Microsoft will maintain its great firewall in China

Microsoft plans to continue to operate its search service in China, despite Google's recent suggestions that it might exit that market due to Chinese government censorship practices.

Microsoft CEO Steve Ballmer's comment to CNBC on Thursday implied that Microsoft would comply with China's censorship rules, but perhaps not outside China.

"We've been quite clear that we are going to operate in China," Ballmer said. "We are going to abide by the law but we are going to continue to make the same kind of content available outside of China no matter what happens inside China, as long as we get legitimate requests documented by the Chinese government which we can explain to our customers."

Ballmer's comments came shortly after attending the White House as part of a meeting of 50 CEOs to discuss "modernizing government" through technology.

Google had announced on Tuesday that it was reviewing its operations in China after a sophisticated hacking attack was launched from that country in an attempt to tap into Chinese human rights activists' communications using Google Gmail. The attacks targeted activists in China, Europe and the United States. In addition, 20 companies were subject to the hacking attacks from China.

Although Google complied with China's censorship restrictions when it first launched the Google.cn service in January 2006, its participation was always subject to review, according to Google's announcement. The hacking incident appears to have triggered such a review.

"We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all," stated David Drummond, senior vice president for corporate development and chief legal officer at Google. "We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China."

Should Google withdraw from the Chinese market, its 30 percent search market share likely would fall to Microsoft/Yahoo and local search provider Baidu, according to Warren Cowan, founder and CEO of Greenlight, a search marketing agency. Baidu currently is the No. 1 search engine in China, with about 59 percent market share.

Microsoft's security team reported on Thursday that a flaw in Internet Explorer was "one of the vectors used in targeted and sophisticated attacks against Google and possibly other corporate networks." Microsoft issued security advisory 979352 to provide guidance on the IE vulnerability. The company may issue an "out-of-band" security fix for the IE bug, which can enable remote code execution attacks.

It's not clear from Microsoft's statements whether the flaw in IE helped in the Gmail attacks, or if the two incidents are unrelated.

The issue of Internet technology companies dealing with government censorship has been batted about for some time. However, in October 2008, Microsoft, Google and Yahoo all joined a coalition of companies and human rights organizations called the Global Network Initiative (GNI). The initiative was formed to address corporate policies with regard to speech and human rights issues. Microsoft's participation in the initiative was announced at the time by Pamela Passman, Microsoft's corporate vice president and deputy general counsel for Global Corporate Affairs.

The voluntary initiative came about, in part, after Sen. Dick Durbin, D-Ill., conducted Senate hearings on the matter. However, the resulting GNI group appears to be a complete failure in terms of solidifying corporate policies to address government censorship.

In a prepared statement issued on Thursday, the GNI suggested it wasn't aligned with Google's position on China at all.

"The ICT [information and communications technology] industry is diverse, and different companies may make different decisions about entering or exiting a market based on specific circumstances such as timing, location, relationships and the nature of a particular product, service or business," the GNI statement read. "There is no 'one size fits all' approach to corporate responsibility, nor a single right course of action or script for all to follow."