US tech giant Microsoft today announced that it will be pulling its professional social network LinkedIn from the Chinese market later this year.
Microsoft bought LinkedIn for over $26 billion in 2016.
The news comes amid rising tensions between the company and the country, along with a flurry of regulatory changes in the Asian nation. Two weeks ago, Microsoft came under heavy scrutiny for its decision Block the profiles of some American journalists in China.
The company is hardly the only American enterprise that finds it difficult to balance the authoritarian demands of the Chinese government and its own business goals. Here, Microsoft has taken a sharp approach to a problem that will likely only get worse over time; The software giant could either choose to accede to the demands of the Chinese government, which it found unacceptable – that journalists were suffering from the bloc, which is not surprising, given the media environment inside China – or walk.
It chose the latter.
in a blog post discuss the news, LinkedIn wrote that the company described its 2014 decision to enter the Chinese market as “complying with the requirements of the Chinese government on Internet platforms” despite its “strong support”.[ing] Freedom of expression.”
But LinkedIn wrote that it now faces “a significantly more challenging operating environment in China and greater compliance requirements.” That changing market landscape prompted the company to “sunset the current localized version of LinkedIn, similar to the way people in China use LinkedIn’s global social media platform, later this year.”
Shares of Microsoft are up about 1.6% in morning trading, almost as high as the technology-focused Nasdaq Composite Index. In other words, investors are avoiding the news.
What the decision will mean for Microsoft’s relationship with the Chinese market and state is unclear at this time. The Chinese Communist Party is making changes to its domestic cloud market, for example, which could limit its commercial future for foreign companies. Microsoft’s Chinese LinkedIn decision can be viewed through the lens of a possible long-term disintegration of the tech shop and the nation.