal of
having its services used by half of the world’s population by 2019 (Parra-Bernal, 2014).

Baidu demonstrated its transnational ambitions in 2007 when the company first
launched its Japanese services, partnering with Japanese e-commerce giant Rakuten.
However, its first foray into global expansion has not gone smoothly. In Japan, Yahoo!
dominates the market with over 50% market share – although Yahoo! search in Japan is
powered by the Google search algorithm, and Google also holds over 36% of the Japanese
market (Schaulzer, 2012). As a newcomer, Baidu was not able to make a dent in the
Japanese search market against these incumbents. Soon after, Baidu regrouped its global
strategies and launched services in Vietnam, Thailand, Egypt, Brazil, and Indonesia to
test those markets. These countries may seem randomly chosen, but they are in fact stra-
tegic as emerging markets and non-English territories not yet fully occupied by Google
and other US firms.

Brazil, one of the most densely populated countries in the world, has led the way for
Baidu’s transnationalization efforts. Brazil has the largest Internet population in South
America, is fifth in the world with over 107 million Internet users as of 2014, and with a
lot of potential growth – only 53% of its population has access to the Internet13 – and the
US companies have a relatively low presence there. Baidu’s strategy in Brazil is not to
attract Google users but new Internet users to Baidu. To tackle this potential growth
market, Baidu and the world’s second largest consumer electronics vendor Lenovo have
banded together and released the Baidu cloud-powered smartphone. In July 2014, Baidu
search went live in Brazil as the Brazilian and Chinese governments made a series of
agreements including the creation of a ‘digital city’ in the state of Tocantins funded by
the Chinese Development Bank (Mari, 2014). Baidu also recently obtained a controlling
stake in Brazilian online-discount company Peixe Urbano to further its push into Brazil
as it anticipates that the country’s e-commerce market will be growing 18% annually by
2016 (Parra-Bernal, 2014).

The Middle East is another region with a burgeoning number of Internet users that is
currently under-exploited by capital. In particular, Egypt is considered a strategic market
by Internet firms because it is the most populous country in the Middle East and the third
most populous in Africa. Kaiser Kuo, Baidu’s director of international communications,
told the press that Baidu was not only interested in standard Fusha Arabic script because
it is commonly used from the Maghreb to Mashriq, but also that Egypt is considered a
culturally dominant country in the Middle East, with a large amount of cultural produc-
tion and a large number of trained engineers (Mahajan-Bansal, 2013).

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What makes these countries attractive markets for Baidu is that the Internet penetra-
tion in these countries is still relatively low, so growth is potentially significant. Thus,
Baidu is targeting populations and markets that are not yet fully saturated by the US-based
capital. So far, compared to its market power in China, Baidu’s overseas operations are
relatively small and limited, leading it to seek strategic partnerships to leverage its mar-
ket power. As a start, Baidu is forging a relationship with a French multinational tele-
communications company – Orange S.A., formerly France Telecom S.A. – to provide a
mobile browser for its Android customers in Africa and the Middle East (Thomas, 2013).
Recently, the company struck a deal with Microsoft where Bing search engine and
Microsoft-owned Nokia will serve Baidu maps to a large number of Chinese tourists
abroad14 for Baidu outside China.

Meanwhile, Baidu’s US counterparts are not sitting idly by in these markets. Google
increased its workforce by 50% in Brazil in 2011 as the Brazilian government sought to
heavily invest in Internet sectors as a strategy to accelerate and improve the country’s
social and economic conditions (Pearson, 2011). The company also turned up its profile
in the Middle East and North Africa (MENA). In Egypt, during the Arab Spring – the
popular struggle that overthrew the US-backed authoritarian regime of Hosni Mubarak
and fought for democratic self-determination – Google exploited the story of its market-
ing executive Wael Ghonim to propagate its own foreign policy of digital capitalism.
Ghonim had created the Facebook page ‘We Are All Khaled Said’, the Egyptian man
killed by police and was himself later arrested and imprisoned for 12 days (Zetter, 2011).
Google and other US Internet firms, backed by liberal western media, portrayed Ghonim
as the face of ‘revolution 2.0’ (Vargas, 2012) and equating the Arab Spring with the
‘Internet/Facebook revolution’, thereby discounting and undermining a decade of work of
Egyptians for their own political and social struggle for justice and crassly promoting their
own business agenda. Google’s CEO Eric Schmidt described Ghonim as a hero. Ghonim
later worked for Google Ventures before leaving the company to join a start-up.

