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By Jared Cummans

The saga of Google (NASDAQ:GOOG) in China took another turn today, as the search engine giant announced it had adapted its business plan to meet Beijing’s demands. For the past three months Google has been redirecting Chinese users to the company’s Hong Kong search engine, which is uncensored. The Chinese government lost patience with the automatic redirect, and threatened Google with a revocation of the company’s license in China due to the lack of censorship. To meet the strict demands of the government, Google has proposed to end the redirect of its website, and simply leaves users with the option to click a link to the non-censored website rather than taking them straight there.

The new business strategy seemingly conflicts with Google’s corporate mission, which aims to avoid censorship. But the company is hoping that it has found a solution that will allow it to provide options for uncensored searches while still maintaining its Chinese presence. “We are going with this new approach because we would like to try to provide our service to Chinese users,” Google China spokeswoman Marsha Wong told CNN. The censoring will now fall into the hands of the Chinese government, allowing Google to maintain their image and still offer their services to a global community.

The impact of Google’s strategy shift has rippled quickly throughout the Chinese tech sector. Google’s license is up for renewal Wednesday, and the ultimate outcome of the standoff is still far from certain. Among the companies taking a hit on news that Google may maintain its presence in the Chinese market was Baidu (NASDAQ:BIDU), the local search engine company that perhaps stood to benefit the most in a Google-free China.

Baidu's stock lost a staggering 9% in Tuesday trading, sending several ETFs focusing on China’s technology sector sharply lower. Below, we profile two ETFs offering exposure to this sector of the Chinese economy that figure to be in focus in coming days as this drama unfolds:

Claymore China Technology ETF (NYSEARCA:CQQQ)

This ETF seeks to replicate the AlphaShares China Technology Index, a benchmark designed to measure the performance of Chinese companies operating in the technology sector. The fund holds about 33 companies, with the top ten holdings accounting for 63% of total assets. CQQQ maintains most of its assets in companies of medium market capitalization and above, steering clear of small cap stocks. The fund’s top holding is Baidu; the search engine firm makes up about 13% total holdings. The fund was down close to 4% in afternoon trading, and has lost close to 10% on the year. If Google’s license renewal is approved, this fund could drop further, while a rejection from the Chinese government could help it reclaim lost ground.

Global X China Technology ETF (CHIB)

Global X’s CHIB tracks the S-BOX China Technology Index, a benchmark designed to reflect the performance of the technology sector in China. CHIB is similar in many ways to CQQQ; this ETF has about 26 holdings and focuses on mid cap and large cap stocks. Also like the aforementioned Claymore ETF, the top holding of CHIB is Baidu, coming in at about 8%. This ETF dropped almost 5% today. Again, CHIB’s fate may rest on the decision that the Chinese government hands down regarding the license renewal for Google.

Disclosure: No positions at time of writing.

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Source: China Tech ETFs and the Google Drama