Is Google Declaring a Trade War against China? If so, is this good for Google?

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Apparently The Big Giant Google has been hacked. The hacker allegedly hacked Gmail accounts of human rights activists. The origin of the hack was traced to a couple of school from China. This led to Google threatining to get rid of its Chinese Search Engine. Hmm.. I'm not sure if this is a good move. Why don't they just make their security tigher instead of black listing a country? I'm not from china but I don't think this is a good business move.