Shortly after the Arab Spring, Google’s calculative business strategy behind the story
of Ghonim was made obvious, as Google commissioned the Boston Consulting Group to
conduct market research probing for market opportunities (Schroeder, 2013). Google
states in its report that ‘One opportunity Google has embraced is investing in enhancing
the quality and quantity of Arabic content on the Internet. The Arabization of the Internet
represents a crucial component of Google’s strategy in the Middle East and North African
region’.15 In that region, Google is enticing elites like Ghonim with start-up funding and
programs like ‘Student Ambassadors’ who work as liaisons between Google and their
own campuses.16 While Google presents this as ‘empowering’ students and providing a
‘career opportunity’ it is clearly a business strategy meant to extend its market reach by
targeting young elites across the MENA region, which is now turning into a battle field
for digital capital. As Google gears up to further open the market and search for new
profit across the MENA region, does this mean that the company is giving up on China?

Google exits China?
We never left China, and we continue to believe in the market. It’s a very vibrant Internet
market. We have some of the best employees at Google and we continue to grow not only our
revenue but also our headcount in the country.17

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Despite Google’s public claim of moral superiority in its ‘withdrawal’ from China and
its ongoing criticism of Chinese censorship, it has never given up on its efforts to gain
market share in the world’s largest Internet market. In fact, the company quietly
turned off its much-publicized anti-censorship service in China after only 6 months
(Clark, 2013).

Google was praised for its ‘idealistic’ act of ‘leaving’ China in protest over Chinese
government censorship, presenting itself as the corporate moral vanguard. However,
Google has kept its R&D operations, Google offices, and ads businesses in Beijing and
Shanghai; in addition, it has never ceased its other business ventures in China. Daniel
Alegre, Google’s top executive in Asia, alluded to Google’s affirmed new strategy in
2012 saying, ‘Google is aiming to capitalize on its fast-growing Android operating sys-
tem for mobile devices, online-advertising and product-search services to grow in China’
(Efrati and Chao, 2012). Google’s Android operating system (OS) runs on approximately
84% of Chinese smartphones, while Apple’s iOS has 12.8% of the market (Winkler,
2014). By providing Android OS on many different mobile phones, Google intends to
control the smartphone market by driving mobile traffic to Google services.

Given that the majority of cellphones run on Android OS, Google theoretically has a
competitive advantage in mobile in-app display advertising in China. Google’s AdMob’s
mobile display ads are embedded in more than 300,000 mobile applications (Patel,
2011), and there are more than 10,000 registered Android app developers in China (Lee,
2012). App developers and corporations such as BMW and General Motors are also
seeking to leverage Google’s AdMob service, which reaches smartphone users using
iPhones and iPads as well as Android devices (Lee, 2012). Most recently, Google has
been working to open a local version of the Google Play mobile app store to tap into the
Chinese mobile market (Minter, 2014).

These inroads, however, do not mean that the company is succeeding in gaining mar-
ket share. Not only has Google’s general search market share in China been shrinking,
Google shut down its shopping and music services as it was not able to compete with
either Alibaba’s retail search service eTao or Baidu music. While Google has boasted
that the company has more than 900 million devices running Android OS, tens of mil-
lions of those Chinese smartphones use only the Android Open Source Platform, which
does not connect to Google services (Rushe and Arthur, 2013). The major Chinese
Internet firms like Baidu, Alibaba, and Tencent have all created forked (modified) ver-
sions of Android OS, replacing Google services with their own. With this in mind,
whether Google can carve out market share in China remains open.

