Yahoo 378s LinkedIn, Fortnite: Why Are Foreign Tech Firms Pulling Out of China?

Companies have decided the regulatory uncertainty and reputational risks outweigh the advantages of staying in the huge market. 4h5o6b

By Associated Press | Updated: 4 November 2021 13:39 IST

Yahoo, LinkedIn, Fortnite: Why Are Foreign Tech Firms Pulling Out of China?

Photo Credit: Bloomberg 2x1m1w

s visiting the Engadget China by Yahoo find a popup notice saying it will not publish any new content

Highlights

Yahoo said its services in China stopped on November 1
China operates what is known as a “Great Firewall”
The downsizing also come as US and China tussle over technology, trade

ment

Yahoo is leaving the China market, suspending its services there as of Monday amid what it says is an “increasingly challenging” business and legal environment.

Foreign technology firms have been pulling out or downsizing their operations in mainland China as a strict data privacy law specifying how companies collect and store data takes effect.

Such companies have decided the regulatory uncertainty and reputational risks outweigh the advantages of staying in the huge market.

Yahoo Leaves China for Good, Cites 'Challenging' Environment

Which foreign technology companies have recently downsized operations or left China?

Yahoo said in a statement Tuesday its services in China stopped as of November 1. s visiting the Engadget China site run by Yahoo this week find a popup notice saying the site will not publish any new content.

Last month, LinkedIn said it would shutter the Chinese version of its site this year and replace it with a jobs board with no social networking functions.

Yahoo Names Tinder Top Boss Jim Lanzone as CEO

Tencent, which owns a 40 percent stake in Epic.

Why are companies leaving China now?

The Personal Information Protection Law that took effect on November 1 limits the amount of information companies are allowed to gather and sets standards for how it must be stored. Companies must get s' consent to collect, use or share data and provide ways for s to opt out of data-sharing.

Fortnite Pulled by Epic Games From China Over Sweeping Crackdown

Companies also must get permission to send s' personal information abroad.

The new law raises costs of compliance and adds to uncertainty for Western companies operating in China. Companies caught flouting the rules could be fined up to CNY 50 million (roughly Rs. 58.17 crore) or 5 percent of their yearly revenue.

Chinese regulators have cracked down on technology companies, seeking to curb their influence and address complaints that some companies misuse data and engage in other tactics that hurt consumers' interests.

The downsizing and departures also come as US and China tussle over technology and trade. Washington has imposed restrictions on telecoms equipment giant Huawei and other Chinese tech companies, alleging they have ties with China's military and government.

Local companies are also feeling the heat, with e-commerce companies like NetEase and Tencent.

What other hurdles do foreign tech companies face in China?

China operates what is known as a “Great Firewall” which uses laws and technologies to enforce censorship.

Content and keywords deemed politically sensitive or inappropriate must be scrubbed from the internet. Companies must police their own platforms, deleting posts and making sensitive keywords unsearchable.

Western social media networks such as Twitter have long been blocked by the Great Firewall and are generally not accessible for people in mainland China.

“China has installed a very draconian policy governing internet operators, telling them what to do and especially what not to do,” said Francis Lun, CEO of GEO Securities Limited in Hong Kong.

“I think the question comes down to why bother (operating as a foreign company in China) with such a limited return, and such heavy liability,” he said.

Michael Norris, a research strategy manager at the Shanghai-based consultancy AgencyChina said compliance costs will rise further.

“Fortnite's exit is particularly damaging, as it shows not even a close partnership and investment with Tencent is enough to make the business case work,” he said.

Foreign tech companies operating in China also face pressure from their home markets. Some US lawmakers criticized LinkedIn's censorship of US journalist profiles in China. In 2007, Yahoo was lambasted for handing over information on Chinese dissidents to the Chinese government that eventually led to their imprisonment.

What does this mean for Internet s in China?

Chinese alternatives have popped up over the years to fill the void left by foreign social media platforms that have given up operating under the Great Firewall.

Instead of Weibo, a microblogging platform, is the closest equivalent to Twitter, with more than 560 million Chinese s.

Unless they use a virtual private network (VPN) to mask their internet traffic and location and circumvent the web restrictions Chinese have fewer options for social networking and access to content and are likely to turn to strictly censored local alternatives.

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