Gmail was attacked recently by sophisticated hackers, attempting to access the accounts of Chinese dissidents. In response, Google has stated that the Chinese government likely had a hand in the attack, and they would no longer submit to regime in terms of censoring search results. A few years ago, Google caught a great deal of flak for knuckling under in order to gain admission to China, which some viewed as a violation of their operating principle, "Don’t do evil."
Google has now put their cards down, but with only a small investment in China, and a relatively small part of the search space, they don’t have overwhelming leverage. Microsoft, Yahoo, and other international players could, if they pledged solidarity, put a lot of pressure on Beijing. Baidu, a Chinese search engine, couldn’t realistically oppose the government, but the amount of market controlled by international players is non-trivial. While a pledge by all the international players might not breach the Great Firewall so quickly, I believe it would force the government’s hand, and could provoke unrest amongst the intelligentsia, which the government very much does not want.
Hooray for Google being really the first to put up a FREE CHINA! banner.
The Chinese intelligentsia uses Google. Baidu, the indigenous search provider may have a much greater market share, but the elites, as always, have influence disproportionate to their numbers, and they rely on Google. This means that if Google packs up and leaves, influential people won’t be happy. Not only are they vocal now, they are the leaders of tomorrow. And they aren’t so much in the mold of quoting from the Little Red Book–they would likely quote a paper on Google Scholar. Google has some leverage in this group, and although they may not force China’s hand in terms of gaining unrestricted internet access, there may well be a liberalization of policies. I see a crackdown as unlikely given China’s current position in the world, and the centrality of the internet in growth.