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Google has effectively closed its flagship search site in China, finally carrying out its threat made two months ago in a dispute over censorship with the Chinese authorities.

The company announced that it had stopped censoring its search results in China and was redirecting all web users of its Google.cn service to its Google.com search site based in Hong Kong.

But the company stopped short of pulling out of China altogether, saying it wanted to keep its research and development staff and sales teams in the country. The compromise reflects the importance to Google of retaining a presence in the world’s largest market of nearly 400 million internet users.

Google has been in negotiations for two months with the Chinese government over its its threat to shut down its Chinese-language search engine and close its offices rather than bow to government censors. Google launched its Chinese-language website, Google.cn, in 2006, agreeing to comply with local laws requiring censorship.

It delivered the ultimatum on January 12 after alleged cyber attacks aimed at its source code and at the Gmail accounts of Chinese human rights activists.

The Chinese authorities have the option of blocking the Google.com site from Hong Kong altogether but Google said it hoped the government would respect Google’s move. Websites such as Facebook and Twitter are blocked by China’s “Great Firewall”.

In a blog post David Drummond, Google’s chief legal officer, said: “We want as many people in the world as possible to have access to our services, including users in mainland China, yet the Chinese government has been crystal clear throughout our discussions that self-censorship is a non-negotiable legal requirement.

“We believe this new approach of providing uncensored search in simplified Chinese from Google.com.hk is a sensible solution to the challenges we’ve faced – it’s entirely legal and will meaningfully increase access to information for people in China.”

The move puts the spotlight on the censorship activities of the Chinese government, something which the authorities are unlikely to appreciate. Google has also launched a website monitoring access to its services in China.

In recent days a series of articles in the Chinese media have attacked the search giant. China’s state-run Xinhua news agency launched a broadside against Google on Monday, saying in an angry commentary that the company had reneged on promises to abide by Chinese law.

Xinhua said Google had promised when it entered the Chinese market to filter its search engine for “harmful content”, in accordance with the law. “Now Google suddenly wants to break its promise, and if it’s not satisfied it will criticise China for a worsening of the investment environment,” Xinhua said.

What action the Chinese authorities take now will have an impact on Google’s remaining businesses in the country.

Mr Drummond said: “We intend to continue R&D work in China and also to maintain a sales presence there, though the size of the sales team will obviously be partially dependent on the ability of mainland Chinese users to access Google.com.hk.”

The company has about 700 software engineers and sales staff at three locations in China.

The Google case has spread beyond censorship and hacking and has become a diplomatic knot in Sino-US relations, already being challenged by spats over Taiwan, Tibet and the value of the Chinese currency. The US, which has backed Google’s stance, is studying whether it can legally challenge Chinese Internet restrictions.

Google executives have been at pains to ensure that no action be taken against its employees in China. Mr Drummond said: “We would like to make clear that all these decisions have been driven and implemented by our executives in the United States, and that none of our employees in China can, or should, be held responsible for them.”

The company hopes that many of its web services can survive unscathed, including its Beijing research and development centre, advertising sales offices and mobile phone and browser businesses. It also has a popular music search business and a version of its knowledge market site, Google Answers

The closure of the google.cn site is likely to have limited immediate impact on the company’s multibillion-dollar profits, analysts say. It is thought that the bulk of its estimated $300 million revenues in China in 2009 came from export-oriented companies that the company hopes would continue to advertise via the Honk Kong site.

But in the long term, Google wants to retain a toehold in the country. Google has plans to expand its Android operating system for mobile phones in China and there is huge potential among China’s billion-strong mobile users.

The biggest winner from Google’s closure of its google.cn site is expected to be Baidu, whose search engine already has a 58 per cent market share by revenue in China, says Analysys International. Google has about 36 per cent of Chinese search revenue

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