This uncertainty possibly helped to motivate Eric Schmidt to visit China in 2013,
when he made a public appearance as a mystery speaker at ‘Geek Park’ – the Chinese
version of TED talks – to target product managers, developers, and investors. At the
gathering of 3000 ‘geeks’, he spoke about Google’s Android OS and attempted to per-
suade local developers to write applications for the platform, enticing them by talking
about ways to monetize apps. Schmidt told the crowd, ‘don’t just settle for the China
market. Go after the world market’ (Castillo, 2013). He sounded more like a cheerleader
than a moralist.

Though the censorship issue has taken center stage in the media, Google CEO Eric
Schmidt has demonstrated that he knows the dynamics of the Chinese Internet market.
Before launching Google services in China, Schmidt expressed in a confidential

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600 Media, Culture & Society 38(4)

presentation that his top concern was local competition (Dean and Delaney, 2005).
Unlike most other regions of the world, and even allowing for very extensive financial
involvement by the US and other foreign Internet firms, US search companies face real
intensifying competition from units of Internet capital based in China, as the Chinese
state’s policies enable and provide maneuverability for domestic digital capital to com-
pete. This has long been a vexing issue for the US government and the US capital as they
have had limited access to China’s booming information and communication industry.
And Google and the US government’s moralist provocation of China’s censorship and
‘Internet freedom’ as a human rights issue is a way to pressure China to further open the
Internet market for the US capital rather than to challenge China’s repressive information
control to contain anti-capitalist political struggles against the Party State’s expansion of
market-oriented economic development.

Google versus China?

Do US Internet firms’ struggles in China, exemplified by Google, mean that China is a
new challenger to the long-standing US global dominance? Or will Google democratize
China by offering an ‘uncensored’ search engine, as western media claims? Behind this
nation-centric rhetoric, Wu rightfully posits that there is a ‘transitional discursive alli-
ance’ that exists within and outside China. This alliance consists of the US government,
transnational capital, human rights activists, China’s liberal media professionals, public
intellectuals, and neoliberal-oriented state officials, who are all allied to promote self-
interested capitalist liberal democracy (Wu, 2014: 446).

As illustrated above, the rhetoric of inter-state rivalry between the United States ver-
sus China is undercut by the extent to which transnational capital has invested in China’s
Internet sector and conceals the interwoven political economic interests between the two
which requires some kind of coordination in sustaining, shaping, and expanding global
capitalism. Thus, the contention between China and the United States is neither about the
US’ efforts to mobilize the democratic movement to counter China via ‘new’ Internet
technologies nor about China’s attempts to challenge the US-led capitalism. The con-
flicts between Google, China, and the United States are not over whether capitalist devel-
opment should structure and guide the information sector – or any other sector – but are
about the terms on which this development will proceed. Which companies, which units
of capital, and which states will dominate and appropriate the greatest share of the profits
that result?

The battles will continue between US- and China-based transnational capital over
which will occupy a better position in order to control this new site of profit. Yet, the
elites in both the United States and China have a mutual understanding that transnational
cooperation is vital to sustain global capitalism. Their economic interests are tightly
enmeshed within the transnationalized global economy, in which information and com-
munication play a pivotal role. In fact, this is far from a hidden political economic
agenda.

At the 2014 Asia-Pacific Economic Cooperation (APEC) summit in Beijing, President
Obama called for greater economic cooperation between the two countries to further
both of their interests:

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In fact, over recent decades the United States has worked to help integrate China into the global
economy – not only because it’s in China’s best interest, but because it’s in America’s best
interests, and the world’s best interests. We want China to do well. We compete for business,
but we also seek to cooperate on a broad range of shared challenges and shared opportunities
… Steady, sustainable growth requires promoting policies and practices that keep the Internet
open and accessible.18

