A person familiar with the matter cited that China has rejected Facebook’s plan to open a new business enterprise in the eastern province of Zhejiang.
A Chinese government database on Tuesday showed Facebook gaining approval from the Chinese government to open a subsidiary, but when checked on Wednesday the registration had disappeared.
In a country, that has already barred WhatsApp and the official website of Facebook, the withdrawal of the approval is a major setback for Facebook.
The incident also sheds light on the difficulties that U.S. companies have to face to pass through the bureaucratic mesh of the Chinese government.
Matt Sheehan, an expert on China-California relations and fellow at The Paulson Institute think tank said, “Certain terms like “The Great Firewall” often promotes the false notion that the Chinese Government is completely unified on technology policy. However, there are a lot of ongoing turf wars and competing fiefdom within that Firewall.”
China declares its decision amidst escalating tensions with the U.S. as the world’s two significant economies levied duties on each other’s imports. U.S. chipmaker Qualcomm’s deal to buy NXP Semiconductors has not yet won approval from Chinese Regulators, the only defiant from eight out of nine global regulators that are required to approve the deal.
Facebook’s plans for Chinese were similar to that of the businesses it established in other countries: Station F in France, Innovation Hub in Korea, Tech Hub launch in India, and Estacao Hack in Brazil.
The disagreement between officials of Zhejiang and the Cyberspace Administration of China, led to the decision to take down the approval since the national internet regulator was heated as it felt that it had not been consulted more closely.
According to the longtime venture investor in China and founder and managing partner of Qiming Venture Partners, Gary Rieschel, the issue is more about the internal Chinese politics than it is about Facebook and China. He further added that “The central Cyberspace Administration of China regulators were miffed they were not consulted more thoroughly by the Zhejiang authorities prior to approval. I don’t think it means anything new for U.S. tech firms trying to enter China.”
China’s announcement regarding the country to lead in technologies like artificial intelligence (AI), has further added to the burden of provincial governments. Now, a colossal task of attracting technological talent lays in front of the provincial government.
However, this decision does not mark the end of breaks for Facebook in the mainland China, and also the government’s pulling of approval does not spell that Facebook was close to launching its official website in the country, believed the investors who have been associated with China.
Sheehan said, “Facebook opening a research center in Hangzhou wasn’t going to fast-track the entry of its main product to Chinese markets.”
China has strictly censored search engines, foreign news outlets, and social media counting Alphabet Inc’s Google and Twitter Inc. Daniel Morgan, a portfolio manager at Synovus Trust, which holds 73,386 Facebook shares, said, “While Facebook had hoped to dip a toe in the market and work with Chinese developers, its very presence appears to have become a large, and incendiary, political question.”