Since there is quite an overlap between the post I wrote earlier today for China/Divide and the subject matter I usually cover in this blog, I thought a little cross-posting was in order today. For anyone who reads both blogs — sorry about the repetition.

First, though, a quick prefatory remark. During the Google “incident,” a lot of commentary assumed that the search company’s game of chicken with Beijing was some sort of watershed event, that perhaps the Net would never be the same here. Well, we know how that worked out.

Other commentators, including the one I responded to in today’s C/D post, suggested that Google’s pullout would have an effect on the foreign investment environment in China.

Looking back at the usual foreign investment topics that I’ve written about over the past six months or so, one thing seems clear: the U.S.-China relationship is complicated, interrelated, fast-paced and subject to a large number of outside pressures. It seems quite far-fetched that one company’s decision to pull out of the country because of existing legal requirements would have a profound impact on such a complicated bilateral relationship.

I think that sets the proper mood. Here are the first few paragraphs of today’s C/D post. If it piques your interest, a link to the entire article is below.

I try to stay away from Google, and they keep pulling me right back in:

In a recent roundtable discussion hosted by Wallace Forbes, [Vahan] Janjigian [Forbes chief investment strategist] said, “I think we’re on the brink of a very serious trade war and that this Google exit from China is only the beginning of what we may see. There’s no question China’s going to retaliate for Google. And the way the Chinese view it is that, you know, Google is not some private company that’s making it’s own decisions. As far as they’re concerned, you know, this is a U.S. decision and they’re going to have to find some way to retaliate. Whether it’s a big way or a little way remains to be seen.” (Forbes)

Trade war? Maybe. More likely because of Google? Very doubtful.

When we were in the middle of the Google media frenzy, a lot of crazy talk was thrown around. Some of the speculation was that Google was the proverbial ’shot heard ’round the world’ that would spark a trade war with China, or alternatively, a global dawn of a new day in Internet liberalization.

I don’t buy in to the hype that the Google pullout was all that significant to China’s trade and investment policies. It seems that in order to bolster the argument that Beijing is lying in wait to retaliate, you have to make several assertions (or at least something similar) that are very difficult to support.

1. Beijing sees the Google decision as a U.S. decision. I took this statement directly from the above quote. I can see how this might appeal to a nationalist world view, but it does not accurately reflect reality. What evidence is there that China saw the Google move as somehow connected with the U.S. government?

If anything, the Google decision was a distraction for the Obama Administration’s China efforts; it caused an uproar in Congress and forced the administration’s China group to spend time and energy dealing with the Google issue instead of other pressing bilateral matters.

(Link to Full Article on China/Divide)