While this rhetoric of cooperation appears normatively benevolent, we should be
careful to address what the ends of this cooperation are and ask the question: the Internet
for whom and for what purpose? As Schiller (2011) points out, the construction of infra-
structure of extraterritorial information networks is pivotal in the expansion of capital
and capitalist economies, yet its processes are complex and conflicted given that they are
involved with various stakeholders’ interests (p. 90). Google, the US-based Internet
empire, and other US capital occupies and controls the strategic high ground of the infra-
structure. At the same time, the resistance against them from China, which has effec-
tively inserted itself into the global capitalist market, as well as from rival units of capital
is intensifying. Yet, to maintain and expand global capitalist economies, these two capi-
talist states have to negotiate in terms of whether to privilege transnational – as opposed
to domestic capital – and which companies will be put in a better position to profit. The
case of Google and China, notwithstanding the liberal rhetoric and coverage about ‘free-
dom’, offers a window into the volatility of the US-dominant information and communi-
cation illustrating the changing dynamics of global capitalism. However, this does not
mean that the United States is ceding its leading position; rather, it is retooling and read-
justing to accommodate China into the US-led transnationalizing capitalism.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this
article.

Notes

1. Recently, China has been suffering a sharp economic slowdown with its stock market turmoil
and housing market bubble that seems to be in decline, so that it is questionable whether the
country will continue to sustain its 10% average annual growth rate which it has maintained
since 1989.

2. In 2010, Google claimed that its computer systems, along with those of 23 other compa-
nies, were hacked and that the attack originated in China. Soon after this incident, Google
announced that the company was ‘leaving’ China.

3. See Google’s description of the company’s global reach at https://www.google.com/about/
company/philosophy/

4. Edward Snowden, a subcontractor at the NSA, leaked classified NSA documents reveal-
ing that NSA was operating a massive global surveillance program called PRISM. Google
and other Internet firms denied having links to the PRISM program; however, it was later
shown that NSA had direct access to central servers of the US Internet companies. See http://
www.washingtonpost.com/investigations/us-intelligence-mining-data-from-nine-us-internet-
companies-in-broad-secret-program/2013/06/06/3a0c0da8-cebf-11e2-8845-d970ccb04497_
story_1.html

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https://www.google.com/about/company/philosophy/

https://www.google.com/about/company/philosophy/

http://www.washingtonpost.com/investigations/us-intelligence-mining-data-from-nine-us-internet-companies-in-broad-secret-program/2013/06/06/3a0c0da8-cebf-11e2-8845-d970ccb04497_story_1.html

http://www.washingtonpost.com/investigations/us-intelligence-mining-data-from-nine-us-internet-companies-in-broad-secret-program/2013/06/06/3a0c0da8-cebf-11e2-8845-d970ccb04497_story_1.html

http://www.washingtonpost.com/investigations/us-intelligence-mining-data-from-nine-us-internet-companies-in-broad-secret-program/2013/06/06/3a0c0da8-cebf-11e2-8845-d970ccb04497_story_1.html

http://www.washingtonpost.com/investigations/us-intelligence-mining-data-from-nine-us-internet-companies-in-broad-secret-program/2013/06/06/3a0c0da8-cebf-11e2-8845-d970ccb04497_story_1.html

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602 Media, Culture & Society 38(4)

5. This submarine cable was built by a consortium consisting of multinational telecom firms
including India’s telecom service firm Bharti Airtel, Malaysian telecom company Global
Transit, US search firm Google, Japanese telecom firm KDDI Corp., Hong Kong-based tel-
ecom firm Pacnet, and Singapore telecom firm SingTel.

6. Besides Google, the participants of FASTER include China Mobile International, China
Telecom Global, Global Transit, KDDI, and SingTel. See https://www.telegeography.com/
products/commsupdate/articles/2008/08/26/googles-subsea-ambitions-expand/

7. Google is partnering with Brazilian Internet service provider (ISP) Algar Telecom, Uruguayan
telcom Antel, and the Angola Cables consortium of Angolan ISPs. This was announced
shortly after Brazil declared that it would build a separate cable to avoid NSA surveillance.
See the map at https://www.telegeography.com/products/commsupdate/articles/2014/10/13/
google-building-us-brazil-submarine-cable-with-three-partners/

8. The term ‘territory of profit’ is borrowed from Gary Field’s work titled Territories of
Profit: Communications, Capitalist Development, and the Innovation of G.F. Swift and Dell
Computer. Stanford, CA: Stanford University Press, 2004.

