Maybe Google finally went on the offensive against China to take focus away from a significant security breach.

Maybe the search giant did it because its business prospects in the hopelessly gamed and deeply corrupt Chinese market were negligible and dwindling fast.

Maybe Google got sick and tired of harassment from authorities and having to censor its results in order to operate.

And maybe, just maybe, Google’s top leadership finally decided to do the right thing after the ethically challenged compromises made in the past–in order to to do business in one of the world’s biggest economies–became too much to bear any longer.

I would guess that a little bit of all these things led to the announcement by Google yesterday that it had been under attack from–if you read between the very bright lines–Chinese government-sponsored hackers, that the company would no longer censor its search results and that it might pull its business out of China all together.

While a lot of the speculation so far has been about Google’s motives, real or imagined, it seems to me that the focus should sit squarely on how appalling the Chinese government behaves regarding the Web.

And more to the point, how it tries to pass off egregious censorship, vicious retribution of its critics using digital skullduggery and persistent violations of basic freedoms as justified by government policy and laws.

That canard is accepted by no one with any kind of conscience and falls flat in today’s increasingly transparent digital-centric world.

Still, few in Silicon Valley, which is knee-deep in lucrative Chinese Web investments, have ever done much in the way of protesting about the situation, even though the writing has been on the wall since China strong-armed Yahoo into releasing information about dissidents and then threw those courageous citizens in jail and threw away the key.

(Thus, one blog post noting that Yahoo’s withdrawal from the country and subsequent investment in Chinese Web company Alibaba meant that the Internet giant “played China far better than Google,” was utterly perplexing, given that it glossed over the key part regarding tragic victims of Yahoo’s cloddish missteps there. Let’s be clear: No matter how much money it makes, for that alone, Yahoo can never ever be called smart when it comes to China.)

Perhaps it is time to remember the late House Foreign Affairs Committee Chairman Tom Lantos (pictured above), who lambasted Yahoo management then, calling its execs moral “pygmies.”

In another memorable hearing, the California Democratic congressman took a well-deserved whack at other tech companies for their lack of “social responsibility” and for caving to “Beijing’s outrageous but predictable demands” simply to garner more profits.

Here’s a video of the eloquent Lantos–himself a survivor of the Holocaust, so he knew exactly what he was talking about when he spoke of government suppression and abuse–at a hearing that included Microsoft (MSFT), Yahoo (YHOO), Cisco (CSCO) and, yes, Google (GOOG).

What he said then must have finally sunk in: “Your abhorrent activities in China are a disgrace. I simply don’t understand how your corporate leadership sleeps at night.”

How far Google execs are willing to take this fight with China will determine how well they sleep in the future. But good for them for beginning this move, which is critical to the Web evolving globally as a free, unfettered and transparent force.

Most of all, we should only hope that Google’s actions spur other tech companies to try to change China the only way its government understands: By saying enough is enough regarding how China behaves in the digital community, and finding a “spine,” as Lantos called for, to actually do something that will make a difference.

Because, let’s be honest, enough was enough a very long time ago.

I urge you to watch this inspiring and pointed speech by Lantos in its entirety:

“We actually did an evil scale and decided not to serve at all was worse evil.”

– Google CEO Eric Schmidt on the company’s decision to offer a censored version of its search services in China, Jan. 30, 2006

Evidently Google is taking its informal “don’t be evil motto” a bit more seriously these days. The search sovereign threatened late Tuesday to pull out of its operations in China after detecting a “highly sophisticated and targeted attack on [its] corporate infrastructure originating from China.” Targeted in the assault: The Gmail accounts of Chinese human rights activists.

“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,” Google’s chief legal officer, David Drummond, wrote in a post to the company blog.

“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,” Drummond added. “We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.”

Shut down Google.cn, and potentially our offices in China? Hmm. What’s the Chinese word for “Bing”?

Drummond didn’t directly accuse the Chinese government of orchestrating the incursion, but he certainly seems to be implying there’s a link. And you’d think one would have to exist for Google (GOOG) to threaten pull out of a country that has more Internet users than the total population of the U.S.–even if its efforts to gain market share there haven’t met with the same success as in the rest of the world.

