Chinas rising cost of business is prompting some companies to leave – East Bay Times

Posted: December 27, 2021 at 4:15 pm

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 Yahoochoosing to leave.

Chinas personal information protection law, implemented this month, is the latest factor adding to a challenging political environment for businesses operating in the country and altering the cost-benefit analysis. While the untapped business potential of 1.4 billion consumers was once an irresistible draw, this is increasingly changing.

James Zimmerman, a Beijing-based American lawyer, said that the China market had become less and less palatable for Western companies because of reputational risks of operating in an environment with extreme content censorship, and tighter regulatory conditions.

The trade war brought politics into U.S.-China business to a much greater degree, with Beijing and Washington wieldingtariffsandconsumer product boycottsin their power struggle. Domestically, Beijing has launched apopulist campaignagainst big business, effectively making the market less profitable for many companies under stricter new regulations.

Microsoft will shut down LinkedIn service in China after facing criticism for censoring postsAnd for some Western business executives, the human-rights controversies of President Xi Jinpings era have become a bridge too far, includinga crackdownon ethnic minorities in the Xinjiang region that Washington classified as genocide;silencing of Hong Kong protestersthrough use of force and imprisonment; and, most recently, the disappearance oftennis star Peng Shuaiafter she accused a former top official of sexual assault.

Womens Tennis Association Chairman Steve Simonsaid last weekthe organization is willing to cease its China operations, potentially losing hundreds of millions of dollars, if Chinese authorities dont properly investigate Pengs allegations.

On Nov. 2, the same day the allegations appeared on Pengs verified social media account, Yahooannouncedit was pulling out of the China market due to the increasingly challenging business and legal environment. Days earlier, LinkedIn had also cited a significantly more challenging operating environment in its decision toclose the Chinese versionof its networking site, though it said it would keep a simple China job listing site without a social feed or the capability to share articles.

Yahoo had been downsizing its China operations for years, faced with diminishing business in the country because of censorship and competition from local players. In 2007, the company came under intense criticism in the United States for turning over emails of two Chinese political dissidents to Beijing authorities, which were used as evidence in their prosecution; they were later imprisoned. Yahoo shut down its email service in China in 2013 and closed its Beijing office in 2015.

Still, the company hung on in the China market until now. While Yahoo didnt go into details about its reasons for leaving China, its announcement occurred as the new data protection law came into effect Nov. 1, which industry executives said would require multinational companies to make significant and costly changes to their processing and storage of data.

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Chinas rising cost of business is prompting some companies to leave - East Bay Times

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