Anyone even glancing at the tech news today has to be aware of what has transpired between China and Google over the past 24 hours. Briefly, Google has discovered that China-based hackers have systematically attacked Google’s infrastructure, primarily aiming at the gmail accounts of Chinese dissidents and human rights activists both in China and around the world. China has denied that the hackers were government-supported, but I find that hard to believe. Here’s a full rundown of the story so far. Right now, Google is evaluating their options, with the thought that perhaps leaving China altogether might be the best course.

This standoff between Google and the People’s Republic of China is a big, big deal. It has ramifications for Google, of course, but also much broader implications.

If Google were to pull out of China, it would be giving up enormous opportunities in a massive market that’s growing at a fast pace. Right now, Google has around 35% of the Chinese language search market, second to Baidu. China is, in a lot of ways, the perfect market for Google. It’s a unique situation in that it doesn’t have a sophisticated legacy infrastructure or an entrenched technology culture – yet it has lots of money to spend and a rapidly growing middle class that yearns to have the technology of the west. It’s a greenfield opportunity for Google services and applications like gmail, Google Docs, etc. – not to mention the advertising money arising from search.  If Google pulls out of the market, they’re potentially ceding the market to the Chinese or to other competitors.

However, if they don’t pull out, they’re headed down a slippery slope. They – and some other American companies – have already knuckled under to some of China’s demands. For Google’s part, they censor search results – although they do disclose that fact to users. If Google were to arrive at some sort of agreement and stay in China, it will, in my opinion, only embolden the government to demand more and more, like a schoolyard bully. If Google doesn’t make a stand here, China will try to gain more and more control over Google’s operations, perhaps extending beyond China’s borders. And this threat only becomes worse over time; the larger Google’s China-based business becomes, the more vulnerable it is to China’s threats. This is going to be the easiest time to make a ‘dump China’ decision; the stakes only get higher over time. A Google stand here might also help other Western companies find the guts to stand up to the Chinese and other repressive governments desiring to use technology to settle scores with their critics.

This is about much more than business, of course. It’s about governments trying to squash criticism and distort history. It’s also about the very serious consequences for the people who dare to speak their mind on the Internet. The Chinese government doesn’t treat dissidents gently. People who speak out against the government or even dare to ask the wrong questions can be ‘re-educated’ (read: tortured), imprisoned, or even disappear entirely. I would hope that Google’s management would keep this front of mind as they’re pondering their Chinese future. I’d love to be a party to the ‘negotiations’ between Google and China, Inc.  But I wonder: how much negotiating can you do with a totalitarian government that tried to raid your user accounts in order to gather information on their enemies?

If Google does stand firm, there’s a good chance that internal pressure in China will force the government to back down. China is one of the world’s largest trading partners, and companies like Google, Microsoft, and Yahoo are vital to connecting China to worldwide commerce. Over time we’ll see what’s more important to China: their political control and ability to squash criticism, or the value that a free flow of information can bring to their economic endeavors.

This is a real ‘Profiles in Courage’ moment for Google, and an acid test for their ‘Don’t Be Evil’ mantra. One of the reasons that Google rose to prominence in search in the first place was because users could trust their results. Back when they first emerged, I can remember trying it out and noticing a couple of things right away. First, it was fast. Second, their search results were accurate – not skewed to support advertisers. Sure, they had advertising, but it was off to the side and clearly labeled as such. Other search engines at the time were skewing their search returns to promote their clients first. Google’s straightforward approach earned my trust – and the trust of tens of millions of other users. But if Google were to continue to do business in China – with full knowledge that the government has sponsored hacking of their user accounts, with the direct intention of harming users who’ve had the gall to state their opinions – I think Google would lose that all-important trust.