Given the longer term importance of doing business in China, analysts said Google is now likely to figure out how to stay in the good graces of the Chinese authorities.

"There's nothing that Google can do to get around it but make peace with the Chinese government," said RBC's Sandler.

Google maintains a Chinese language website, Google.cn, which the company says complies with the local laws. The company's flagship, English language site Google.com does not adhere to China's rules.

The Chinese government's comments on Thursday were aimed at Google's English language Web site, suggesting that the authorities may be trying to exert a broader level of control over its operations.

It's unlikely that Google would alter search results on its international sites to conform to Chinese standards, said Sanford Bernstein's Jeff Lindsay. But he said the company could devise ways to address China's concerns, such as routing all Chinese Internet traffic going to Google.com through its Chinese infrastructure.

According to Google, the English site Google.com has suffered from outages in China before, such as in October 2007. YouTube, the video sharing site that Google own, has been inaccessible in China since March.

Sanford Bernstein's Lindsay said Beijing appears to be trying to exert more control over the Internet during a politically sensitive period, with the country marking the 20th anniversary of the Tiananmen Square protests.

And the role of the Internet in the recent protests in Iran, following that country's disputed elections, could also have been a factor, Lindsay said.

... contd.