Report claims Google has no licence to operate in China

Less than a month after starting its new China-based search engine, Google's position in the world's second-biggest internet market was thrown into doubt yesterday when the local media published reports questioning whether the US company had a valid operating licence.

The ministry of information is reportedly investigating the case. If it decides the accusations are valid, Google's widely criticised decision to self-censor its content in line with the requests of the propaganda department could be in vain.

Google denied the report, which appeared in the Beijing News describing Google.cn as "clearly unlawful." The US firm said it had gone through correct channels to start its service with a local partner, Ganji.com.

"Google has the required licence to operate Google.cn service in China. Google clearly displays its internet content provider licence number on the Google.cn site," said a spokeswoman.

Industry sources said the Chinese government might be allowing the reports to appear as a means of keeping pressure on Google, which has been criticised for agreeing to censor content in China but lets users know when access to certain web pages has been blocked.

Foreign investors in the Chinese internet industry usually hand over running of their services - at least nominally - to a local partner, receiving payment for technical support. Google said Yahoo! and eBay used a similar method. However, Beijing News said the circumstances were different. Wang Lijian, a spokesman for the ministry of information, told reporters that the government was aware that Google.cn did not own its own licence but did not elaborate on whether it was operating within guidelines.

Last week members of the US congress accused Google of selling out to communist censors. Google has acknowledged it is uncomfortable with the ethical sacrifice it made to start up a business in China.