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Spokeswoman Jiang Yu told a regular news briefing that China encouraged development of the Internet.
"China's Internet is open," said Jiang. "China has tried creating a favorable environment for Internet," said Jiang while responding to a question on Google's possible retreat.
"China welcomes international Internet companies to conduct business within the country according to law," she said. "China's law prohibits cyber crimes including hacker attacks."
Google's corporate development and chief legal officer, David Drummond, posted a statement on the company's official blog on Tuesday, indicating the possibility that Google may "shut down Google.cn, and potentially our offices in China."
Google sent a short statement to Xinhua Wednesday, saying, "We are proud of our achievements in China. Currently we are reviewing the decision and hope for a resolution."
According to the iResearch Consulting Group, the Chinese search engine market reached nearly 7 billion yuan (US$1 billion) in 2009, and Google took 32.8 percent of the market in the third-quarter while China's home-grown search engine Baidu claimed 63.8 percent.