The tension between Google Inc. and Beijing is more of a nuisance than a financial blow for now, but it's a taste of the challenges that lie ahead as the world's largest internet search engine strives to expand in China.
A Chinese official accused Google of spreading obscene content over the internet. The comments came a day after Google.com, gmail and other Google online services abruptly became inaccessible to many users in China.
Analysts said the service disruptions are unlikely to have major financial repercussions on Google given its presence in China, but may prompt the company to tweak its operations in the world's single largest internet market by subscribers.
Google's share of the Chinese search market lags Baidu, the country's home-grown internet powerhouse which analysts believe has more than of 60 per cent market share.
But with more than 200 million internet users, China represents a market Google cannot overlook.
The Chinese government has not acknowledged whether it had a hand in the recent Google service outages. Google said it is investigating the incidents but would not comment on whether it has had any contact with Chinese authorities.
Beijing's criticism of Google comes as the government steps up a campaign against internet pornography, but it isn't clear why the search engine has been singled out by Chinese officials.
China has required all PC makers to pre-install special "Green Dam" software to filter out objectionable material like online pornography. Critics, including US Commerce Secretary Gary Locke and US. Trade Representative Ron Kir, say the software can also be used to enforce broader censorship.
Two weeks ago Beijing ordered Google to block overseas sites with "pornographic" or "vulgar" content from being accessible through the Chinese language version of its search engine.
Google said it met with Chinese government officials and was taking necessary steps to ensure that the search results on its Chinese language site complied.
Given the longer-term importance of doing business in China, analysts said Google is now likely to figure out how to stay in the good graces of the Chinese authorities.
Google maintains a Chinese language website, Google.cn, which the company says complies with the local laws. The company's flagship, English language site Google.com, does not adhere to China's rules.
The Chinese government's comments were aimed at Google's English language website, suggesting that the authorities may be trying to exert a broader level of control over its operations.
It's unlikely that Google would alter search results on its international sites to conform to Chinese standards, said Sanford Bernstein's Jeff Lindsay. But he said the company could devise ways to address China's concerns, such as routing all Chinese internet traffic going to Google.com through its Chinese infrastructure.
According to Google, the English site Google.com has suffered from outages in China before, such as in October 2007. YouTube, the video sharing site that Google owns, has been inaccessible in China since March.
And the role of the internet in the recent protests in Iran, following that country's disputed elections, could also have been a factor, Lindsay said.
Last week, the US Department of State urged microblogging service Twitter to delay an upgrade to its technology that would have disrupted daytime service to people in Iran.
"Probably what sparked (the Chinese crackdown on Google), or made it particularly relevant at the moment, is the US government and US internet companies being seen as having some kind of role in prolonging the unrest in Iran," Mr Lindsay said.