Why is China so important to Google?

Shanghai: Google Inc surprised markets on Friday by saying Chinese authorities had renewed its licence to operate a website. In a bid to secure the licence, the world's largest search engine said last week it would stop automatically redirecting users of its China search site, Google.cn, to its uncensored Hong Kong site.

The saga began when Google said in January it may quit China over censorship concerns and after suffering a hacker attack it said came from within China.

Why has Google fought so hard?

Without the Internet Content Provider licence, Google's search presence in China would have reverted back to when it did not have a localised search page. China users keen to access Google search had to turn to its offshore sites, meaning longer search times - and a boost for Baidu, the top local player.

Google's current search business in China accounts for a tiny slice of its $ 24 billion in annual revenue, with analysts putting its annual China revenue at $ 300-$ 400 million. But the long-term growth prospects are key.

For one, Google is keen to provide non-search functions on the Google.cn site, such as music search and text translation.

As the world's largest Internet market with nearly 400 million users, China has huge potential. Firms that got out of it early, such as eBay and Yahoo Inc, haven't been able to regain a foothold.

What's the upside and downside to being allowed to stay?

Google's hard-fought effort to stay in China may pay off if it successfully maintains access to the world's largest Internet market by users.

With an Internet penetration rate of 25 percent, China's online sector is still in its infancy. Japan and South Korea, the two most Internet savvy Asian countries, have penetration rates between 70 to 80 percent.

China holds not only huge market potential for search, but also from other Internet sectors including social-networking, e-commerce and online gaming.

The downside of operating in such a market is the strict government controls - a source of friction between Google and Beijing that was largely responsible for the original dispute.

Allowing itself to be subjected to China's censorship rules could undermine Google's credibility after it won plaudits on the world stage earlier this year for its tough China stance.

Beyond search, what does Google have in China

Beyond search, Google still has its Android platform, an open source operating system for mobile phones.

Credit Suisse analyst Wallace Cheung expects Android to become the most popular mobile operating system in China in the long run, beating out Apple's popular iPhone.

China's two main telecom firms China Mobile and China Unicom already offer smartphones running Google's Android system.

The non-renewal of Google's ICP licence would have spelled uncertainty for Android as China could also find a way to make it hard for Google to develop and market the platform in China.

What obstacles do other Google products in China face?

Google Maps may face difficulties in the near future as China recently implemented new laws requiring firms wanting to provide online mapping services to apply for a licence.

On Wednesday, China's State Bureau for Surveying and Mapping released a preliminary list of 23 companies approved for online mapping. Baidu was on the list but Google was not.

Other popular Google products such as Blogger and YouTube are blocked in China, which defends the move on the need to ensure public security and social harmony.