The significance for Google is of the ‘last straw’ variety. For years, the company has struggled to maintain the right path in China. Its policy around the world is that it will obey the law of whatever country it operates in. You might object to that – until you think about it: in a world of sovereign states, how could a company possibly say, ‘We’ll operate within your borders but won’t obey your laws?’ (Similarly, Google’s national sites in certain parts of Europe obey laws banning neo-Nazi sites and other material that would be permissible in the U.S.)

Chinese laws require search engine companies and other Internet operators to censor certain material. Searches conducted by Google.CN, in Chinese language, mainly for users inside China – have obeyed those Chinese laws. Meanwhile searches on the main Google.COM have been uncensored for material like ‘Tiananmen Square’ or ‘Dalai Lama.’ Anyone who could find a way to get to Google.COM could find whatever they wanted.

Dealing with those requirements has been part of a non-stop set of difficulties for Google in China. Like most other Western companies, Google has consistently decided to cope with the difficulties and stay in China. Part of the reason was the obvious commercial potential that the Chinese market has for almost any company in any industry. Another part was Google’s argument that the Chinese public was better off with another source of information, even if constrained, than it would be without that option. But, as reported on Google’s site, a latest wave of provocations and intrusions was simply too much.

In terms of information flow into China, this decision probably makes no real difference at all. Why? Anybody inside China who really wants to get to Google.com – or the BBC or whatever site may be blocked for the moment – can still do so easily, by using a proxy server or buying (for under $1 per week) a VPN service (further details here). For the vast majority of Chinese users, it is not worth going to that cost or bother, since so much material is still available in Chinese from authorised sites. That has been the genius, so far, of the Chinese ‘Great Firewall’ censorship system: it allows easy loopholes for anyone who might become really upset, but it effectively keeps most Chinese Internet users away from unauthorised material.

In terms of the next stage of China’s emergence as a power and dealings with the United States, this event has the potential to make a great deal of difference – in a negative way, for China. I think of this as the beginning of China’s Bush-Cheney era.

To put it in perspective,, I have long argued that China’s relations with the U.S. are overall positive for both sides (both here and here); that the Chinese government is doing more than outsiders think to deal with vexing problems like the environment (here); and more generally that China is a still-poor, highly-diverse and individualistic country whose development need not ‘threaten’ anyone else and should be encouraged.

But there are also reasons to think that a difficult and unpleasant stage of China-U.S. and China-world relations lies ahead. This is so on the economic front (as warned about here nearly a year ago, with later evidence here). It may also prove to be so on the environmental front – that is what the argument over China’s role in Copenhagen is about. It is increasingly so on the political-liberties front, as witnessed by Vaclav Havel’s denunciation of the recent 11-year prison sentence for the man who is in many ways his Chinese counterpart, Liu Xiaobo. And if a major U.S. company (indeed, Google has been ranked the #1 brand in the world) has concluded that, in effect, it must break diplomatic relations with China because its policies are too repressive and intrusive to make peace with, that is a significant judgment.

Everything in the paragraph above has the similarity of being based directly or indirectly on recent Chinese government decisions. The government could decide (and probably will) to allow the value of the RMB to float again. The government could decide to throw its weight behind an effective climate agreement – we will know by January 31 about its post-Copenhagen proposals. The government could have decided not to prosecute Liu Xiaobo, and presumably it could have worked with Google to address the complaints alleged in the Google statement.

In a strange and striking way there is an inversion of recent Chinese and U.S. roles. In the switch from George W. Bush to Barack Obama, the U.S. went from having a president that much of the world saw as deliberately antagonising them, to a president whose Nobel Prize reflected (perhaps desperate) gratitude at his efforts at conciliation. China, by contrast, seems to be entering its Bush-Cheney era. I must emphasise again my argument that China is not a ‘threat’ and that its development is good news for mankind. But its government is on a path at the moment that courts resistance around the world. To me, that is what Google’s decision signifies.

This article was first published here at the Atlantic.

James Fallows is National Correspondent for The Atlantic, currently based in Beijing.