BAIDU CEO DENIES HIJACKING OF RIVAL SEARCH ENGINE

C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 000648

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/21/2028
TAGS: PGOV PROP SOCI EINT CH
SUBJECT: BAIDU CEO DENIES HIJACKING OF RIVAL SEARCH ENGINE
TRAFFIC, COMPANY "GETS NO SPECIAL TREATMENT"

REF: A. OSC CPP20071019968173

B. BEIJING 7035

Classified By: Deputy Political Section Chief Ben
Moeling. Reasons 1.4 (b) and (d).

Summary
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1. (C) Contrary to popular Chinese perception, China's
top search engine, Baidu.com does not enjoy a special
relationship with the PRC Government, company founder
Li Yanhong told Poloff in a recent meeting. However,
Li said, Baidu does engage in extensive self
censorship of Internet searches but must only
cooperate directly with government authorities on
censorship issues during "sensitive periods," such as
last October's 17th Communist Party Congress. Li
asserted that these practices are no different than
other Chinese search engines. Furthermore, he claimed
there was no truth to Western media reports that
during the Party Congress Baidu "hijacked" traffic
from rival search engines. Commenting on the
Yahoo/Shi Tao case, Li said all Internet companies
active in China must obey PRC law. Despite his own
competitive instincts to the contrary, Li said he
hoped that U.S. firms will continue to be active in
the Chinese market. End summary.

"Baidu Better at Chinese-Language Searches"
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2. (C) PolOff met January 29 with Li Yanhong
(protect),the Chairman and CEO of Baidu.com, China's
leading Internet search engine with 60 percent market
share. Li attributed Baidu's success to its superior
handling of Chinese language searches. Baidu, Li
explained, was designed from the outset for Chinese
language users and is better able to parse Chinese
search phrases to bring up useful results. This is in
contrast with Yahoo and other competitors who have
adapted their U.S.-developed search engines for the
Chinese market.

"No Special Relationship with Government"
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3. (C) Li strongly denied that Baidu receives
preferential treatment from the PRC Government, as
some critics have alleged. "We are treated just like
everyone else," Li asserted. However, Baidu does
practice "self discipline" to avoid running afoul of
official Internet censors. Normally, Li explained,
there is no direct coordination between Baidu and the
Chinese authorities except during sensitive events,
such as the October 2007 17th Communist Party
Congress. Li asserted that these practices are no
different than those followed at other Chinese search
engines, however, he did not want to elaborate on the
mechanisms of how Baidu interacts with Chinese
agencies on censorship issues.

Alleged "Hijacking" of Rival Search Engines
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4. (C) Li likewise dismissed accusations that during
the 17th Party Congress, Internet users attempting to
access Google, Yahoo and other competing search
engines were redirected to Baidu (Ref A). Li told
PolOff he first learned of the story via the media,
and Baidu's internal analysis shows no increase in
traffic during the period when the alleged hijacking
was taking place. Li decried the damage the story did
to Baidu's image by fueling the perception that Baidu
enjoys special privileges in exchange for its
aggressive self censorship. "We got all this negative
publicity, but we didn't get any of the additional
page views," he complained. (Comment: Emboffs
experienced this "hijacking" first hand (Ref B) though
the extent of the redirecting varied from city to city
and only lasted for one day. Rebecca MacKinnon, an
expert on China's Internet at University of Hong Kong,
has written that the redirection was not necessarily a
deliberate act by Baidu or government censors.)

Yahoo/Shi Tao Case
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5. (C) Commenting on the criticism Yahoo has received
over the case of Shi Tao (a journalist who was
arrested in 2004 and later sentenced to 10 years in

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prison after Yahoo provided Chinese police with
information about Shi's email use),Li said that all
Internet companies have no choice but to obey Chinese
law. Unlike Yahoo, Li noted, Baidu does not provide
email accounts and thus does not need to cooperate
with police in investigations of individual Internet
users. Li said Baidu's decision not to offer email
was simply a commercial one as China is over-saturated
with free email services. Nevertheless, Li expressed
some sympathy for Yahoo and concern that the U.S.
Congress will restrict U.S. Internet companies from
operating in China. Setting aside his business
interests, Li said he felt it was best for the
development of China's Internet if U.S. companies
continue to operate in the PRC.

Bio Note
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6. (C) Li Yanhong (Robin Li) was born November 17,
1968 in Shanxi Province. After graduating from
Beijing University in 1991, he studied at State
University of New York, Buffalo, where he graduated in
1994 with an MS in computer science. During the
1990s, Li developed search engine technology for the
U.S. firm Infoseek. He returned to China to launch
Baidu in 2000 with the help of several American
venture capital firms. Baidu.com went public on the
NASDAQ stock exchange in 2005. Li is listed number
21 on Forbes magazine's 2007 "40 Richest Chinese" list
with an estimated personal net worth of USD 2.35
billion. Li's wife and daughter are U.S. citizens.
Li told PolOff he was previously a legal permanent
resident of the United States but has since given up
his LPR status.

Comment
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7. (C) Emboffs' own experiences back Li's claims that
Baidu provides superior handling of Chinese searches.
Chinese government documents and news stories are
easier to find with Baidu. Baidu's "self discipline,"
however, appears to go beyond its competitors.
Entering the name of former Communist Party General
Secretary Zhao Ziyang (who was deposed after the 1989

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Tiananmen crackdown) in Baidu brings up just two
links: one to an official biography, the other to a
Xinhua News Agency notice of his death in 2005.
Google.cn (Google's mainland China version) offers
hundreds of links on Zhao, thought not all of them
function due to government censorship. However, Baidu
has pushed the boundaries on non-politically sensitive
topics to get an edge on competitors. In February,
after our conversation, the government-sponsored
Beijing Association of Online Media demanded that
Baidu apologize for being slow to block sexually
explicit photos related to a scandal involving Hong
Kong pop star Edison Chen. The scandal is huge news
in the PRC, and Baidu allegedly maintained links to
the photos after its major competitors had erased
them.
RANDT