BEIJING – China issued a blistering public attack against Google on Wednesday and appeared to quietly begin getting businesses to abandon the U.S. Internet giant after it moved its controversial Chinese search engine offshore.
The critical remarks in a high-profile Communist Party newspaper coupled with souring business deals underscored Beijing's determination to settle scores with Google Inc. after a public two-month dispute over stringent Chinese censorship policies. By challenging the often tetchy government, Google appears to have violated an unspoken rule of doing business in China, especially in the Internet industry whose control Beijing sees as crucial to maintaining its authoritarian rule.
"Everybody in the Internet space operates under the good graces of the government, and if the government's not happy with your partner, you probably are going to have to change," said T.R. Harrington, founder and CEO of Shanghai-based Darwin Marketing, which specializes in advertising for China's search engine market.
Signs quickly appeared that some ties forged over Google's nearly four years operating in China were unraveling.
Industry executives said that Google's revenues were diving as companies shied away from placing new ads with the search engine. Deals with China's top two mobile companies were also in doubt.
In Hong Kong, executives with China Unicom Ltd., the listed unit of one of China's biggest mobile phone companies, hinted that it would shelve plans to offer two cell phones running Google's Android program.
Asked by reporters if the deal to cooperate with Google to sell the phones made by Motorola and Samsung was still moving forward, China Unicom chairman Chang Xiaobing said the company was "open to cooperation with all the vendors but at the same time we need to abide by the laws and regulations in China."
Publicly, Google's Tokyo-based spokeswoman Jessica Powell said it was continuing to work with Chinese business partners, even providing some of them with censored search services to abide by existing contracts.
But the souring atmosphere came only a day after Google announced that it closed its China-based search engine and began redirecting queries to its
Mainland users rerouted to the Hong Kong site still come up against Chinese government Web filters — collectively known as the Great Firewall — that automatically weed out anything considered pornographic or politically sensitive before it can reach computers in China. The company's move, in effect, shifts the handling of the censorship from Google to the government.
Beijing initially seemed to shrug off Google's move. A government statement called the move "totally wrong" while a Foreign Ministry spokesman appeared to dismiss it as an isolated business case.
The People's Daily newspaper on Wednesday was more shrill, accusing Google in a front-page commentary of cooperating with U.S. intelligence forces and suggesting its decision to move its search engine to Hong Kong was a salvo by U.S. Internet warriors.
"Considering the United States' big push in recent years to prepare for Internet war, perhaps this could be an exploratory pre-dawn battle," said the commentary in the newspaper's overseas edition.
While the U.S. State Department has said it was not involved in Google's decision over its search engine, a speech by Secretary of State Hillary Clinton championing Internet freedom added to Beijing's concerns about collusion and aggravated recently tense U.S.-China relations.
Google's troubles also added to growing pessimism in the U.S. and European business community that a richer, more powerful China was less in need of foreign investment and technology. New rules to promote indigenous innovation and favor local technology in government procurement have brought protests from Western chambers of commerce in China that Beijing was closing off access to the domestic market.
Given those dynamics, Google is likely to face a tough road to rehabilitation in the China market, Chinese and foreign Internet analysts said.
"They are certainly going to suffer and they are going to be spending years rebuilding their reputation with the people who are trying to market inside of China and proving they can offer a decent service in the PRC. Trust me, they aren't walking away from this unhurt," said David Wolf, president of Wolf Group Asia, a technology marketing consultant in Beijing.
Associated Press researcher Bonnie Cao in Beijing contributed to this report.
CHARLOTTE, N.C. – Bank of America is taking a major step to help some of its most troubled mortgage borrowers. The bank says it will forgive up to 30 percent of some customers' loan principal.
The bank has said Wednesday it will start forgiving principal for homeowners who owe more than 120 percent of their home's value.
The plan, to begin in May, is among the first by a U.S. mortgage lender that takes a systematic approach to reducing mortgage principal when home values drop well below the amount owed. The effort is aimed at preventing foreclosures.
Bank of America, based in Charlotte, N.C., is the largest mortgage servicer in the country.
WASHINGTON – Sales of new homes fell unexpectedly to the lowest level on record in February as stormy winter weather kept buyers on the sidelines. The weak results make clear the difficulties facing the housing industry as it tries to recover from the worst slump in decades.
The Commerce Department reported Wednesday that new home sales fell 2.2 percent last month to a seasonally adjusted annual sales pace of 308,000.
It was the fourth consecutive month of declines and the worst showing on records dating to 1963. January's results, meanwhile, were revised upward slightly to a pace of 315,000.
Economists surveyed by Thomson Reuters had expected February sales would rise to an annual rate of 320,000.
Sales plummeted dramatically in parts of the country that were hit with bad weather. In the Northeast, they fell 20 percent from a month earlier. Midwestern sales fell 18 percent. Sales fell nearly 5 percent in the South but rose 21 percent in the West.
The new home sales report reflects signed contracts to purchase homes rather than completed sales and thus gives economists a feel for how many buyers were out shopping for new homes in a given month.
The number of new homes up for sale in February increased slightly to 236,000. At the current sales pace, it would take more than 9 months to exhaust that supply.
There was some positive news for builders as the median sales price climbed on both a monthly and yearly basis. It rose to $220,500, up more than 5 percent from a year earlier and up about 6 percent from January.
Home sales have been sluggish during the winter even though the deadline for a tax credit for first-time home buyers was extended. It had been set to expire on Nov. 30. The earlier deadline caused sales to surge last fall.
Congress extended the deadline until April 30 and expanded it to cover existing homeowners who move. But economists and real estate agents say the extension has not had much of an impact on sales. That also was reflected Tuesday when the National Association of Realtors said sales of previously occupied homes dropped 0.6 percent in February to a seasonally adjusted annual rate of 5.02 million.
Some homebuilders say their outlook is getting better, but the recovery is not a strong one.
"A number of housing markets may be stabilizing or starting to rebound, though we do not yet see, in many respects, a sustained nationwide recovery," Jeffrey Mezger, president and chief executive officer of KB Home, a major builder, said Tuesday as his company reported a $55 million quarterly loss.