The plan comes even as China has stepped up scrutiny into business dealings involving USA tech firms including Facebook Inc (FB.O), Apple Inc (AAPL.O) and Qualcomm Inc (QCOM.O) amid intensifying trade tensions between Beijing and Washington. The biggest search engine in the world obeying the censorship in China is a victory for the Chinese government - it sends a signal that nobody will bother to challenge the censorship any more.
If (when?) Dragonfly does launch, expect Google to tell us why it took the decision to so, but don't expect any compromises to have been made by China.
The New York Times, citing two people with knowledge of the plans, said that while the company has demonstrated the service to Chinese government officials, the existence of the project did not mean that Google's return to China was imminent.
Progress on the project picked up after a December meeting between Google's Chief Executive Sundar Pichai and a top Chinese government official, it added.
Almost a decade after leaving China in a huff, Google is now reportedly working on making a comeback in the Middle Kingdom with a search engine that will fully comply with the wishes of Chinese censors.
Between 2006 and 2010, Google actually ran a censored version of its search engine in China.
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The censorship would be embedded in image searches, spell check and even suggested searches.
On an internal message board, the employee wrote: "In my opinion, it is just as bad as the leak article mentions". It will set a bad precedent for many other companies who are still trying to do business in China while maintaining the principles of not succumbing to China's censorship. He said he had transferred out of his unit to avoid being involved.
Furthermore, The Intercept also notes that Google's app won't show any results for specific words and phrases that have been banned by the government.
The question remains if Google has any more chance to win the Chinese search engine market. The report goes on to say that reaching Android users is crucial as the operating system boasts of 80 percent of the total smartphone market share in China. It is unclear whether Google will launch a desktop version of its China search platform.
In January, the search engine joined an investment in Chinese live-stream mobile game platform Chushou, and earlier this month, launched an artificial intelligence (AI) game on Tencent Holdings Ltd social media app WeChat.
The Intercept's source expressed deep reservations at Google's confab with the Chinese government, saying they feared it could set an example for censorship in other countries: "I'm against large companies and governments collaborating in the oppression of their people, and feel like transparency around what's being done is in the public interest".