This Reuters story has some stats the Chinese company’s rapid growth:

Baidu posted first-quarter net profit of 481 million renminbi, or $70.4 million, up from 181 million renminbi a year ago. Analysts expected profit of 366 million renminbi, according to Thomson Reuters data.

Baidu is, unsurprisingly, reluctant to credit its growth solely to Google’s departure:

“We saw marginal benefit from this so-called semi-exit of Google,” Robin Li, Baidu’s charismatic chief executive, said during a conference call to discuss his company’s results.

“We are certainly benefiting from this. But at the end of the day, the China search market is still in its very early stage,” Mr. Li said. “The performance of Baidu is largely driven by our own execution, not the competitive landscape change.”

“The Chinese, according to our records, have now established 60 Confucius centers here in the United States, but they are permitting only four of our centers to be built in China,” Mr. Lugar told Mrs. Clinton. “So I call this to your attention for some potential negotiations with [our] Chinese friends, as we try to extend this idea of diplomacy centers, which I think is important.”

Mr. Lugar suggested that the administration is resigned to the restrictions, noting that its 2011 budget request has asked for funds for just “eight to 10 American centers of public diplomacy” around the world, but “it’s not clear where those would be located.”

Mrs. Clinton responded that the administration is “raising the issue of reciprocity with Chinese officials,” though she made clear a change in the numbers is unlikely anytime soon.

“On the Confucius centers, the Chinese government provides each center with $1 million to launch, plus they cover operating expenses that exceed $200,000 per year,” she said. “We don’t have that kind of money in the budget, so we are limited in the numbers that we can do.”

It’s hard to directly equate the Confucius Centers in the United States with the public diplomacy centers the United States is trying to establish overseas. They’re similar in idea but are not identical:

“The U.S. centers are much more explicitly associated with the U.S. government, but on the other hand, they both have the same function, which is public diplomacy and outreach, and trying to present a version of the respective country,” said Dean Cheng, a research fellow at the Heritage Foundation.

Mr. Cheng said China’s concerns about prospective U.S. centers most likely have to do with human rights, which are part of Washington’s outreach around the world.

He also noted that it is almost impossible for Washington to find a Chinese university to partner with that is not at least partially controlled by the Chinese government, which is not a problem in the United States.

Not content merely to block dissonant views, the government increasingly employs agents to peddle its views online, in the guise of impartial bloggers and chat-room denizens. And increasingly, it is backing state-friendly clones of Twitter, Facebook and YouTube, all Western sites that have been blocked here for roughly a year.

The government’s strategy, according to Mr. Bandurski and others, is not just to block unflattering messages, but to overwhelm them with its own positive spin and rebuttals.

The government makes no apologies for what it calls “guiding public opinion.” Regulation is crucial, it says, to keep China from sliding into chaos and to preserve the party’s monopoly on power. . . .

In recent years, local and provincial officials have hired armies of low-paid commentators to monitor blogs and chat rooms for sensitive issues, then spin online comment in the government’s favor.

Mr. Xiao of Berkeley cites one example: Jiaozuo, a city southwest of Beijing, deployed 35 Internet commentators and 120 police officers to defuse online attacks on the local police after a traffic dispute. By flooding chat rooms with pro-police comments, the team turned the tone of online comment from negative to positive in just 20 minutes.

According to one official newspaper editor who refused to be named, propaganda authorities now calculate that confronted with a public controversy, local officials have a window of about two hours to block information and flood the Web with their own line before the reaction of citizens is beyond control.

In January, we discussed a set of highly sophisticated cyber attacks that originated in China and targeted many corporations around the world. We believe that malware is a general threat to the Internet, but it is especially harmful when it is used to suppress opinions of dissent. In that case, the attacks involved surveillance of email accounts belonging to Chinese human rights activists. Perhaps unsurprisingly, these are not the only examples of malicious software being used for political ends. We have gathered information about a separate cyber threat that was less sophisticated but that nonetheless was employed against another community.

This particular malware broadly targeted Vietnamese computer users around the world. The malware infected the computers of potentially tens of thousands of users who downloaded Vietnamese keyboard language software and possibly other legitimate software that was altered to infect users. While the malware itself was not especially sophisticated, it has nonetheless been used for damaging purposes. These infected machines have been used both to spy on their owners as well as participate in distributed denial of service (DDoS) attacks against blogs containing messages of political dissent. Specifically, these attacks have tried to squelch opposition to bauxite mining efforts in Vietnam, an important and emotionally charged issue in the country.

