Facebook Inc’s short-lived attempt to open an “innovation hub” in China underscores just how difficult it would be for the social network to build a meaningful presence in the country.
Shortly after a local government Web site showed a unit of the social network could register a company in Zhejiang Province, meant as a hub to interact with Chinese developers, the notice vanished.
While no reason was given, the New York Times reported that approval was withdrawn after the Chinese Internet regulator disagreed with the provincial government’s approval of the subsidiary.
China, which tightly controls media and the Internet, remains elusive to Facebook even as chief executive officer Mark Zuckerberg makes overtures.
Plans for a Beijing office went nowhere, photo-sharing app Colorful Balloons failed to gain traction, WhatsApp works intermittently and its social network has been blocked for almost a decade.
At the same time, Tencent Holdings Ltd’s (騰訊) WeChat has become nearly ubiquitous, raising questions about whether the US company would be able to win over customers even if it is allowed in.
“Given the current widespread cleanup of all media in China, I think it is now even more difficult for Facebook to bring its main platform to China,” said Asia Innovations Group (亞洲創新集團) chief executive officer Andy Tian (田行智), who runs a live-streaming service across China and has worked for Zynga Inc and Alphabet Inc’s Google in the country.
The issue underscores the complexity of navigating China’s regulatory terrain, particularly in an Internet arena that is one of the most heavily policed and censored in the world.
“They should’ve had a direct conversation with the Internet ministry saying ‘we’re not going to bring the Facebook platform to China — all we want to do is do an engineering thing and have investments,’” Tian said.
Beijing limits what information and content Chinese can access, including by imposing its will on local social media. While WeChat and Weibo censor posts on sensitive subjects, Facebook and other foreign companies are beyond Beijing’s control.
Where businesses with strategic technologies that China needs, like Intel Corp or Tesla Inc, can negotiate concessions thanks to their advantages, Beijing sees little need to compromise when it comes to allowing in Western Internet companies.
Asked at a briefing why Facebook’s request had been rejected, Chinese Ministry of Foreign Affairs spokesman Geng Shuang (耿爽) directed all detailed inquiries to “the relevant authorities,” but not before adding a comment about China’s clout.
“China’s Internet market is booming. China has the largest Internet users in the world. We would like to share the development opportunities brought by the development of the Internet,” he said. “As long as these foreign Internet companies comply with Chinese laws and regulations we welcome their development and opening up of business in China.”
Facebook’s proposed hub highlights a shifting strategy for US companies banned from operating their main businesses in China: build small beachheads that do not attract attention, but still promote their brands to developers, engineers and tech-savvy consumers.
Google, whose main services are blocked, is focusing on promoting its TensorFlow software to developers, plunging money into an artificial intelligence research center in Beijing and launching doodling and note-taking apps that do not run up against the Chinese government’s censorship controls. It has also been investing in local start-ups.
While China remains a massive hole in Facebook’s global footprint of 2.23 billion people, the company has plenty of other challenges, including slowing growth, a tanking share price and scandals over user data.
That helps to highlight why it still wants to be in China and continues to take small steps to establish a presence in the country, such as with the innovation lab.
The proposal was listed on a filing with a company registration database before it later disappeared.
Facebook’s subsidiary was approved on July 18 with registered capital of US$30 million, according to the filing.
It is significant that Facebook chose to locate its hub in Zhejiang, which would provide it with access to Chinese tech talent.
The province south of Shanghai has a prestigious university, hosts China’s annual summit of global tech leaders and is home to local technology giants Alibaba Group Holding Ltd (阿里巴巴) and its payments affiliate Ant Financial Services Group (螞蟻金服).
With assistance from Sarah Frier and Shelly Banjo
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