Google Inc. said it won a renewal of its Internet license in China, defusing a six-month standoff with the government over censorship that led the company to redirect users through Hong Kong.

"We look forward to continuing to provide Web search and local products to our users in China," the company said in its blog today.

Google risked getting expelled from the world's largest Internet market after the government objected to the practice that was adopted in March. The operator of the world's most-used search engine earlier said in January it was no longer willing to comply with Chinese government regulations for Web sites to self-censor content.

"This is a reasonable move by the government," said Jake Li, an Internet analyst at Guotai Junan Securities in Shenzhen. "Google has brought itself into compliance with regulations, so there's no good reason to deny them the license.

Google Chief Executive Officer Eric Schmidt said yesterday he expected China to renew the company's revised application to deliver Web services in the country.

Google defied the government in March by ending self- censorship of the Chinese search engine and redirecting users to an unfiltered Hong Kong site that shows search results deemed unacceptable to Chinese censors. The dispute has cost the company partnerships with China Unicom (Hong Kong) Ltd. and Tom Online Inc., and lifted sales at local rival Baidu Inc.

Leaving China

"Google doesn't really want to leave China, because it's a very big market and there is a lot of potential for them," Bruno Lippens, a fund manager at Pictet Asset Management SA in Geneva, said before the renewal. "It goes much broader than just business issues. It's about cultural differences and fundamental beliefs like freedom of speech and privacy."

Google last week resubmitted a license renewal application on the grounds that the Mountain View, California-based company would now point users to an unfiltered Hong Kong site instead of redirecting them automatically.

More for you News Beijing not likely to back down over Google censorship

Google in January said it would stop censoring content and threatened to exit the Chinese market after cyber attacks originating from the nation targeted its systems. The "highly sophisticated" attacks were aimed at obtaining proprietary information and personal data belonging to human-rights activists who use the company's Gmail e-mail service, it said.

Cyber Attacks

Adobe Systems Inc., Juniper Networks Inc. and Rackspace Hosting Inc. said after Google's announcement they were also targeted by cyber attacks. The attacks may have targeted more than 100 companies, according to security research firm ISEC Partners Inc.

Google said last week it added a link to its unfiltered Hong Kong site on the google.cn homepage, instead of directing users automatically, and submitted a revised license application to the government based on the practice. That allows the company to "stay true" to a commitment not to self-censor search results in China while adhering to local law, Chief Legal Officer David Drummond said at the time.

Since it began redirecting Chinese users to the unfiltered Hong Kong site in March, Google's search results have been screened by China's so-called "Great Firewall," the monitoring system operated by government censors to block overseas services such as Facebook Inc. and Google's YouTube.

'Great Firewall'

The "Great Firewall" limits Chinese Web users' access to information on topics ranging from Tibet's independence to the 1989 crackdown on democracy protesters in Tiananmen Square.

Google's market share in China fell to 30.9 percent in the first quarter from 35.6 percent three months prior, according to data from research firm Analysys International. Baidu's share increased to a record 64 percent from 58.4 percent, according to Analysys.

Bank of America Corp.'s Merrill Lynch estimated in April Google would generate $160 million in sales this year from China. That's less than 1 percent of the company's projected total revenue this year, according to the average of 29 analyst estimates compiled by Bloomberg. It earned sales of about $335 million from China in 2009, according to Analysys.

China had 384 million Internet users at the end of 2009, the government estimates. That's more than the total U.S. population. The number may grow to 840 million by 2013, according to EMarketer Inc. in New York.

Baidu, operator of China's biggest search engine, in April said it benefited from Google's "semi-exit." The Chinese company expects "healthy" growth in customers and average spending by clients will continue, Baidu Chief Executive Officer Robin Li said in a conference call on April 29.

Google Advertisers

Google's advertisers in China may have cut their spending by as much as 30 percent on average, and shifted their business mostly to Baidu, Credit Suisse Group AG analyst Wallace Cheung wrote in an April 27 report. This has allowed Baidu to charge higher prices, according to Cheung.

The Chinese government on June 8 announced topics it censors on the Internet, including material that may damage "state honor and interests" or "subverts state power."

No organization can "produce, duplicate, announce or disseminate information" on topics that may be "against the cardinal principles set forth in the constitution," China's State Council Information Office said in a 31-page policy paper on the Internet.

Information which may incite ethnic hatred, jeopardize state religious policy or spread "superstitious ideas" is also subject to the restrictions.

Google's Drummond last month called on the U.S. and European Union governments to press China on Internet restrictions as they represent barriers to trade.

Secretary of State Hillary Clinton in March said Google's decision about whether to pull out of China "is really between Google and China." In January, she called on U.S. technology companies to resist censorship of the Internet and said perpetrators of cyber attacks such as those on Google must face consequences. She also said China's Internet controls could harm the nation's development.

Bloomberg News