According to the AP, Google appears to have learned about the Vietnamese cyber attacks while performing its investigation of the Chinese cyber attacks:

Google apparently stumbled onto a scheme targeting Vietnamese-speaking Internet users around the world while investigating the surveillance of e-mail accounts belonging to Chinese human rights activists, one analyst suggested.

The attackers appear to have targeted specific Web sites and duped users into downloading malware programs, said Nart Villeneuve from The Citizen Lab at the University of Toronto. That may have allowed the infiltration and surveillance of activists, he said.

“This kind of stuff happens all the time in China,” said Villeneuve. “It has a chilling effect. It silences people.”

Google engineer Neel Mehta wrote in the posting, “these attacks have tried to squelch opposition to bauxite mining efforts in Vietnam, an important and emotionally charged issue in the country.”

The mining project involving a subsidiary of Chinese state-run aluminum company Chinalco is planned for Vietnam’s Central Highlands and has attracted strong opposition.

Foes fear the mine would cause major environmental problems and lead to Chinese workers flooding into the strategically sensitive region.

The computer security firm McAfee, which has investigated the malware, also discussed the attacks in a blog posting Tuesday.

“We believe that the perpetrators may have political motivations and may have some allegiance to the government of the Socialist Republic of Vietnam,” wrote George Kurtz, McAfee’s chief technology officer.

Vietnamese officials did not respond to requests for comment Wednesday.

The networks are the creation of a handful of North Korean defectors and South Korean human rights activists using cellphones to pierce North Korea’s near-total news blackout. To build the networks, recruiters slip into China to woo the few North Koreans allowed to travel there, provide cellphones to smuggle across the border, then post informers’ phoned and texted reports on Web sites.

The work is risky. Recruiters spend months identifying and coaxing potential informants, all the while evading agents from the North and the Chinese police bent on stopping their work. The North Koreans face even greater danger; exposure could lead to imprisonment — or death.
The result has been a news free-for-all, a jumble of sometimes confirmed but often contradictory reports. Some have been important; the Web sites were the first to report the outrage among North Koreans over a drastic currency revaluation late last year. Other articles have been more prosaic, covering topics like whether North Koreans keep pets and their complaints about the price of rice.

But the fact that such news is leaking out at all is something of a revolution for a brutally efficient gulag state that has forcibly cloistered its people for decades even as other closed societies have reluctantly accepted at least some of the intrusions of a more wired world. “In an information vacuum like North Korea, any additional tidbits — even in the swamp of rumors — is helpful,” said Nicholas Eberstadt, a scholar at the American Enterprise Institute who has chronicled the country’s economic and population woes for decades.

There are logistical limitations, but the use of cellphones is facilitating the exchange of information that would not have been possible until recently. Both the informants and North Korean officials are adapting:

The cellphones work on China’s cellular networks, so they operate only within several miles of the Chinese border. Because North Koreans cannot travel freely in their country, the Web sites are forced to depend mostly on people who live near China.

While such contacts would have been unimaginable 20 years ago, one thing has not changed: the danger.

Mr. Mun of Daily NK says his informers engage in a constant game of cat and mouse with the authorities. The North Korean government can monitor cellphone calls, but tracing them is harder, so the police rove the countryside in jeeps equipped with tracking devices.

One of the domain name companies, Go Daddy Inc., announced its change in policy at a congressional hearing that was largely devoted to Google Inc.’s announcement Monday that it will no longer censor Internet search results in China.

Christine Jones, executive vice president and general counsel of Go Daddy, said the company’s decision was not a reaction to Google but instead reflects its concern about the security of its customers and “the chilling effect” of the new Chinese government requirements.

“We just made a decision that we didn’t want to act as an agent of the Chinese government,” Jones told lawmakers.

Separately, a company that offers similar services, Network Solutions LLC, also said Wednesday it had stopped handling China Web registrations in December, for the same reason. . . .

Go Daddy said the agency has always made the company, known as a registrar, collect customer names, addresses and other contact information since it began registering “.cn” Internet domain names. But late last year, Go Daddy said, the Chinese agency changed its policy to require “.cn” domain name registrars to also collect head shots, business identifications and signed registration forms from new customers and then forward that information to the agency.

Then, Jones said, the agency instructed domain name registrars to obtain this same information from existing customers and forward it too – warning that Web sites of customers who refuse to register would be disabled.

Go Daddy said it has contacted 1,200 of its customers with “.cn” Web sites, asking for the additional documentation and informing them that it would be handed over to the China Internet Network Information Center. The company said only about 20 percent of those customers have provided the documentation.

