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China Stocks Share Pain

BEIJING -- Amid worldwide gloom over the prospect of more interest rate hikes, downward selling pressure ruled China's markets Tuesday. The Hang Seng Index finished down 0.3% at 15,973, and the Shanghai Composite Index was off 0.3% to 1679.

On Monday in New York, China names were mostly decliners. Sohu (SOHU - Get Report) lost 2.9% to $24.90 and Linktone (LTON - Get Report) slid 0.7% to $6.70. Bucking the trend, Baidu (BIDU - Get Report) rose 0.5% to $83.26.

The stock market isn't the only place Baidu is gaining ground. Not only has it been gobbling up market share, but lately its chief competitor in China, Google (GOOG), has suffered major service disruptions there.

Since last week, Google's site has been inaccessible to many local users.

Though email service in China can sometimes slow to a crawl, it's rare for a Web site to be down for days at a time. Other websites, including Baidu, appear to be functioning normally.

The service meltdown is a setback for the Mountain View, Calif.-based technology giant against the backdrop of its recent expansion drive in China.

A call to Google's office in Beijing was not returned.

In January this year, Google launched a China-based version of its site. A few months later Google CEO Eric Schmidt flew to Beijing for a ceremony to give the company a Chinese name and open a research lab there.

But service snafus will hardly help Google as it attempts to compete with Baidu, which has surged to a lead position in the China search market. As of 2005 Baidu owned 57% of the search market, with Google lagging behind at 33% and Yahoo! (YHOO - Get Report) a distant third, according to Chinese research house iResearch.

An analyst in Hong Kong said today he was not aware of any recent Google service interruptions outside mainland China. And some Internet users in China say they have not had problems using Google. Yet a number of Beijing residents report being unable to access the site.

Tuesday, a Beijing firm that helps Google with advertising work said it had also not been able to pull up the site.

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