Abacus | Why Facebook and Google’s China dream will cost more than it pays

Even if the tech giants succeed in gaining a toehold in the China market they will start at a disadvantage to local competitors, face labyrinthine regulation and leave themselves open to interference from Beijing

Reading Time:4 minutes

Published: 8:00am, 13 Aug 2018Updated: 8:07am, 13 Aug 2018

The old dream still burns. In the 19th century, British textile merchants used to fantasise about the vast fortunes they would make if only they could “add an inch of material to every Chinaman’s shirt tail”.

Almost 200 years later, the modern equivalents of the industrialised textile factories of 19th century Britain are the great internet technology giants of the US: companies like Facebook and Google. And like their forebears they still dream of breaking into the China market.

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They may succeed one day in establishing a toehold, but they will pay a heavy price to do so. And they are highly unlikely ever to make the great fortunes from China that they have long dreamt about.

Both Facebook and Google, along with other US tech giants including Amazon, have long been shut out of China. Google itself pulled out of China in 2010 rather than manipulate its search engine’s results to suit Communist Party censors.

Chinese President Xi Jinping talks to Facebook Chief Executive Mark Zuckerberg. Photo: Reuters

Since then, the market has changed beyond all recognition. Today China boasts some 770 million internet users – more than the populations of western Europe and the United States combined – and Google and others want a slice of the pie.

This month it emerged that Google is developing a search engine app for smartphones that will comply with China’s strict censorship rules. Meanwhile Facebook has been attempting to set up a subsidiary in China.

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