In the morning of June 28, 2005, the Ideal Plaza situated at the north 4th Ring Road in Beijing saw a mysterious guest. The middle-aged guest in business suit is Eric Schmidt, CEO of Google. As the lift stopped at the 12th floor, he stepped into Baidu CEO Li Yanhong's office.

"I don't know about it," said Bi Sheng, spokesperson of Baidu as asked to confirm the visit.

"One thing is for sure. Google will enter the market of Chinese mainland this year," said a CEO of a noted Chinese portal site and search engine company. How it enters depends on the negotiation with Baidu.

Google announced May 11 that it had obtained license to operate in China and established representative office in Shanghai. According to some reporters who had visited Google's representative office in The Center, the office is "spacious enough to accommodate 200 staff". Google's announcement says it has had strong interest in the Chinese mainland market. A lot of things may be done once they enter the market officially.

"Starting with a representative office seems out-of-date and too prudent if compared with MSN's joint venture."IT Manger World commented. China has definitely become the nexte target for Google's market expansion.

Obviously, the senior management of Google has fully realized this. But the market environment in China makes the always-prudent Google even more careful in making decision. Yahoo, the pioneer of search engine is just an example. It draws a blank after struggling four years in the Chinese market. Finally it ends up acquiring 3721 to strengthen its foothold in China.

"There are two options for Google," said the CEO. Google holds shares of Baidu, the NO.1 in Chinese search engine market. There is possibility for Google and Baidu to deepen cooperation, say, Google holding more Beidu's stakes, or even a JV. This may lead to Google's takeover of Baidu, turning Baidu into its subsidiary in China. The other option for Google is to strengthen its representative office in China by massive recruitment and finally set up its China subsidiary.

According to a poll done by iResearch, Baidu has 33.1 percent of market share in the Chinese search engine market, outracing any other competitor. Google, ranking the 3rd, has 22.4 percent.

Source: People's Daily