Just when it seemed opinion on Google et al in China was moving toward "necessary evil" and/or "net-positive tradeoff", Sergey Brin appears to be backpeddling. The AP quotes him as saying that the company "compromised its principles" and that, after trying and failing to make the censorship thing work, Google might decide to say the heck with it and "not operate" in China.
Here's what I hope: That Brin, Page, et al, aren't just caving to a blast of often knee-jerk criticism on this issue. Google is almost certainly doing more good than harm in China, and it will continue to, especially over the long haul. If the sole goal is to avoid making tradeoffs, boycotting the country at this stage of the game won't have anywhere near the impact it would a few years down the road, when a few hundred million Chinese citizens--and a few million Chinese businesses--use it every day. At that point, Google will have some real leverage.
Another interesting question is what Sergey means by "not operating" in China. He volunteered that most of the company's traffic comes through Google's uncensored site, rather than the censored one, so perhaps the idea is that Google's China users will be able to access the uncensored site forever. If this is the case, then the "principles" debate is academic: Google can have its cake and eat it, too. Judging from a recent Reuters story, however, it seems the Chinese government is getting more aggressive about blocking Google's uncensored site, perhaps in an effort to force it to get more accomodating on the censored side.
If Google is committed to improving the overall situation in China (as well as for its shareholders), it will not simply "not operate" there. Rather, it will continue to engage and struggle with the Chinese government and be upfront (outside of China, at least) about what compromises these struggles entail. Whatever else you say about the party, after a failed experiment, they are overseeing a powerful economy, and they are keenly aware that it is in large part the strength of the economy that allows them to remain in power. A public struggle with a company as powerful and global as Google, one that keeps China's absurd, petty attempts to control information forever in the public eye, will likely do more to change these policies than a mere boycott ever could. Morality aside, Beijing's current attitude toward this issue is bad for business, and, right now, it is business, not censorship or violence, that is keeping the government in power.