On Rio Tinto and Google: Two Choices in China

The row between Google and China can be expressed in very simple practical terms. If you type “Tiananmen Square Massacre” into a Google search engine in mainland China you are greeted by the response: “Search unavailable.” If you make the same search in Bangkok, for instance, where freedom of speech is far less restricted, you will be directed to sites describing the massacre of 1989. China’s government wants its people to hit an investigative dead end. Google has decided to circumnavigate government censorship by rerouting traffic through their Hong Kong engine.

vTwo famous international companies—one old dog, one young pup—are facing the choice foreign businesses in dealing with China.

Rio Tinto, a mining company that’s been no stranger to dealing with difficult regimes over the years, is making its peace. It has signed an agreement to develop a joint venture with Chinalco in Guinea, and is discussing more projects in Mongolia. All the while, four of its employees are on trial in Shanghai, accused of taking bribes and stealing commercial secrets.

Google, on the other hand, the idealistic Internet company for which “don’t be evil” is an often noted guiding principle, has decided to end its accommodation of China’s web censorship laws. It’s redirecting users to a site in Hong Kong that isn’t censored, the culmination of a row that started when Google said its systems were suffering cyber attacks originating in China.

There’s a knee-jerk conclusion to draw from all this: cynical old economy companies will make any compromise as long as there’s a buck to make. Heroic new economy firms are keener to put principles before profit.

Maybe. But a cool commercial logic lies behind both Rio and Google’s decisions also.

China is a crucial market for Rio Tinto, with its ever-growing appetite for iron ore. The supply and demand equation is weighted in favor of Rio and the other major miners, too, meaning it’s a profitable place to do business, however troublesome iron ore price negotiations with Chinese steelmakers may be. Having state-run Chinalco back on side, meanwhile, will help the debt-laden Rio develop its global interests.

For Google, however, China has yet to become a major profit center, even though it has gained a decent market share. China accounts for about 1% to 2% Google’s global income, it’s estimated. Nor will China miss Google: it has compliant local companies like Baidu to offer search services to its Web-users. China and Google don’t need each other in the way China and Rio do.

This news is from China electronics manufacturer.

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