Economically, China is the greatest beneficiary and the leading driver of globalisation. Politically, it is the chief champion of traditional nationalism.

Both are at play in the extraordinary saga - which has only just begun - of Google's quixotic attempt to open up Beijing's internet boundaries, to demolish the Great Firewall of China.

The company was yesterday attempting to play down what has been happening since chief legal officer David Drummond stunned the world with his announcement two days before.

He said that after a cyber attack on Google and 20 other big companies operating in the internet, finance, technology, media and chemical sectors that Google attributes to Chinese agents, "we are no longer willing to continue censoring results" on google.cn, the company's Chinese website.

Its English site, google.com, is censored by the Chinese `net police, but not with the company's collaboration.

A Google spokeswoman told The Weekend Australian yesterday: "We are continuing to operate google.cn in compliance with Chinese law.

"Over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all.

"If it is impossible to operate an uncensored service within the law, we will close google.cn. We will obviously continue to offer Chinese-language search on our global search engine."

This raises the intriguing question as to how netizens in China - where 330 million people have internet access - were able, immediately after the original Google statement was issued, to view via google.cn data and photos previously barred online, such as the iconic photo of the unknown man who stood in front of a tank near Tiananmen Square during the protests of June 4, 1989.

One interpretation is that suddenly international journalists based in China were highly motivated to start looking for information for which they had previously abandoned fruitless searches. Maybe they found what they might have seen before if only they had looked properly.

Another interpretation is that after Google made its first bold step, it began to have second thoughts when it realised it had reached the point of no return in handling the world's fastest growing internet market. So for now, it wishes to stress it is still co-operating with the Chinese net police, while insisting at the same time: "We are no longer willing to continue censoring."

All too often, this is the situation in which global investors in China are stranded - finding themselves saying one thing and meaning another, unsure how far they can go before they upset the Chinese authorities while worrying about the flak they risk copping elsewhere ln Chinese labour, health and safety issues, and the whole freedom debate.

When Google entered the Chinese market four years ago, its co-founder, Sergey Brin, whose family fled Soviet communism, said it accepted "a set of rules we weren't comfortable with".

But on reflection, as Drummond said this week, Google believed "the benefits of increased access to information for people in China and a more open internet outweighed our discomfort in agreeing to censor some results".

Netizens who are eager to obtain uncensored information can do so by paying to route their searches through proxies. But only a tiny minority have the time, the know-how and the incentive to bother to do this.

By setting up in China through the proper channels, Google provided a service for the regular internet user. When a search hit the Great Firewall, failure would be accompanied by the display of a message saying: "Search results may not comply with the relevant laws, regulations and policy, and cannot be displayed." Google's YouTube business is also regularly blocked in China.

But now Google has implied this deal has become untenable with the increase in attacks on corporate sites from China - in its case risking the ultimate credibility of its hugely successful Gmail platform, and potentially undermining its unofficial motto: "Don't be evil."

Drummond stressed that its move this week "was driven by our executives in the US, without the knowledge or involvement of our employees in China". Perhaps those employees have now persuaded the US executives to take a step back, and re-examine the implications of the challenge they have thrown to Beijing.

This could easily be portrayed as a lose-lose-lose confrontation. Google loses a market. China loses face internationally. China's netizens lose the chief competitor to the dominant locally owned search engine, Baidu.

Some critics have suggested Google is just seeking to make the best of a bad job, finding an excuse for quitting China because it has only secured 35.6 per cent of the search market there, while Baidu has 58.4 per cent. But that's still a huge number of followers, given the size of the market. And most of the China revenues for Google come not from ads on its local site but from Chinese wishing to advertise globally.

The Chinese authorities have reacted in a surprisingly low-key way, at least in public, with the State Council Information Office stating "It is still hard to say whether Google will quit China or not. Nobody knows." This seems to have encouraged Google to take a less confrontational stand.

Google's action has been compared with that of BHP-Billiton, Rio Tinto and Brazil's Vale, which - as negotiations with China, the putative price-setter, dragged on too long - have in recent years several times settled their benchmark price for iron ore with Japan instead. This prospect is looming for this year too.

But these companies are traders with China, not investors there. Google has 700 employees in China. That makes a difference. Australian companies are not in the front line of the challenges involved with dealing with China because they have invested very little there.

The arrest in Shanghai of Rio Tinto executive Stern Hu - who appears unlikely to face trial until after the Chinese New Year of the Tiger starts on February 14 - did not make such investments any more likely.

Duncan Clark, the chairman of Beijing telecommunications consultant BDA, said this week: "There has been a raft of decisions and unpredictability, a kind of unpleasantness about what's happening here. There has been this received wisdom that no one can afford not to be in China, but that is being questioned now - there's a kind of arrogance characterising government policy towards multinationals."

China feels it has no desperate need any more for inward investment - it can take it or leave it. Its new priority is to "go global" - for which it does need good international relationships.

Beijing demonstrated at the climate change conference in Copenhagen in December that it will continue to pursue national goals as its chief priority, even while it takes an increasingly important global role. .

China's leadership in the developing world has been sustained in part by its insistence on "non-interference in domestic affairs" of sovereign states. But Beijing does recognise it can do deals with this White House.

Influential commentator James Fallows of The Atlantic Monthly says: "In a strange and striking way, there is an inversion of recent Chinese and US roles. In the switch from George W. Bush to Barack Obama, the US went from a president much of the world saw as deliberately antagonising them to a president whose Nobel Prize reflected perhaps desperate gratitude at his efforts at conciliation.

"China, by contrast, seems to be entering its Bush-Cheney era. Its government is on a path at the moment that courts resistance around the world."

This epochal conflict over censorship in China has set up huge expectations about the speech that Obama's Secretary of State, Hillary Clinton, will make next Thursday when launching an internet freedom initiative.

The tide of world events has appeared to be heading Beijing's way so far this century, underlined by China's continued economic sprint through the downturn that has laid low the Western world.

Rebecca MacKinnon, an expert on the Chinese internet, says: "If history takes some unexpected turns - and that's one thing you can count on Chinese history doing - it won't always be on their side. By announcing it will no longer censor its Chinese search engine, and will reconsider its presence in China, Google has taken a bold step on to the right side of history."