Google has won a license to operate in China, press reports indicated on Wednesday. The search giant would join rival Yahoo as the only two government sanctioned search engines available in the country, which is the second biggest Internet market. An office should be opened in China during the year, sources say.

It is unclear how Google will handle the issue of censorship in China. The Chinese government monitors Internet traffic, and looks down any searches on anything other than government-sanctioned content. Search firms voluntarily block most questionable material.

Google itself has been blocked; In 2002 its Chinese language site was forwarded to similar sites.

While company officials have been mum on Google's China plans, it is likely in response to the rapidly growing market in the country. 134 million Internet users are expected to log on by the end of 2005, up from 94 million last year, and the market is worth some $150 million.

Even without an official Chinese language site, Google was already doing rather well. The company had a 21.2 percent share of searches, not far behind market leading Baidu with a 36.3 percent share. Google last year bought a small portion of Baidu, although it is unclear if they will maintain that stake with the company now officially operating in China.

However, the search engine industry is beginning to grow in China, and Google may have to deal with increased competition in the market. Several companies have announced plans to launch sites in the country in recent weeks, including Sina Corporation, Sohu.com and even Microsoft.