For weeks China has been chastising Google for disseminating “huge amounts of porn and lewd information.” The company has made a strong effort to accommodate Beijing’s high “moral” standard by launching a separate Chinese Web site, Google.cn, to filter out sensitive information.

Still, China’s war on the search engine has only intensified. That has led some analysts to believe that the communist government is acting on behalf of Baidu Inc. (Nasdaq ADR: BIDU), or perhaps as part of a smear campaign to drum up support for its latest attempt to tighten its grip on Internet content that is becoming harder to control.

Google’s word association feature – a drop-down box that offers suggestions based on the terms typed into the search engine – was disabled last week after a report on China Central Television (CCTV), the state television network, showed how typing the Chinese word for son could solicit terms that have lewd connotations. However, it has since been revealed that a Chinese youth, depicted in the television segment as a university student who had started an anti-Google campaign, was actually an intern at television station.

Coincidentally, the lion’s share of Baidu’s first-quarter advertising budget – about $5.6  million – went to the state-owned CCTV, according to UPI Asia Online.

Searches for foreign Web sites have also been suspended on Google, while domestic competitors like Baidu continue to offer these features – this despite the fact that there is evidence to suggest searches conducted on Baidu offer up just as many pornographic or illicit sites.

“Chinese search engines are the obvious beneficiaries of [the criticism of Google] and that suits the authorities fine,” an industry insider speaking on the condition of anonymity told TIME magazine. “They all take care of the political censorship themselves and obviously have to do exactly what the bureaucrats tell them. A foreign company like Google is that much harder to control.”

Baidu has a firm grasp – about 60% — of the Chinese Internet search market, but Google has amassed about a third of that market since 2005.

Another reason analysts believe Chinese authorities may have singled out Google is that Beijing wants to divert criticism away from the controversy surrounding its newly unveiled filtering system, Green Dam Youth Escort.

China’s Ministry of Industry and Information Technology (MIIT) last month announced that starting July 1 all computers sold in the country would have to have Green Dam preinstalled.

This not only angered a Chinese public that’s already bemoaning the presence of cyber cops, as well as computer manufactures who argue that the software is an onerous and costly expenditure – no to mention an infringement on civil liberty.

“It doesn’t seem like a coincidence that [the attack on Google] comes amid mounting criticism of Green Dam, whose ostensible purpose is to block porn,” Rebecca MacKinnon, a former Beijing bureau chief for CNNwho is writing a book about the Internet in China, told TIME. “Now they’re trying to show what a bad job Google does in protecting China’s children.”

No high-profile computer manufacturers have indicated one way or another whether they will or will not include the software, but several – including Hewlett Packard Co. (NYSE: HPQ) and Taiwan’s Acer Inc. – have said they are asking regulators for details.

With the deadline less than a week away, most companies are no doubt hoping China will cave to international pressure and rescind its mandate. And U.S trade officials, who don’t often intervene directly in matters of Chinese Internet censorship, have demanded that China do just that.

Officials lodged a formal complaint to the World Trade Organization (WTO) that the Green Dam mandate violates free trade rules and Trade Representative Ron Kirk and Commerce Secretary Gary Locke wrote a letter to the Chinese Ministry of Commerce asking that the country drop its requirement.

“China is putting companies in an untenable position by requiring them, with virtually no public notice, to pre-install software that appears to have broad-based censorship implications and network security issues,” said U.S. Commerce Secretary Gary Locke.

Source: What’s Behind China’s Assault on Google

The government earlier this week cited 19 Web sites – including Baidu, Google, Sohu, Sina, and Tianya – as purveyors of vulgar content that is morally or politically destructive.

Some results produced by search engines had “large amounts of pornographic links [and] after notification from the complaint center, the site did not take effective countermeasures,” the State Council Information Office said in a statement.

“Some Web sites have exploited loopholes in laws and regulations,” said Cai Minzhao, deputy chief of the Information Office. “They have used all kinds of ways to distribute content that is low-class, crude, and even vulgar, gravely damaging mores on the Internet.”

Cai made clear the “gravity and threat of vulgar current infesting the Internet,” and reminded Web sites that they are liable to face “stern punishment.”

While some of the companies reprimanded agree that it is their responsibility to self-censor, others were caught off guard by Beijing’s sudden crackdown.

“We find this extremely strange and are still figuring out what exactly happened,” a manager at Sohu.com Inc. (SOHU) told the Financial Times.

Cui Jin, a Google public relations officer in Beijing told Reuters that she had no comment on the citations, but added that the company abided by regulations.

“If [users] find content that is contrary to Chinese law, they can report it to Google. And if we find it’s truly illegal, we’ll deal with it according to the law,” said Cui.

If companies are confused, some analysts suggest it may be because Beijing is hiding its true motives for the sudden effort. While the government singled out “vulgar” and “crude” material not suitable for younger audiences, the real goal may be to clamp down political dissent in what has the potential to be a bumpy year.

“I’d guess that this is in response to all the sensitive dates in 2009. They want to tighten up,” Wang Junxiu, a Chinese pioneer of blogging platforms and a critic of censorship, told Reuters. “This is about more than pornography. We’ve had crackdowns on pornography since the start and they’ve never worked, so there must be more than that… It’s a warning.”

