Internet giant Google has said it may end its operations in China following a "sophisticated and targeted" cyber attack originating from the country.
Google said the e-mail accounts of Chinese human rights activists were the primary target of the attack.
The company did not accuse the Chinese government directly, but said it was no longer willing to censor its Chinese search engine - google.cn.
This could result in closing the site, and its Chinese offices, Google said.
The search engine has now said it will hold talks with the government in the coming weeks to look at operating an unfiltered search engine within the law in the country.
Google launched google.cn in 2006, agreeing to some censorship of the search results, as required by the Chinese government.
Shares in Google fell by 1.1% to $584.80 in after-hours trading in New York, after the news was announced.
Phishing attack
US Secretary of State Hillary Clinton said Google's allegations "raise very serious concerns and questions", and that the US was seeking an explanation from China.
Google's chief legal officer David Drummond said: "A primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists."
The company said its investigation into the attack found two accounts of its online mail service - Gmail - appeared to have been accessed.
However, the attack was limited to accessing account information such as the date the account was created and subject line, rather than e-mail content, it said.
It said it had also discovered that the accounts of dozens of US, China and Europe-based Gmail users, who are "advocates of human rights in China", appeared to have been "routinely accessed by third parties".
It said these accounts had not been accessed through any security breach at Google, but "most likely via phishing scams or malware placed on users' computers".
At least 20 other large companies from a wide range of businesses were similarly targeted, it added.
Rebuke
Chris Hogg, the BBC's Shanghai correspondent, said Google's actions will have angered China.
"This will be the highest-profile rebuke by a major US firm of how China operates," he said.
"The fact that [Google] have come out publicly before sitting down to negotiate with Chinese officials - there is little doubt it will have outraged the Chinese."
BBC technology correspondent Rory Cellan-Jones said the attacks, coupled with further attempts to limit free speech, had led Google to reconsider its position.
If it does pull out, the move will "leave other overseas web companies operating in China with difficult decisions to make," he said.
Search market battle
Google's decision to concede to China's demands on censorship in 2006 led to accusations it had betrayed its company motto - "don't be evil" - but Google argued it would be more damaging for civil liberties if it pulled out of China entirely.
In 2008, it signed the Global Network Initiative agreement with rivals Microsoft and Yahoo, pledging better protection of online privacy and freedom of speech against government interference.
Those commitments, however, are weighed against the commercial opportunities that China provides as a fast growing market.
Nearly 340 million Chinese people now online, compared with 10 million only a decade ago.
Last year, the search engine market in China was worth an estimated $1bn and analysts previously expected Google to make about $600m from China in 2010.
But unlike most markets, Google comes second in search in China.
It has 26% of the market compared with about 60% controlled by market leader Baidu, which has a close relationship with the Chinese government. Yahoo has 10%.
Microsoft has a tiny share of the Chinese market with its new Bing search engine, but in December the technology giant said it was committed to China, calling it "the most important strategic market".