For Chinese regulators, even a censored US-based social network was too much.
Microsoft said Thursday that it would stop operating its work-oriented social network LinkedIn in China before the end of the year. In a statement, the company cited a “significantly more challenging operating environment and greater compliance requirements in China.”
The announcement is a symbolic moment for US-China technology connections and for China’s new tough approach to regulating its tech industry. Microsoft’s withdrawal is the most high-profile departure since Google left the country in 2010 in protest of censorship and alleged espionage.
LinkedIn entered China in 2014 after agreeing to censor content on its site for misinformation and politically sensitive topics, such as Taiwan. Microsoft, which had its own long and relatively strong relationship with Chinese authorities, acquired LinkedIn in 2016. In recent years, it has been the only major US Internet company to offer content within China. LinkedIn says it will operate a China-only job board and effectively remove the site’s social network and content sharing functionality.
The exit highlights the pressure on US companies as US-China relations deteriorate and the Chinese government increases its influence on the economy. “China’s austerity measures are becoming less and less conciliatory for Western companies,” said Nina Xiang, a financial analyst and author of USA-China Tech War, a book on high-tech competition and cooperation between the world’s two largest economies.
“LinkedIn is about the last remaining major US tech company operating in China, involving content,” says Xiang. “Once it is gone, the decoupling between China and the rest of the world will only deepen.”
The announcement from LinkedIn follows months of intensified Chinese government pressure on its technology industry, with extensive interventions and tough new rules. Significantly, this includes a plan to take effect later in the year to examine and regulate recommendation algorithms. This would cover the algorithms that LinkedIn uses to suggest content as well as new potential business connections to users.
Microsoft has a long history of operating successfully in China’s tech industry. The company established a significant research laboratory, Microsoft Research Asia, in Beijing in 1998. Researchers trained there can be found across China’s technological world.
In 2012, members of the laboratory collaborated with Geoff Hinton, a pioneer in modern artificial intelligence, using a technique known as deep learning for speech recognition. The laboratory demonstrated a system that translates between English and Mandarin in real time using the technology. The adoption of AI helped a number of Chinese AI companies.
Microsoft will continue to operate its censored search engine, Bing, in China, even though it accounts for less than 4 percent of the country’s search market, according to MarketMeChina.
The pressure has been rising on LinkedIn for several months. In March, company executives in China were reportedly reprimanded by the government for not controlling political content shared on the platform, despite censorship. It is unclear what caused the action, but the company was supposed to conduct a “self-assessment”, stop registering new users and report to the Cyberspace Administration in China within 30 days.
In August, the company again said it stopped new member registrations via the LinkedIn app “to ensure we stay in line with local law” without elaborating. And in September, the company expanded its censorship with tells some foreign journalists that their profiles would be blocked with China
Chinese Internet companies are also facing new challenges as the government enforces tighter antitrust rules and regulations regarding the use of data and algorithms.
Under government pressure, the Ant Group, a spin-off of financial services in Alibaba behind the widespread Alipay app, and plans for a multi-billion dollar listing in Hong Kong and Shanghai ceased last November. The company has since been ordered to break its business and make its mobile app compatible with that of its toughest competitor, Tencent.
In April, Ant’s parent company Alibaba was fined DKK 2.8 billion. Dollars of the supervisory authorities for violations of cartels in connection with its e-commerce business.
In August, riding tribute company DiDi was reprimanded for going ahead with its own IPO despite concerns from China’s Internet regulator over data protection. The company’s app was removed from Chinese app stores, and it has been the subject of a new study of its data practices.