The Obama administration has leapt to the defence of Google after the internet search giant threatened to pull the plug on its Chinese operations.
Hillary Clinton, the US Secretary of State, demanded "an explanation" for Beijing of Google's allegation that its Gmail email system was infiltrated. "The ability to operate with confidence in cyberspace is critical in a modern society and economy," she said.
Robert Gibbs, Mr Obama's press secretary, emphasised that the President backed internet freedom and said that Google had co-ordinated with the Obama administration before it had acted.
The alleged cyber attacks have further strained Sino-US relations that are already fraying over issues of trade, currency, climate change and arms sales to Taiwan.
"We have been briefed by Google on these allegations, which raise very serious concerns and questions," Mrs Clinton said.
Mrs Clinton had also met executives from Google and Microsoft, as well as with Cisco Systems, which provides much of China's internet infrastructure, to discuss how to stop countries from "stifling" access to information, the state department added.
Next week the US is to launch a new technology policy to help citizens in other countries to gain access to an uncensored internet.
The Chinese authorities said they were seeking clarification over Google's demand it be allowed to operate its Google.cn search engine free from the increasingly draconian censorship of the Great Firewall of China.
China has spent millions trying to project it's 'soft power', however analysts said its rulers now faced a choice between protecting its power at home and suffering the embarrassment of being rejected by one of the free world's biggest brands with negative consequences for the investment climate.
"It is setting us up for a clash, and it's interesting to see who backs down. It's the US versus China, but the companies will be lobbying," said Chris McNally, a China analyst at the East-West Center in Hawaii.
A spokesman for Google said the company was 'in talks' with the authorities, while outside Google's offices in Beijing a handful of citizens braved the cold to lay flowers 'in mourning' at the prospect of Google's departure from China.
Despite hopes that China would start to relax freedom of speech restrictions after the 2008 Olympics, China has in fact tightened of internet controls, blocking popular as social networkings sites such as Twitter, Facebook and YouTube.
The issue of censorship was raised by the US President Barack Obama on his maiden visit to China last November when he told an online town hall that he was "a big supporter of non-censorship."
"I can tell you that in the United States, the fact that we have free internet – or unrestricted internet access – is a source of strength, and I think should be encouraged," he said.
The decision by Google to break ranks from other big corporations doing business in China and openly criticise the country's autocratic leadership comes after four rocky years during which Google was forced to compromise its core belief in the free-flow of information.
Announcing its sudden change of heart on the company's blogsite, David Drummond, Google's chief legal officer, said: "These attacks and the surveillance they have uncovered – combined with the attempts over the past year to further limit free speech on the Web – have led us to conclude that we should review the feasibility of our business operations in China.
"We are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all," he said.
Human rights groups, which have criticised Google's decision to submit Chinese censorship after setting up in China in 2006, applauded the company's stand. The New York-based Human Rights Watch described it as "an important step" to protect human rights online.
"Through international pressure, finally a big business in the West has come to realise its own conscience," said the prominent Chinese dissident Wei Jingsheng who lives in exile in the United States after 18 years in prison in China.
"Some Western businesses thought that by making compromises with the Chinese communists' regime, they could do business as they wished.
However, this is impossible because the Chinese government would not be satisfied."