I don’t like the idea of this happening in our own country (with a few exceptions most would agree with). But China is not our own country and if you want to do business there you need to follow local laws. Americans like to think their laws follow them wherever they travel but (unfortunately) that’s not the case. Americans also expect their tastes (food, language, cold beverages, seat belts in taxis) to follow them everywhere (particularly in Paris during the summer) but that’s another post.
It is in the best interest of America to allow Google (and Yahoo) to gain a strong foothold in China and other countries. As I talked about in “I am spying on you” having the ability to monitor and understand search results is a powerful strategic weapon – in essence a 21st century wiretap. If Google takes a leadership position for search in China, it will give our national organizations an effective overseas intelligence capability. Not to mention enhance the economic performance of our economy- But everyone already knew that. Realpolitik dictates that the downside of engaging in un-American business behavior is exceeded by the strategic and economic asset we will gain from penetrating their information infrastructure.
That might explain why the EU has recently kicked off an effort to build a search engine run exclusively from within the EU. They want some way to search without a US national company seeing the request.
Update [2 February 06]: Just coined a new word. Searchtaps. Def: To engage in concealed observation of search queries.