China's renewal of Google's Internet license reflects a face-saving compromise between a political powerhouse and a technology titan who both sought to avoid a painful break-up, analysts said.
"It's not a complete surprise because I think the politics were that the Chinese wanted to avoid a big fight," said James Lewis, a cybersecurity expert and senior fellow at the Center for Strategic and International Studies.
"With (Chinese President) Hu Jintao coming to Washington it was not the best time to reshape the agenda of the meeting by messing with Google," Lewis told AFP.
He noted that China's decision to renew Google's Internet Content Provider license came after the company stopped automatically redirecting Chinese Web surfers to Google's uncensored search engine in Hong Kong.
Instead, Chinese visitors to Google's search engine in China, Google.cn, must now click on a link to land on the Hong Kong site.
"It's good sometimes to do face-saving things," Lewis said. "It gave everyone a nice way to move along for the next few months. It's good for Google as well as for China."
Lewis added, however, that the Chinese authorities are "still not happy" with Google over its decision to stop censoring Web search results to protest cyberattacks last year that the California company said came from China.
"I think they'll still look for things they can do to Google," he said.
While Google and China may have reached a temporary truce, Lewis said the Chinese goverment has a "long-term problem."
"They like technology, they like access to the global information infrastructure but they don't like the political implications," he said.
Matthew Ingram of technology blog GigaOm.com said Google will have problems of its own as it "tries to maintain a foothold in the country without bowing completely to the government's desire for control.
"(Google) has to walk a tightrope in order to remain on the government's good side, while still maintaining some semblance of ethical principles by not caving in to the authorities," he wrote.
Sharon Hom, executive director of Human Rights in China, said "China's approval of Google's license reflects that despite all the recent rhetoric, China wants Google to stay."
"The significance may be that making a principled stand to do business in a way that that does not violate fundamental rights... will not automatically get you kicked out of China as many businesses fear," Hom told AFP.
She said, however, that for China to provide a truly hospitable climate for foreign businesses, "it will take more than granting one company one license."
The US State Department, which has made Internet freedom a top priority, had an unusually muted reaction to China's decision to allow Google to remain in the country.
"It's a matter between Google and the Chinese government," State Department spokesman Mark Toner said in response to a question from reporters.
Investors on Wall Street were a bit more enthusiastic about the news that Google could stay in the world's largest Internet market for at least another year.
Google shares gained 2.39 percent on Friday to close at 467.49 dollars. Shares in Baidu, China's top search engine, lost 1.77 percent meanwhile to close at 71.15 dollars.