9. See detailed statistics on Internet penetration rate by country at http://data.worldbank.org/
indicator/IT.NET.USER.P2

10. The VIE structure creates two entities: one offshore and the other in China. An offshore entity
is established in the Cayman or other British Islands so that foreign investors are able to inject
capital into that entity; in turn they can acquire ownership in offshore assets. The first entity
then sets up a wholly foreign-owned enterprise (WFOE) in China as a direct subsidiary. This
subsidiary in China sets up one or more domestically licensed companies as its operating
companies, and these domestically licensed companies are called VIEs. The Chinese subsidi-
ary sits between the offshore firms and the VIEs.

11. Stanford Program on Regions of Innovation and Entrepreneurship hosted a conference in
2011 titled China 2.0: Transforming Media and Commerce where Jack Ma and other major
Chinese Internet figures spoke at Stanford University. See detailed conference informa-
tion at http://fsi.stanford.edu/sites/default/files/evnts/media//China_2point0_Agenda_
Sept_28

12. Totally, 60% of Qihoo’s shares are held by Institutional and mutual funds; Alibaba’s top
five shareholders are Japan-based information technology firm Softbank (32.4%), US-based
Internet firm Yahoo! (16.3%), executive chairman Jack Ma (7.8%), executive vice presi-
dent Joseph C. Tsai (3.2), and US-based equity firm Silver Lake Affiliated Entities (2.2%);
Tencent’s biggest single shareholder is South Africa’s largest media company Naspers with
over 33.6%.

13. See detailed statistics on Internet use in Brazil at http://www.statista.com/topics/2045/
internet-usage-in-brazil/

14. China’s outbound travel data available from UNWTO Tourism Highlights, 2014 Edition at
http://mkt.unwto.org/publication/unwto-tourism-highlights-2014-edition

15. See Google commissioned report on Egypt at http://googlepolicyeurope.blogspot.kr/2012/12/
boosting-egyptian-economy.html

16. See detailed description of Google’s Student Ambassador Program at http://www.google.
com/edu/programs/student-ambassador-program/

17. In 2012, Daniel Alegre, president of the company’s Asia-Pacific operations denied that
Google had left the Chinese market. See his Bloomberg interview at http://www.bloomberg.
com/news/articles/2012-01-24/google-china-business-grows-continues-to-thrive-alegre-says

18. See President Obama’s full remarks to APEC CEO Summit at http://www.whitehouse.gov/
the-press-office/2014/11/10/remarks-president-obama-apec-ceo-summit.

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https://www.telegeography.com/products/commsupdate/articles/2008/08/26/googles-subsea-ambitions-expand/

https://www.telegeography.com/products/commsupdate/articles/2014/10/13/google-building-us-brazil-submarine-cable-with-three-partners/

https://www.telegeography.com/products/commsupdate/articles/2014/10/13/google-building-us-brazil-submarine-cable-with-three-partners/

http://data.worldbank.org/indicator/IT.NET.USER.P2

http://data.worldbank.org/indicator/IT.NET.USER.P2

http://fsi.stanford.edu/sites/default/files/evnts/media//China_2point0_Agenda_Sept_28

http://fsi.stanford.edu/sites/default/files/evnts/media//China_2point0_Agenda_Sept_28

http://www.statista.com/topics/2045/internet-usage-in-brazil/

http://www.statista.com/topics/2045/internet-usage-in-brazil/

http://mkt.unwto.org/publication/unwto-tourism-highlights-2014-edition

http://googlepolicyeurope.blogspot.kr/2012/12/boosting-egyptian-economy.html

http://googlepolicyeurope.blogspot.kr/2012/12/boosting-egyptian-economy.html

http://www.google.com/edu/programs/student-ambassador-program/

http://www.google.com/edu/programs/student-ambassador-program/

http://www.bloomberg.com/news/articles/2012-01-24/google-china-business-grows-continues-to-thrive-alegre-says

http://www.bloomberg.com/news/articles/2012-01-24/google-china-business-grows-continues-to-thrive-alegre-says

http://www.whitehouse.gov/the-press-office/2014/11/10/remarks-president-obama-apec-ceo-summit

http://www.whitehouse.gov/the-press-office/2014/11/10/remarks-president-obama-apec-ceo-summit

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Yeo 603

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