Reading this guardian article – ‘PR firms make London world capital of reputation laundering’ is alarming but then I have a few thoughts about this. For one I agree, PR companies may unscrupulously try to airbrush problems of their clients in every way possible, this is true. But, the one glaring thing about this exposé is that no country known the world over for human rights violation is going to get a ‘squeaky clean’ reputation handed over on a platter. No way!

While Google and China battle it out with threats and innuendos after the great Google hack in China, we now have the weakest link of ‘em all in this murky affair unveiled – Microsoft and its browser IE!

Microsoft has now admitted this and has even come out with a warning about the critical unpatched vulnerability in the IE.  Mike Reavey, director of Microsoft’s Security Response Center (MSRC) had this to say:

“We have determined that Internet Explorer was one of the vectors used in targeted and sophisticated attacks against Google and possibly other corporate networks”

For Microsoft, admitting this is the first step in damage control and they have gone on record with a security warning which Computer World reported as shown below:

 The security advisory said that the only version of IE not containing the critical flaw was IE 5.01 running on Windows 2000. All other versions, including IE6, IE7 and IE8 on Windows 2000, XP, Server 2003, Vista, Server 2008, Windows 7 and Server 2008 R2 are vulnerable to attack.

A patch for the vulnerability may miraculously arrive any minute now  as part of crisis mangement from Microsoft. After all Google’s threat is keenly watched the world over and for an Internet giant like Microsoft there’s nothing as big as a security flaw in terms of reputation mangement.

In other Microsoft news today, Steve Ballmer has announced that Microsoft intends to continue to stay in China and obey the country’s rules. (yawn)

The interesting question now is -Will Google really pull out of China after China has scoffed at Google’s threat saying that they are going to continue filtering Google content come what may?

Google and China - the tussle continues and further developments on this front may just take the heat off of Microsoft for now.

Google’s behaviour in China has always been something of a reputation menace for them. Are they colluding in censorship? How can they square their business objective of organising the world’s information with the censorship requirements of China’s state? They might not need to any more after effectively accusing the Chinese government of sponsoring a sophisticated hack of their systems.

One side is the Chinese government who insist that  “Internet companies and all sorts of websites must recognise their social responsibilities and further strengthen their internet security. They must voluntarily submit to the supervision and guidance of government departments.”  ”Must voluntarily submit” is nice totalitarian touch from the government spokesman. On the other side is Google trying to square their “do no evil” with their fraught relationship with China’s government and its censoring approach to internet activities.

Shareholders have already come out in support of Google’s stance, demonstrating that this is likely to be a PR win for the US company. Now Yahoo and Bing will have to consider their own response to the Chinese government. Do they try to exploit the situation commercially at Google’s expense which could be an expensive strategy in the longer reputational terms or do they follow Google’s lead.

For the Chinese government this could not have come at a worse time for their reputation as a place you can do business. As one commentator succinctly put it: “This is a very politically charged environment. Multinationals have been complaining about ‘Buy China’ policies, unfair restrictions and hacking… and this is going to be very damaging if there isn’t a solution. There’s a feeling that China is emboldened and that they don’t need to have the same sort of dialogue. This is the mismatch – people here think no one can do without China, and I think now some companies are thinking no one can deal with China.”

Google has long recognised that government relations is a long term threat to their dominance of their markets. In too many markets they are verging close to monopoly strength. Where the 90s was the decade of Microsoft bashing, it could be the 10s is a decade for Google bashing. Avoiding questionable business practices could be the first part in a more flexible and visible response to working with questionable governments around the world.

It’s one thing for foreigners to trash your reputation and another to do it to yourself.  China has a reputation for producing things cheaply, but also for stomping all over intellectual property, general corruption and being difficult to work with. Nobody said they were inefficient… until now.

An article in the Daily Telegraph in the UK recounts the experience of a British entrepreneur trying to build motorcycles for the UK, and it does not make pretty reading for China.

“Victor is the most dishonest man I have met in my entire life,” says Chris, tersely. “But the problem is that no one takes any direct responsibility. The workers lie to their bosses. The bosses lie to the salesmen, the salesmen are our point of contact, but they don’t know what is going on,” he adds…

…When asked what had happened during the making of the prototype he freely confessed to having lied to Chris. “During all those months, I did nothing. Nothing at all. He asked what was happening, so I emailed him to say everything was fine and sent him photographs from a friend’s factory,” he says.

Businesses often defer to China when it comes to criticising them through fear of the response from the government, but over the past couple of months, there have been a notable number of articles questioning the reality of China’s economic miracle, suggesting that cheap workers rather than efficiency and business acumen lies at the heart of economic growth. Furthermore the yawning gap in business practices is a reality that many visiting businesses prefer to ignore or forget. As commentators have reiterated over hundreds of years: the Chinese, they are different!