It’s tough to stake your claim in a country where the government favors the local rival and blocks your traffic if you fail to censor. Baidu’s share of the Chinese search market in the third quarter was 77 percent, up from 75.6 percent. Google’s share for the same period? Just 17 percent, down from 19 percent.

So, to some extent, Google can probably threaten to leave China because the country accounts for such a small portion of its revenue. On the other hand, China leads the world in Internet users and presents a hell of a market opportunity–large enough that Google willingly provided a censored version of its services as a prerequisite for doing business there. Or, rather, it used to.

At $395.50 Baidu shares are up more than two percent after hours on the news. Google shares are down 1.6 percent at $581.01.

Drummond’s post in full, below, as well as another on the safety of data on Google by Dave Girouard, President of Google Enterprise:

A new approach to China

Like many other well-known organizations, we face cyber attacks of varying degrees on a regular basis. In mid-December, we detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google. However, it soon became clear that what at first appeared to be solely a security incident–albeit a significant one–was something quite different.

First, this attack was not just on Google. As part of our investigation we have discovered that at least twenty other large companies from a wide range of businesses–including the Internet, finance, technology, media and chemical sectors–have been similarly targeted. We are currently in the process of notifying those companies, and we are also working with the relevant U.S. authorities.

Second, we have evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists. Based on our investigation to date we believe their attack did not achieve that objective. Only two Gmail accounts appear to have been accessed, and that activity was limited to account information (such as the date the account was created) and subject line, rather than the content of emails themselves.

Third, as part of this investigation but independent of the attack on Google, we have discovered that the accounts of dozens of U.S.-, China- and Europe-based Gmail users who are advocates of human rights in China appear to have been routinely accessed by third parties. These accounts have not been accessed through any security breach at Google, but most likely via phishing scams or malware placed on the users’ computers.

We have already used information gained from this attack to make infrastructure and architectural improvements that enhance security for Google and for our users. In terms of individual users, we would advise people to deploy reputable anti-virus and anti-spyware programs on their computers, to install patches for their operating systems and to update their web browsers. Always be cautious when clicking on links appearing in instant messages and emails, or when asked to share personal information like passwords online. You can read more here about our cyber-security recommendations.

We have taken the unusual step of sharing information about these attacks with a broad audience not just because of the security and human rights implications of what we have unearthed, but also because this information goes to the heart of a much bigger global debate about freedom of speech. In the last two decades, China’s economic reform programs and its citizens’ entrepreneurial flair have lifted hundreds of millions of Chinese people out of poverty. Indeed, this great nation is at the heart of much economic progress and development in the world today.

We launched Google.cn in January 2006 in the belief that the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results. At the time we made clear that “we will carefully monitor conditions in China, including new laws and other restrictions on our services. If we determine that we are unable to achieve the objectives outlined we will not hesitate to reconsider our approach to China.”

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, 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. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.

The decision to review our business operations in China has been incredibly hard, and we know that it will have potentially far-reaching consequences. We want to make clear that this move was driven by our executives in the United States, without the knowledge or involvement of our employees in China who have worked incredibly hard to make Google.cn the success it is today. We are committed to working responsibly to resolve the very difficult issues raised.

Keeping your data safe

Many corporations and consumers regularly come under cyber attack, and Google is no exception. We recently detected a cyber attack targeting our infrastructure and that of at least 20 other publicly listed companies. This incident was particularly notable for its high degree of sophistication. We believe Google Apps and related customer data were not affected by this incident. Please read more about our public response on the Official Google Blog.

This attack may understandably raise some questions, so we wanted to take this opportunity to share some additional information and assure you that Google is introducing additional security measures to help ensure the safety of your data.

This was not an assault on cloud computing. It was an attack on the technology infrastructure of major corporations in sectors as diverse as finance, technology, media, and chemical. The route the attackers used was malicious software used to infect personal computers. Any computer connected to the Internet can fall victim to such attacks. While some intellectual property on our corporate network was compromised, we believe our customer cloud-based data remains secure.

While any company can be subject to such an attack, those who use our cloud services benefit from our data security capabilities. At Google, we invest massive amounts of time and money in security. Nothing is more important to us. Our response to this attack shows that we are dedicated to protecting the businesses and users who have entrusted us with their sensitive email and document information. We are telling you this because we are committed to transparency, accountability, and maintaining your trust.

