chian.jpgChina has granted Google permission to enter China. It’s a big deal because it might help alter China’s perceptions of Google as being “foreign,” and of its home-grown Baidu being a default “domestic” favorite. China’s resistance has been a big thorn in Google’s effort to expand there for some time, which we mentioned a while ago here. With Baidu’s plans to go public on a U.S. exchange, the “us-against-them” dynamic won’t be as clear-cut.

Two big questions now: How will Google handle Beijing’s constant censoring efforts, and how will it deal with Baidu, which Google invested in partly to gain access to the China market? Baidu, Yahoo, and Google were the leaders in search traffic last year, with 33.1%, 30.2%, and 20.4% market share, respectively, according to iResearch.

As Interfax China reports:
Market leader Baidu.com is now looking to list on the NASDAQ exchange later this year. Google, moreover, is a minority shareholder in Baidu.com, having made a USD 10 mln strategic investment in the Chinese search engine in June of 2004. Competition between these two companies, however, will not be mollified by Google’s stake in Baidu, Chen Wen, an analyst with CCID, told Interfax. CCID is a research firm under China’s Ministry of Information Industry, the country’s top telecom regulator.

“Google will be Baidu’s main competitor in China,” Chen said. “Baidu has certain advantages in the short term, because Baidu’s Chinese language search services are a lot stronger than Google’s right now. However, in the long term, Google’s Chinese language search services will definitely get stronger and so I expect that there will be some very fierce competition between the two.”

UPDATE: Though see Battelle’s latest post, which suggests the agreement may be weaker than we thought.