Chinese government withdraws approval for Facebook subsidiary

Facebook Founder and CEO Mark Zuckerberg speaks on stage during the annual Facebook F8 developers conference in San Jose, California, U.S., April 18, 2017.Stephen Lam/Reuters

• The Chinese government has withdrawn its approval for Facebook to launch a new venture in the country.
• The California tech giant had been granted permission to create a subsidiary on Tuesday.
• It said it wanted to launch an “innovation hub” for local Chinese startups.
• Facebook’s main social network remains banned in China.

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Facebook’s plan for a new venture in China has ended before it even begun.

The Chinese government has withdrawn its approval for the California tech company’s plan to launch a subsidiary in the eastern province of Zhejiang, The New York Times reported on Wednesday, citing a person familiar with the matter.

Facebook had said on Tuesday it planned to create an “innovation hub” to support local start-ups. The new subsidiary was registered in Hangzhou, according to a filing approved on China’s National Enterprise Credit Information Publicity System last week and seen by Reuters on Tuesday.

A Chinese government database showed that Facebook had gained approval to open a subsidiary — but that registration has since disappeared. Facebook could not be immediately reached for comment.

The decision to take down the approval came after a disagreement between officials in Zhejiang and the national internet regulator, the Cyberspace Administration of China, which was angry that it had not been consulted more closely, according to the New York Times.

The Chinese internet regulator was not immediately available for comment. Other Chinese officials could not be reached outside business hours.

Facebook’s planned venture in China was similar to what it did in other countries: Station F in France, Estacao Hack in Brazil, Tech Hub launch in India and Innovation Hub in Korea.

“Having a wholly foreign-owned enterprise does not change our approach in China,” a Facebook spokesperson said on Tuesday after announcing the venture. “We are still understanding and learning the various approaches on what it takes to be in China.”

“If China blocks this move by Facebook it’s another shot across the bow at U.S. tech companies as this tariff battle heats up between China and the Beltway, coupled by the Qualcomm-NXP saga continuing,” GBH Insights analyst Daniel Ives said.

Facebook is the latest company to get caught in the crosshairs of rising U.S.-China trade tensions. U.S. chipmaker Qualcomm’s proposed bid to buy NXP Semiconductors NV has also got stuck awaiting approval from Chinese regulators.

Facebook’s website remains banned in China, which strictly censors foreign news outlets, search engines and social media including content from Twitter and Google. Its messaging app WhatsApp is also blocked in the country.

Shares of Facebook pared most of their gains to trade marginally up at $215.34, after touching a record-high earlier in the session. The company is due to report quarterly results after the closing bell.