“I sold my YHOO stake, which I held through my hedge fund last month when it hit $20,” Jackson told Digital Daily. “I still own a small amount personally. I had no idea idea it would fall this much but I finally decided to stop pushing a rope by calling for change from the inside [as a shareholder]. I voted with my feet. This board has the blood of its shareholders on its hands, and I hope they wear that scarlet letter stigma for a long time.”

Asked to comment on Mithras Capital Partners proposal that Yahoo (YHOO) sell itself to Microsoft (MSFT) for $22 a share, Jackson had this to say: “If I was in Redmond, I’d say why not wait a few weeks and pick this company up for a couple of bucks?”  

“I sold my YHOO stake, which I held through my hedge fund last month when it hit $20,” Jackson told Digital Daily. “I still own a small amount personally. I had no idea idea it would fall this much but I finally decided to stop pushing a rope by calling for change from the inside [as a shareholder]. I voted with my feet. This board has the blood of its shareholders on its hands, and I hope they wear that scarlet letter stigma for a long time.”

Asked to comment on Mithras Capital Partners proposal that Yahoo (YHOO) sell itself to Microsoft (MSFT) for $22 a share, Jackson had this to say: “If I was in Redmond, I’d say why not wait a few weeks and pick this company up for a couple of bucks?”  

Less than a week after Yang’s grueling Capitol Hill appareance, during which Committee Chairman Tom Lantos (D., Calif.) upbraided him and another company executive as moral “pygmies,” Yahoo settled a lawsuit brought against it on behalf of two Chinese journalists who were jailed after the company provided Beijing authorities with their email records.

Under the terms of the settlement, Yahoo will provide unspecified financial assistance to the plaintiffs and their families and establish a fund to support other political dissidents. And sources close to the company say it may even offer legal support to the two dissidents and their families.

“After meeting with the families, it was clear to me what we had to do to make this right for them, for Yahoo and for the future,” Yang said in a statement that tried a bit too hard to cast the company’s decision to settle as a humanitarian one. “Yahoo was founded on the idea that the free exchange of information can fundamentally change how people lead their lives, conduct their business and interact with their governments. We are committed to making sure our actions match our values around the world.”

… And putting this long legal and public-relations nightmare to an end.

If you think our witnesses today are uncomfortable sitting in this climate-controlled room and accounting for their company’s spineless and irresponsible actions, imagine how life is for Shi Tao, spending 10 long years in a Chinese dungeon for exchanging information publicly–exactly what Yahoo claims to support in places like China.”

–Statement of Rep. Tom Lantos (D., Calif.), chairman of the House Committee on Foreign Affairs, yesterday

Yahoo CEO Jerry Yang celebrated his 39th birthday yesterday with a public shaming before the House Foreign Affairs Committee. During a hearing to discuss Yahoo’s cooperation with the Chinese authorities, Yang and Yahoo General Counsel Michael Callahan were pilloried for misleading lawmakers last year about the company’s role in the investigation and imprisonment of dissident Chinese journalist Shi Tao.

Seems the committee didn’t quite buy Yahoo’s it-was-the-poorly-translated-document’s-fault story. “While technologically and financially you are giants, morally you are pygmies,” said Committee Chairman Lantos. “Yahoo claims that this is just one big misunderstanding. Let me be clear–this was no misunderstanding. This was inexcusably negligent behavior at best, and deliberately deceptive behavior at worst. … Look into your own soul, and see the damage you have done to an innocent human being and his family. It will make no difference to the committee what you do, but it will make you better human beings, if you recognize your own responsibility for the enormous damage your policies have created.”

Seated in front of Shi’s weeping mother, Yang had little choice but to do just that. “I deeply regret the consequences of what the Chinese government has done,” Yang said. “My heart goes out to the family. … I want to say we are committed to doing what we can to secure their freedom. And I want to personally apologize for what they are going through.”

Yang, however, made no promises to provide financial assistance to Shi’s family for what happened.

It had to run afoul of the language barrier sometime, right? It’s just a shame that when it did, Chinese journalist Shi Tao ended up in prison as a result.

