A new data protection law is changing the calculus for doing business in China, with foreign and domestic firms scrambling to comply, and some companies including LinkedIn and Yahoo choosing to leave.
China’s personal information protection law, enacted this month, is the latest factor adding to a challenging political climate for businesses operating in the country and changing cost-benefit analysis. While the untapped business potential of 1.4 billion consumers was once an irresistible attraction, this is rapidly changing.
Beijing-based US lawyer James Zimmerman said the Chinese market had become “less and less palatable to Western companies” because of “the reputational risk of operating in an environment with extreme content censorship and strict regulatory conditions”.
The trade war significantly escalated politics in US-China trade, with Beijing and Washington introducing tariffs and consumer product boycotts in their power struggles. Domestically, Beijing has launched a populist campaign against large businesses, effectively making the market less profitable for many companies under tighter new rules.
Microsoft will shut down its LinkedIn service in China after facing criticism for censoring the post and, for some Western business executives, the human rights disputes of President Xi Jinping’s era have become a bridge too far, including ethnic issues in the Xinjiang region. Includes action on minorities that Washington has classified. as a genocide; silencing Hong Kong protesters through the use of force and imprisonment; And, more recently, the disappearance of tennis star Peng Shuai after he accused a former top official of sexual assault.
Women’s Tennis Association president Steve Simon said last week that the organization was set to shut down its China operations, potentially causing hundreds of millions of dollars in damages if Chinese officials do not properly investigate Peng’s allegations. could.
On November 2, the same day that allegations surfaced on Peng’s verified social media account, Yahoo announced it was exiting the China market due to an “increasingly challenging business and legal environment”. A few days ago, LinkedIn also cited a more challenging operating environment in its decision to shut down the Chinese version of its networking site, though it said it was a simple China job without a social feed or the ability to share articles. The list will keep the site.
Yahoo had been slashing its China operations for years, facing dwindling business in the country due to censorship and competition from local players. In 2007, the company faced intense criticism in the United States for turning over emails from two Chinese political dissidents to Beijing officials, which were used as evidence in their prosecution; He was later imprisoned. Yahoo shut down its email service in China in 2013 and closed its office in Beijing in 2015.
Nevertheless, the company has so far remained in the Chinese market. Although Yahoo did not provide details about its reasons for leaving China, it was announced when the new data protection law came into force on November 1, which industry executives said would cost multinationals significant and costly in their processing and storage. changes will be required. of data.