The world's most innovative company just announced that it can't do business in China. What does this tell us about the state of Chinese innovation? The question answers itself.

When Google entered China in 2006, it got a lot of advice from old hands that China's Leninist state would make it hard for them to do business. Google ignored this advice and gambled that the internet would prove stronger than the Communist party – that once Google was in the door on however compromised terms, popular demand for freer information would create incremental movement toward a more open internet.

Four years later, Google seems to have concluded that they were wrong and the old hands were right: in the short term, and within China, the party is more powerful than the internet. If this is so, it makes no business sense for Google to be in China.