Facebook has registered a subsidiary in the city of Hangzhou, according to a Chinese government filing, which said the company had gotten approval on July 18. The subsidiary was financed with an investment of $30 million, according to the records.
Yet late Tuesday, in a sign of possible complications, the corporate registration was taken down from the Chinese government website and some references to the new subsidiary appeared to be censored on social media in the country.
The moves indicated how complicated it remains for Facebook to navigate China, where it has been blocked for almost 10 years. If the subsidiary is allowed to proceed, it would be a toe in the water for the Silicon Valley company there. Facebook said it wanted to use the subsidiary to coordinate with Chinese developers in the closely censored market.
Even to release an app in China, Facebook is likely to need a separate license from regulators. To go further and introduce one of its larger products, like its social network or messaging service, would require further negotiations over issues like data storage and security. Facebook’s photo-sharing service Instagram and its messaging platform WhatsApp are also blocked in China.
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“We are interested in setting up an innovation hub in Zhejiang to support Chinese developers, innovators and startups,” said Debbie Frost, a Facebook spokeswoman, referring to the province in eastern China where Hangzhou is. “We have done this in several parts of the world — France, Brazil, India, Korea — and our efforts would be focused on training and workshops that help these developers and entrepreneurs to innovate and grow.”
The ruling Chinese Communist Party deems all social networks that it does not ultimately control, like Facebook and Twitter, as potentially destabilizing. A series of sophisticated internet filters block residents from accessing such sites. Networks within China often self-censor, but are still held closely accountable by government regulators.
To get around those fears, some U.S. companies, like LinkedIn, have voluntarily censored their products.
If Facebook were to start introducing services in China, it would probably face questions about whether to censor content or share data with Beijing. The latter could be a particularly tricky issue for the social network to deal with at a moment that it is under scrutiny by the U.S. government for its handling of user data.
Facebook’s chief executive, Mark Zuckerberg, said in an interview last week with Recode’s Kara Swisher that the company was “a long time away from doing anything” in China. He said Facebook was working on products for China “over the long term,” but added that “we need to figure out a solution that is in line with our principles and what we want to do, and in line with the laws there, or else it’s not going to happen. Right now, there isn’t an intersection.”
Facebook’s fortunes in China follow some progress there for Google, which has also seen its products slowly squeezed out of the market. Over the past year, the search giant has set up an artificial-intelligence research lab in China and also introduced several services, including an AI-powered sketching game.
To court China, Zuckerberg previously pulled out all the stops, dining with China’s president, hosting a question-and-answer session in Mandarin at a Chinese university, and even once jogging across a smog-choked Tiananmen Square. The company also quietly worked on a censorship tool and released an app in China, called Colorful Balloons, without putting its name to the service.
Despite not having any product or office in China, Facebook still does booming business there. The company sells ads across the world to Chinese companies and the Chinese government. Facebook’s ads are so in demand that China has been the company’s largest source of ad revenue in Asia.
The legal representative for Facebook’s new China subsidiary was the same employee who registered the company that launched Colorful Balloons: Ivy Zhang, Facebook’s chief representative in China and head of business development.
Also on the board of the new subsidiary with Zhang is William Shuai, Facebook’s China government affairs representative and a former government relations executive at the Chinese search engine Baidu and LinkedIn. Before holding those positions, Shuai was briefly a low-level official in the Chinese government.
The New York Times
Paul Mozur and Sheera Frenkel © 2018 The New York Times