This year will mark the 20th anniversary of the infamous Tiananmen Square protest of 1989.

Unemployment, driven by the global financial crisis, is set to reach its annual growth target of 8% – a level many economists believe will contribute to social unrest.

“Unemployment among university graduates and migrant workers, caused by the global economic downturn and the shrinking of export industries will put much stress on Chinese society in 2009, even social risks,” Han Kang, vice-president of the National School of Administration in Beijing, told Xinhua.

“The 4-trillion-yuan stimulus plan, intended to boost the economy and ensure the 8% growth rate, may not create as many steady jobs as expected,” he added.

Whatever the reason, Beijing has been tightening the reigns on news organizations for infractions such as referring to Taiwan as a country, since the close of the Olympic Games.

In its bid to host the 2008 Olympic Games, Beijing liberalized its stance on Internet censorship. The government made even more concessions when journalists covering the Games openly criticized regulations they considered restrictive and overbearing. However, the Web sites of prominent Western news outlets such as the British Broadcasting Corporation (BBC) and Voice of America, which were accessible during the games, have since been re-blocked.

Beijing TRS Information Technology, China’s leading provider of search technology and text mining solutions told the Financial Times that it is working closely with the government to better “manage” public opinion.

“On high-end applications, Chinese police now basically use TRS technology,” He Zhaohui, marketing manager at TRS told the FT. “We did such systems for eight police stations in Shanghai. The work formerly done by 10 Internet police officers can now be done by one.”

Before implementing the new practices, government officials were simply typing keywords or phrases into search engines and probing the results, He said. Now with TRS’ advanced text-mining technology, authorities are able to anticipate and monitor threats rather than expunge unacceptable content after its publication.

“For example, some Internet propaganda departments supervise forums of university students – students tend to have more extreme opinions,” He said.

Still, others believe Beijing is fighting an uphill, if not futile, battle in trying to keep its citizens in the dark.

“The free flow of information in China now is huge,” said Nicholas Bequelin, Asia researcher for Human Rights Watch told Daily Tech. “Jailing journalists, closing down Web sites and blocking foreign Web sites, even arresting people like [dissident writers] Hu Jia and Liu Xiaobo, it’s illusory to think that’s going to stop Chinese society from demanding more accountability, rights and more transparency.”

Source: Internet Censorship Intensifies as China Attempts to Curb Online Vulgarity, Political Dissent

• ConocoPhillips‘ (COP) second-quarter profit climbed 13% on the back of record high oil prices. Net income rose to $5.44 billion, or $3.50 a share, for the April-June period, from $301 million, or 18 cents a share, in the year-ago quarter. Revenue increased to $71.4 billion from $47.4 billion a year ago, when the company incurred a $4.5 billion charge related to its former assets in Venezuela.

• PepsiCo Inc. (PEP) reported strong second-quarter operating results yesterday (Wednesday), with 14% net revenue and 12% operating profit growth. The company delivered earnings per share of $1.05. PepsiCo expects full-year 2008 performance of 3%-5% volume growth, low-double-digit net revenue growth and earnings per share of at least $3.72 excluding the impact of any mark- to-market gains/losses.

• Amazon.com Inc. (AMZN) says its second-quarter profit more than doubled to $158 million, or 37 cents per share, from $78 million, or 19 cents per share, last year. The company’s revenue climbed 41 percent to $4.06 billion.

• Oil prices shed nearly $4 Wednesday, tumbling below $125 a barrel for the first time since early June on growing fears that high prices and the weak economy are draining demand. Light, sweet crude for September delivery dropped $3.98 to settle at $124.44 a barrel on the New York Mercantile Exchange, crude’s lowest finish since June 4, the Associated Press reported.

• Northwest Airlines Corp. (NWA) reported a $377 million loss in the second-quarter based on a $547 million non-cash accounting charge. The airline would have posted a $170 million profit without the charge, Forbes reported. Northwest’s loss of $1.43 per share was also helped by a $250 million fuel hedge gain.

• The U.S. Federal Reserve released its Beige Book yesterday (Wednesday). The report, which comes out roughly every seven weeks and is compiled from data submitted by the Fed’s 12 regions, painted a glum picture of the U.S. economy. “Reports from the 12 Federal Reserve districts suggest that the pace of economic activity slowed somewhat since the last report,” the beige book said, The Wall Street Journal reported.

• China’s largest search engine, Baidu.com Inc. (ADR: BIDU), announced yesterday (Wednesday) that second-quarter profit increased 87% on high Internet traffic leading up to the Beijing Olympic Games. Beijing-based Baidu posted profit of $38.6 million (265 million yuan) for the three months ended June 30, compared with $20.8 million (141.9 million yuan) in the same period the year prior, Reuters reported.

• Privately held U.S. automaker Chrysler LLC announced yesterday (Wednesday) it would eliminate 1,000 office jobs in an effort to cut costs during a deep downturn in the domestic car industry. The job cuts will be achieved primarily through natural attrition, retirements and special programs, Reuters reported.

Source: Global Investing Roundups: Thursday, July 24th, 2008