Yahoo General Counsel Michael Callahan apologized yesterday to the House Foreign Relations Committee for failing to tell U.S. lawmakers that Yahoo knew more about China’s crackdown on online dissidents than he initially acknowledged in testimony last year. “Months after I testified before two House subcommittees on Yahoo’s approach to business in China, I realized Yahoo had additional information about a 2004 order issued by the Chinese government seeking information about a Yahoo China user,” Callahan said. “I neglected to directly alert the committee of this new information, and that oversight led to a misunderstanding that I deeply regret and have apologized to the committee for creating.”

That oversight, incidentally, meant that Callahan’s testimony of Feb. 16, 2006, was allowed to stand. And that went something like this:

The Shi Tao case raises profound and troubling questions about basic human rights. Nevertheless, it is important to lay out the facts. When Yahoo China in Beijing was required to provide information about the user, who we later learned was Shi Tao, we had no information about the nature of the investigation. Indeed, we were unaware of the particular facts surrounding the case until the news story emerged.

“Let me take this opportunity to correct inaccurate reports that Yahoo Hong Kong gave information to the Chinese government. This is absolutely untrue. Yahoo Hong Kong was not involved in any disclosure of information about Mr. Shi to the Chinese government. In this case, the Chinese government ordered Yahoo China to provide user information, and Yahoo China complied with Chinese law. To be clear–Yahoo China and Yahoo Hong Kong have always operated independently of one another. There was not then, nor is there today, any exchange of user information between Yahoo Hong Kong and Yahoo China.”

Quite an oversight.

So, assuming for the moment that this is an honest account of what happened, how did it happen? Yahoo blames the incident on a lousy translation of the Chinese government’s order, which didn’t mention that its request for user information involved an investigation into state secrets. Mea culpa, eh, Yahoo?

It is more important for us to participate, not only for economic reasons, but to be able to [help shape where the industry is going]. You have to balance the risk of not participating. And people don’t realize that being in the market every day there, and being on the ground, we are seeing changes, on the whole, for the positive.”
–-Yahoo co-founder Jerry Yang on China, March 2006

Sure, Yahoo signed China’s “Public Pledge on Self-Discipline for the Chinese Internet Industry,” a voluntary agreement to monitor and restrict information deemed “harmful” by Beijing, but did it have to take it quite so seriously? Was it really necessary to divulge the identity of a Chinese journalist who was subsequently arrested and sent to prison for a decade? Can’t Yahoo do business in China without helping its government jail political dissidents (three at last count)?

We may never get a staight answer to those questions, but at least they’re being asked. The House Foreign Affairs Committee has ordered an investigation into Yahoo’s role in the prosecution of Shi Tao, a journalist and Yahoo Mail user, who was arrested in 2004 by Chinese officials after Yahoo cooperated with their request for information. The committee’s interest in the matter was sparked by new documents that suggest Yahoo gave information to Chinese authorities knowing that it could lead to the reporter’s arrest. An interesting revelation, as Yahoo has long maintained it had no information about the nature of the investigation.

“This new documentation suggests that Yahoo’s Beijing office was at least aware of the general nature of the crime being investigated in the Shi Tao case even if it was unaware of the specific circumstances or the name of the individual involved,” said Joshua Rosenzweig of the Dui Hua Foundation, a human-rights organization. “One does not have to be an expert in Chinese law to know that ‘state secrets’ charges have often been used to punish political dissent in China. We must remember that before Shi Tao there were three other Chinese dissidents about whom Chinese police obtained user information from Yahoo in Beijing. If we assume that law-enforcement agencies investigating these cases followed the same procedures to obtain that information, three other notices would have been provided specifying investigations into subversion or incitement–crimes of a more unambiguous political nature.”

A scathing indictment and one that may mean Yahoo is finally called to answer for its conduct in China. “It is bad enough that a wealthy American company would willingly supply Chinese police the means to hunt a man down for shedding light on repression in China,” said Tom Lantos, the Democratic chairman of the House Foreign Affairs Committee. “Covering up such a despicable practice when Congress seeks an explanation is a serious offense. For a firm engaged in the information industry, Yahoo sure has a lot of secrecy to answer for. We expect to learn the truth, and to hold the company to account.”