Baidu stock overtakes Google's for first time on China spat

The price of stock in Chinese search engine Baidu.com surged past Google's on Monday following reports in several news sources that the U.S. giant plans to quit China's Internet search market, leaving it to Baidu.

Google is Baidu's biggest rival in China, even though Baidu holds a far larger share of the market, and analysts say Baidu stands to take most of the advertising spoils left by Google if it exits China, with some scraps going to Microsoft's Bing search engine and other small players.

Hopes for a surge in revenue sent Baidu stock up US$26.60 on the Nasdaq Stock Market to close regular trading Monday at $576.84. The closing price marked the first time the Chinese Internet company's stock price ended higher than Google's, which fell $16.36, or 2.8 percent, to end trade at $563.18. Baidu stock started trading on the Nasdaq Aug. 5, 2005, while Google's began trading on Aug. 19, 2004.

The significance of the parity in the company's stock prices is mostly symbolic: Google's market valuation, at $179.08 billion, is far higher than Baidu's $20.05 billion because Google has issued far more shares than Baidu, according to figures from Yahoo Finance.

However, the stock price movements signal that Google, whether it leaves China or not, faces serious problems in the nation with the largest Internet population in the world.

Google's problems in China started late last year when its sites suffered sophisticated hack attacks by unknown assailants, widely believed to be from China. Certain intellectual property, including e-mails belonging to Chinese human rights activists, are thought to have been accessed.

"These attacks and the surveillance they have uncovered -- combined with the attempts over the past year to further limit free speech on the web -- have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn," Google said in a blog posting in early January.

"We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China," the post said. There has been speculation since that time about which way Google will go, but recently news reports in the The Wall Street Journal, the Financial Times and elsewhere have stated that Google is very likely to exit China's search market.

Google's sponsorship last week of Le Prix du Net-Citoyen, the Netizen Prize, for Internet freedom, may have revealed its hand. "More than ever, governments around the world are threatening online free expression," Google said last Thursday on its blog. "Forty countries have taken measures to limit this freedom, up from only a handful a few years ago," the search company added.

Google has not made any formal announcements on its intentions going forward. A company representative contacted for this story declined to comment.

Baidu is China's largest Internet search engine, accounting for 76 percent of Web searches there last year, according to iResearch, a local consultancy. Google accounted for 18.9 percent of searches in China.

(Owen Fletcher in Beijing contributed to this article.)

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