China is threatening to revoke Google's business licence over the company's decision to redirect Chinese traffic to computers in Hong Kong that are not governed by the communist government's censorship practices.
The latest skirmish between Beijing and the leading internet search provider threatens to cripple the company in one of the web's biggest markets.
Google agreed to dismantle the virtual bridge to its Hong Kong site that was created in March, but it was unclear whether that will be enough to stay in business in China. The licence is required for the company to continue providing its mapping and music services in China.
Google hopes to keep its licence by turning its Chinese website into a "landing page" anchored by a link that users must click on to send visitors to the Hong Kong search service. The company has no plans to revert back to its previous practice of omitting search results that the Chinese government considers subversive or pornographic.
"This new approach is consistent with our commitment not to self-censor and, we believe, with local law," David Drummond, Google's top lawyer, wrote in a blog post.
A foreign ministry spokesman, Qin Gang, said he had not seen Google's announcement and could not comment on it. However, he added, "I would like to stress that the Chinese government encourages foreign enterprises to operate in China according to law."
The impasse could drag on for months, analysts predicted, as both Google and the Chinese government jostle in a heavyweight wrestling match unfolding on an international stage.
Google announced in January that it would no longer comply with Chinese censorship after being hit by a hacking attack traced to China. The high-profile challenge irritated Chinese leaders, even though they want foreign companies to help develop the country's technology industry.
Google met a Wednesday deadline to apply to renew its Internet license in China. It's not clear how long the Chinese government will take to review the application, but BGC Financial analyst Colin Gillis expects the company "to twist in the wind for a while."
Google's uncertain fate in China could become a distraction for management, but it is one that is probably worth the trouble, said Gartner analyst Whit Andrews - because China already has about 400 million people online, making it the world's largest Internet market, and that figure is expected to steadily grow for decades to come.