If even Linkedin can’t function in China, who can?

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The Daily

This column was first published in SvD Näringsliv, in Swedish, on October 15th, 2021.

There was only one realistic way into China as a foreign company. Now even that seems to be closed. When Linkedin dismantles its social network in the country, it could mark a new era for tech companies in China.

An established truth is that the only way to enter China as a foreign company is through partnerships. The local legislation and relations with the Chinese state simply require some form of Chinese ownership. But if you play those cards right, a huge market can open up.

It was the same story for Linkedin, when they launched in China in 2014. The Microsoft-owned social network partnered with venture capital firms China Broadband Capital and a Chinese branch of Sequoia Capital for exactly this reason. It is therefore noteworthy that Linkedin now announces that they are shutting down the part of the business where you can post articles and updates to each other. It seems that relations with the state were not sufficient to allow this activity to continue.

At the beginning of the month there were reports that Linkedin had started to remove content from journalists covering China. A reporter at the news site Axios received a message from Linkedin stating that “your profile and public activity, such as your comments and links you share with your network, will not be visible in China.” It was not specified which material was intended, but a common theme was that the message was sent to journalists who covered China, and who were thereby able to be critical of the country.

The thesis that it is about the expression of uncomfortable opinions is supported by the fact that Linkedin still retains some business in the country, but that it is through a newly started app that provides job ads. The company as such is therefore not banned from the country – it is only a certain part of the business that can no longer be carried on. The company itself specifies that it has become a “significantly more challenging environment and greater requirements for regulatory compliance in China”.

Linkedin is not alone in experiencing this “challenging environment”. In one fell swoop, the entire Chinese tutoring industry was shut down after the government deemed it unsuitable for profit. This week that industry received some redress, when those companies are now allowed to assist with vocational training at least. That fits well with the modern China that Xi Jinping wants to build. And those types of swings can happen quickly – even for the companies that are on the inside.

The picture being painted is of a China that is closing itself more and more. The harsh pressure that has been put on the domestic tech companies has attracted the world’s eyes and caused stock market prices to fall. When established foreign companies – which followed market practices – are forced to reconsider their operations, this could create more uncertainty among the world’s investors.

If even the world’s second highest valued tech company, Microsoft, can’t manage to navigate the political landscape – what will all other companies do?

This column was first published in SvD Näringsliv, in Swedish, on October 15th, 2021.

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