Brin and Page Google Is Leaving ChinaGoogle’s talks with China over censorship have stalled and it now appears that Google will leave the Chinese market entirely.

After Friday’s announcement that China would not cave on censorship regulations for Google, which came after Google announced that they would not censor their searches, this showdown seemed imminent. With neither party prepared to cave, the Financial Times is reporting that Google “is 99.9% certain” that they will quit the Chinese market.

Looks like Baidu’s share price will end up spiking again.

Google CEO Eric Schmidt was quick to emphasize that Google would not be quitting China entirely. “It’s very important to know we are not pulling out of China,” He said. “We have a good business in China. This is about the censorship rules, not anything else.” However, there is a growing fear among other Google executives that backlash from this decision will make staying in the Chinese market entirely untenable.

The Chinese government, who hardened their stance against Google’s plans to go censorship-free yesterday, still says that Google should remain in the country. Chinese Minister of Industry and Information Technology Li Yizhong said yesterday that, “Google has taken 30 per cent of the Chinese search market. If you don’t leave, China will welcome that, if you don’t leave, it will be beneficial for the development of the internet in China.”

What Mr. Yizhong doesn’t seem to understand is that it’s essentially impossible to continue to operate a business in a hostile state. Google (and other American companies) have been attacked by organs of the Chinese state.

The attacks on Google that spurred this whole controversy were carried out with Chinese software by Chinese botherders and hackers operating out of Chinese State Schools. For China to claim that they weren’t complicit in these attacks is entirely and completely absurd. While Google doesn’t command the search market in China, a Google-free China would be a China that is worse off.

One thing’s for sure, though. The guys at Baidu are partying their butts off right now, because this news will send their share prices sky-high.