Industry and Information Technology Minister Li Yizhong, China's top internet regulator, insisted Friday that Google must obey its laws or 'pay the consequences.' (Vincent Thian/Associated Press)

China's top internet regulator insisted Friday that Google must obey its laws or "pay the consequences," giving no sign of a possible compromise in their dispute over censorship and hacking.

"If you want to do something that disobeys Chinese law and regulations, you are unfriendly, you are irresponsible and you will have to pay the consequences," Li Yizhong, the minister of Industry and Information Technology, said on the sidelines of China's annual legislature.

Li gave no details of Beijing's talks with Google over the search engine's January announcement that it planned to stop complying with Chinese internet censorship rules and might close its China-based site.

"Whether they leave or not is up to them," Li said. "But if they leave, China's Internet market is still going to develop."

China has the world's most populous internet market, with 384 million people online. Google has about 35 per cent of the Chinese search market, compared with about 60 per cent for local rival Baidu. Chinese users of Google and even some of China's state-controlled media have warned the loss of a major competitor could slow the industry's development.

Beijing encourages internet use for education and business, but tries to block access to material deemed subversive or pornographic, including websites abroad run by human rights and pro-democracy activists.

Li insisted the government needs to censor internet content to protect the rights of the country and its people.

"If there is information that harms stability or the people, of course we will have to block it," he said.

A Google spokeswoman, Courtney Hohne, declined to comment on the status of contacts with the Chinese government or when the company might start stop censoring search results.

Chinese government deters hacking attacks: Li

Responding to Google's complaints of China-based hacking against its email service and several dozen major companies, Li said the government opposes hacking.

Google CEO Eric Schmidt said Wednesday the company is in active negotiations with Beijing and expects some resolution in the dispute soon.

Speaking at a conference in the United Arab Emirates, Schmidt declined to provide specifics or predict how long the discussions would last. He said Google has decided not to publicize details of the talks.

Even if the China-based Google.cn search site is shut down, Google wants to keep a Beijing development centre, advertising sales offices and a fledgling mobile phone business, according to a person familiar with the company's thinking.

Google will not say how many employees it has in China, but industry analysts estimate the workforce at 700. The company, based in Mountain View, Calif., employs about 20,000 people worldwide.

Beijing has rejected suggestions by Western security experts that China's military or government agencies might have been involved in the hacking.

"You cannot find evidence about who organizes such attacks. The Chinese government has repeatedly opposed and deterred hacking attacks," Li said.