Google's threat to pull out of China in a row over censorship threatened to escalate into a diplomatic dispute between Beijing and Washington yesterday.
The Obama administration leapt to the defence of the internet search giant after it said it may end its Chinese operations amid allegations of a cyber-attack on the email accounts of human rights activists.
Hillary Clinton, the US Secretary of State, demanded "an explanation" for claims the Gmail system had been infiltrated. "The ability to operate with confidence in cyberspace is critical in a modern society and economy," she said.
Robert Gibbs, Mr Obama's press secretary, said the president backed internet freedom and Google had co-ordinated with the Obama administration before it had acted.
The alleged cyber attacks have strained Sino-US relations that are already fraying over issues of trade, currency, climate change and arms sales to Taiwan.
Ms Clinton met executives from Google and Microsoft, as well as Cisco Systems, which provides much of China's internet infrastructure, to discuss how to stop countries from "stifling" access to information.
Next week, the US is to launch a new technology policy to help citizens in other countries to gain access to an uncensored internet.
The Chinese authorities said they were seeking clarification over Google's demand that it be allowed to operate its Google.cn search engine free from increasingly draconian censorship.
"It is setting us up for a clash, and it's interesting to see who backs down. It's the US versus China, but the companies will be lobbying," said Chris McNally, a China analyst at the East-West Center in Hawaii.
A spokesman for Google said the company was in talks with the authorities, while outside Google's offices in Beijing a handful of citizens laid flowers "in mourning" at the prospect of Google's departure.
Despite hopes that China would relax freedom of speech restrictions after the 2008 Olympics, internet controls have been tightened, with blocks on popular social networking sites such as Twitter, Facebook and YouTube.
Censorship was raised by Mr Obama on his maiden visit to China last November when he told an online town hall that he was "a big supporter of non-censorship". Announcing its sudden change of heart, David Drummond, Google's chief legal officer, said: "We are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all."
Human rights groups, which have criticised Google's decision to submit to Chinese censorship rules after setting up in China in 2006, have applauded the company's latest stand.
The New York-based Human Rights Watch described it as "an important step" to protect human rights online. (© Daily Telegraph, London)