A new data protection law is changing the math for doing business in China, with foreign and domestic companies scrambling to comply, and some companies, including LinkedIn and Yahoo, are choosing to leave.
China’s personal information protection law, implemented this month, is the latest factor adding to a difficult political environment for companies operating in the country and changing the cost-benefit analysis. While the untapped business potential of 1.4 billion consumers was once an irresistible draw, that is changing more and more.
James Zimmerman, a Beijing-based US lawyer, said the Chinese market has become “less and less acceptable to Western companies” because of the “reputational risks of operating in an environment with extreme censorship of content and media. stricter regulatory conditions “.
The trade war brought politics much more into U.S.-China affairs, with Beijing and Washington applying tariffs and consumer product boycotts in their struggle for power. Nationally, Beijing has launched a populist campaign against big business, making the market less profitable for many companies under new, stricter regulations.
Microsoft will shut down the LinkedIn service in China after being criticized for censorship of posts. as genocide; silence protestors in Hong Kong with the use of force and imprisonment; and, most recently, the disappearance of tennis star Peng Shuai after accusing a former senior official of sexual assault.
Women’s Tennis Association president Steve Simon said last week the organization was ready to cease operations in China, which could result in a loss of hundreds of millions of dollars if Chinese authorities fail to properly investigate on Peng’s allegations.
On November 2, the same day the allegations surfaced on Peng’s verified social media account, Yahoo announced that it was withdrawing from the Chinese market due to “the increasingly difficult business and legal environment.” Days earlier, LinkedIn also cited a much more difficult operating environment in its decision to shut down the Chinese version of its networking site, although it said it would keep a simple job board. in China without social feed or possibility to share articles.
Yahoo had scaled back its operations in China for years, facing a decline in business in the country due to censorship and competition from local players. In 2007, the company came under heavy criticism in the United States for providing Beijing authorities with emails from two Chinese political dissidents, which served as evidence in their prosecution; they were then imprisoned. Yahoo closed its China messaging service in 2013 and its Beijing office in 2015.
Still, the company has held onto the Chinese market so far. Although Yahoo did not give details on the reasons for leaving China, its announcement came as the new data protection law went into effect on November 1, which the executives of the industry, would force multinational companies to make significant and costly changes to their processing and storage. of data.