Google and other major American Internet companies like Yahoo and eBay failed to gain significant traction in the Chinese market. And Facebook, Twitter and YouTube are blocked by the government.

Instead, the hottest companies in the world’s biggest Internet market have names like Baidu, Tencent and Alibaba — fast-growing local firms that are making huge profits. Post-Google, China’s Internet market could increasingly resemble a lucrative, walled-off bazaar, experts say. Those homegrown successes, however, could have trouble becoming global brands.

“If the Chinese government continues to favor domestic companies, those companies that reach critical mass could become phenomenally profitable,” said Gary Rieschel, founder of Qiming Ventures, an American venture capital firm with investments in China. “But it may be hard for those companies to become world class without outside competition.” . . .

The story behind the success of these companies is a simple one, some analysts say. The young people who dominate Web use in China are not just searching for information; they’re searching for a lifestyle. They are passionate about downloading music, playing online games and engaging in social networking.

“Sixty percent of the Internet users here are under the age of 30,” said Richard Ji, an Internet analyst at Morgan Stanley. “In the U.S., it’s the other way around. And in the U.S. it’s about information. But in China, the No. 1 priority is entertainment.” . . .
One question, though, is whether Google’s departure will prevent Chinese companies from developing alongside the world’s technology powerhouses.

“When the Chinese companies go outside of China, they will find that they fail to understand their competitors as well as they did when they were competing in China,” said Mr. Rieschel, founder of Qiming Ventures.

Of course, Chinese companies may just be happy staying home. With 400 million Internet users and growing, their own market is a substantial prize.

[E]arlier today we stopped censoring our search services—Google Search, Google News, and Google Images—on Google.cn. Users visiting Google.cn are now being redirected to Google.com.hk, where we are offering uncensored search in simplified Chinese, specifically designed for users in mainland China and delivered via our servers in Hong Kong. Users in Hong Kong will continue to receive their existing uncensored, traditional Chinese service, also from Google.com.hk. Due to the increased load on our Hong Kong servers and the complicated nature of these changes, users may see some slowdown in service or find some products temporarily inaccessible as we switch everything over.

Figuring out how to make good on our promise to stop censoring search on Google.cn has been hard. We want as many people in the world as possible to have access to our services, including users in mainland China, yet the Chinese government has been crystal clear throughout our discussions that self-censorship is a non-negotiable legal requirement. We believe this new approach of providing uncensored search in simplified Chinese from Google.com.hk is a sensible solution to the challenges we’ve faced—it’s entirely legal and will meaningfully increase access to information for people in China. We very much hope that the Chinese government respects our decision, though we are well aware that it could at any time block access to our services. We will therefore be carefully monitoring access issues, and have created this new web page, which we will update regularly each day, so that everyone can see which Google services are available in China.

This Washington Post article has some interesting stats:

Since coming to China in 2005, Google has, as in much of the rest of the world, become embedded in the lives of its users. Its search engine Google.cn has almost one-third of the market share in a country with 350 million Internet users. Hundreds of government officials have Gmail accounts, according to estimates by one senior Chinese official involved in monitoring the Internet. Chinese exporters can’t work without Google Translate. An estimated 12 million Chinese use Google Maps every day. Scientists and researchers rely on the Google Reader and Google Scholar for the latest in academic work.

“When I meet something unfamiliar, my first reaction is to Google it,” said Chen Xiaoqiang, a 30-year-old instructor at a business school, sounding like the average Web-savvy American. “Even when I can’t find my glasses, I have the impulse to search for them on Google.”

“Without Google, our academic research will be seriously affected,” said Ma Yuanye, a 55-year-old biologist based in Kunming in southwest China. “If Google is blocked, we will see nothing but darkness.”

But Google’s exit would mean something else to Chen, Ma and others like them — a kind of abandonment, they say. Although many who were interviewed said they supported Google’s decision to confront the Chinese government, they also said its departure would make them feel even more marginalized in Chinese society, stuck between a state committed to controlling information and a freer outside world.

The Shanghai-based publication reported that Google is expected to announce on Monday it would shutter its China operations on April 10, quoting an unnamed Google employee and a Chinese sales agent for the company.

A spokesperson for Google in China wouldn’t comment on the report.

The news comes as speculation continues to rise in China over whether the Internet giant will pull out of the market and what the ramifications would be for the world’s largest online market.

Google has threatened to leave China and briefly quit censoring its Web site there in January. Chinese law requires Internet operators to censor information for sexual or political content.