Google's Eric Schmidt warns on China's attempts to control the internet China crisis ... Google's Eric Schmidt, in conversation with Alan Rusbridger, has expressed his fears over the superpower's influence. Photograph: Manan Vatsyayana/AFP Eric Schmidt, the executive chairman of Google, has described China as "the most egregious" example of a nation attempting to control the internet, as he hinted at expanding the company's multimillion-pound transition fund towards British publishers to boost revenues from digital. In an interview with the Guardian editor-in-chief Alan Rusbridger at the Big Tent Activate Summit in New Delhi, India, on Thursday, Schmidt spoke of his concern about reports from the New York Times last month that its computers had been invaded by Chinese hackers. "As the internet has emerged in many of these different countries, there's quite a few countries that have no laws that pertain to the internet at all and those internets tend to be free and open with almost anything goes," he said. There are other governments that try very dramatically to censor or control the internet, with China being the most egregious example. Asked about his views on the privacy of citizens online, Schmidt gave the example of Chinese dissidents who may wish to speak in confidence to a newspaper to reveal sensitive information. If I was giving you important information about something that was very very sensitive and if it were revealed that I were leaking this to you I would lose my job, my family would be killed or I would be exiled. This does occur - I was just in North Korea, for heavens sakes," he said. You take notes as a journalists and you write those down - but where do those notes go? You don't have to answer for the Guardian, but how would you feel if the Chinese had just hacked into the New York Times and gone into all of the servers of the New York Times ... how would you feel if you were a Chinese dissident? You'd be worried, if you had indeed done that," he told the summit. These are some of the problems that happen when everyone's connected ... My point here is that this [ability to intrude on privacy] is going to happen because the value of the internet is so profound and positive, but we've got to recognise the issues and get ahead of it by discussion. Schmidt's remarks are likely to inflame already tense relations between Washington and Beijing over allegations of cyber-warfare. On Wednesday, South Korea said it had traced a co-ordinated cyber-attack targeting banks and media firms to China, whose new premier, Li Keqiang, earlier this week said that states should "not make groundless accusations against each other." The interview comes a month after it was revealed that Schmidt makes his sharpest criticism of China yet in his new book, The New Digital Age, which is due to be released in April. The Google chairman describes China as "the world's most active and enthusiastic filterer of information" and "the most sophisticated and prolific" hacker of foreign companies. In the wide-ranging interview before India's internet pioneers, Schmidt did not rule out the prospect of Google launching a "digital transition fund" for British publishers, similar to the €60m money pot recently agreed in France. "I'm sure we can talk about it," he said. The reason I like this model is I don't like the idea of randomly writing cheques to publishers in the old model. I think it's a very good idea for Google to assist in the transition of their business model from old to new, so it's a very good positioning. Speaking in India on Thursday, Schmidt flatly denied speculation that he is attempting to position himself for a job in the US government. Asked by Rusbridger whether he would take such a role, Schmidt replied: "No, never. Government people have a very hard job. I much prefer this job, it's much easier. Speculation about a White House move has increased in recent months following Schmidt's trips to North Korea and Burma as an advocate for the open internet, coupled with his decision to shed 42% of his Google stock. He was replaced as chief executive of the internet giant in April 2011, as co-founder Larry Page sought to refocus the business on key areas, such as its Android smartphone software, Chrome web browser and search. On the future funding models for newspapers, Schmidt singled out Politico, a Washington website that runs a hybrid of free and subscription-only sites for policy junkies, as a potential model for newspapers. Last week Politico announced it had 1,000 subscribers paying upwards of $8,000 (£5,200) a year and was launching a quarterly print publication. Referring to newspapers, he also said it was "a reasonable prediction that incumbent businesses who already have subscribers will transition them into online subscribers." Schmidt also touched on his thoughts on soon-to-be-killed Google Reader ("I do love Google Reader, but we had priorities") and Apple's iPad Mini ("Too small").