Due to escalating US-China tensions
Considering withdrawal from Hong Kong market as well
[Asia Economy Reporter Kwon Jaehee] Google has ultimately decided to scrap its plan to enter the Chinese market with its cloud business, which it has been nurturing as a new growth engine. Last year, Google's cloud business revenue growth rate reached 53%, and it was widely expected to further expand by leveraging the Chinese market as a foothold. However, after initially deciding to postpone due to escalating US-China conflicts, the company eventually gave up on the plan. It is also reported that Google is considering withdrawing from the Hong Kong market.
On the 9th (local time), Bloomberg News cited an internal Google source saying, "The company has decided to abandon plans to enter the cloud business in politically sensitive regions, including China."
According to the source, the decision was made following the impact of the novel coronavirus (COVID-19) and the implementation of the Hong Kong National Security Law, which is expected to impose restrictions on corporate activities.
Google's abandonment of the Chinese cloud market is considered unusual given the market outlook and the groundwork laid so far. Bloomberg News quoted an insider saying, "This decision is regarded as a major strategic shift."
China is the world's largest internet market and ranks second in cloud computing after the US. There are about 900 million internet users in China, roughly equivalent to the entire population of Europe. Among global users of Google's operating system Android, 30% are Chinese. For this reason, when Google's search engine business entry into the Chinese market failed in 2006, it launched a bypass service through Hong Kong while maintaining advertising sales and research centers on the Chinese mainland. The strategy was to target the rapidly growing Chinese internet market while avoiding Chinese government censorship. Google sought to enter the Chinese cloud market in January last year but postponed the decision due to US-China trade conflicts.
The Hong Kong National Security Law, which came into effect on the 1st of this month, was a decisive factor in Google's decision to abandon its cloud market entry. According to Articles 9 and 10 of the Hong Kong National Security Law effective from the 1st of this month, the Hong Kong government is required to take necessary measures for national security in schools, social organizations, media, and the internet, and to strengthen guidance and supervision over these entities. Although the implementation of the Hong Kong National Security Law is not directly related to mainland China, Google considers China a politically sensitive region.
Google's move is expected to influence the China strategies of other Silicon Valley companies. US IT companies, including Google, have declared that they will not provide user data to the Hong Kong government.
Bloomberg News quoted a Google employee saying, "Google has continuously monitored demand for cloud services from mainland Chinese customers," and evaluated, "The failure of the cloud business prepared for entry into mainland China was decisively influenced by US national security policies, including the Huawei issue, and the Hong Kong National Security Law."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
