Caijing is arguably China's best business magazine. Under editor Hu Shuli, it has in the past few years earned a reputation for solid journalism and ethics that are beyond reproach (a big deal in a country where journalism scandals are depressingly regular). This month the cover story is Google's fortunes in China. Conveniently, Caijing translates some of its editorials and articles into English every month, including this two-parter on Google. The articles suggests that Google could be turning itself around here, but they also show that the company remains prickly about its status in China.

The main story, under a Chinese headline that might be translated as "Google Returns" is pretty positive on the company's fortunes in China. True, it recounts a fairly miserable past 12 months, but it also suggests that momentum is building:

After being pounded by Baidu.com's promotion efforts, including nationwide advertising that boasts the domestic search engine's understanding of the Chinese market, Google chose to concentrate on improving its search services. The goal was to meet local needs rather than rush to introduce new products to compete with Baidu.com.

"We invested 70 percent of our manpower into this sector," said Wang Jin, technology supervisor for Google China. 'We set up a user database, even including a psychologist, to collect regular feedback so as to help us understand Chinese needs."

To Lee's delight, the startup efforts recently started paying off.

The latest data from Alexa, an Internet research company, showed a marked increase in Chinese viewership in 2007 for Google.com and Google.cn. By early spring, Google.cn had clawed its way to 61st place among global search engines, up seven notches from three months earlier.

Then on April 23, Google.cn suddenly jumped to No. 33. Meanwhile, Baidu.com stood at 7th place globally, three notches below its position just three months earlier.

In the first quarter 2007, Baidu.com lost 28 percent of its viewers, despite the search engine's popular distribution of software.

So far this year, Google has launched nine products in China, including a mobile search feature. That compares with four new products from Baidu.com.

More interesting, perhaps, is the companion article based upon a news conference with Google CEO Eric Schmidt recently held in Beijing. This article paints a picture of a tetchy and impatient CEO displeased with the questions he is receiving from the Chinese media. I wasn't there, so I don't know whether that was really the case, but it's how he comes across in the article:

"Let me be very crisp," Schmidt, chairman of the Internet powerhouse, said slowly. "We are very happy with our Chinese operations."

Schmidt was venting frustration in Beijing over rumors about the company. At an April press conference and during an interview with Caijing, he denied reports that headquarters is dissatisfied with Google China's chairman Dr Lee Kai-fu, and stressed that the search engine's China operation is doing very well.

"Someone's lying," he said red-faced, while speaking with Caijing. "Someone's misleading you."

***

Schmidt grew increasingly annoyed as reporters repeatedly asked him about Google China's competition and rumors surrounding the company. At one point, he told a reporter that the entire basis for his question was untrue.

"We're not focused on our competitors," Schmidt later stressed to Caijing. "We have our competitors. We're not focused on them. We're focused on our users. We're not focused on revenue. We're focused on users. Does that make sense?"

Yes it does. For now.

One of the things that Schmidt was trying to do was to put a bullet through recent rumors that Lee's days in charge of Google.cn were numbered. This rumor has drifted about for the past few months and will probably persist until Google.cn's spotty fortunes are clearly reversed. It's hard to know how much stock to put in it. Google has been plagued by some high-profile problems here, including the recent IME scandal that reflected poorly on a man brought onboard specifically because of his R&D chops. Schmidt certainly sounds supportive of Lee, but anyone who works around corporate or political communication knows how this works. The corporation loves you until it doesn't. And then you had better look out.

On the other hand, the IME scandal has receded, Google.cn looks like it is doing better, and it's hard to see what would be gained by a change of leaders at this point except for another bout of bad publicity and instability, especially if there isn't a superstar candidate waiting to step in. Looming over the issue of Lee's tenure is also the question of how much autonomy Lee really has in a company notorious for its top-level control freakery.

Personally, I think if there is any American Internet company that can still make a lasting presence for itself in China it's Google. Despite its problems, the company learns, appears to be patient, and has some supporters here. In fact, not making the translation cut--at least not yet--was a second companion article on the impact of Google's energetic Chinese fans on the company (in Chinese). So Google may yet have a bright future in China.

Now it needs to work on not snapping at the press. That sounds like the behavior of a company too accustomed to success elsewhere.


G-Men on the cover.