China’s rising cost of business is prompting some companies to leave – Redlands Daily Facts

A new data protection law changes the way business is done in China as foreign and domestic companies scramble to comply, and some companies, including LinkedIn and Yahoo, decide to leave.

China’s Personal Data Protection Act, enacted this month, is the latest contributing factor to a difficult political environment for businesses 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 increasingly changing.

James Zimmerman, a Beijing-based American attorney, said the Chinese market “has become less and less palatable to Western companies” because “reputational risks exist in an environment of extreme content censorship and stricter regulatory conditions.”

The trade war brought politics into the US-China deal to a much greater extent, with Beijing and Washington practicing tariffs and consumer goods boycotts in their power struggle. Domestically, Beijing has launched a populist campaign against big business that is effectively making the market less profitable for many companies under stricter new regulations.

Microsoft to shut down LinkedIn service in China after being criticized as genocide for censoring posts; Silence by demonstrators in Hong Kong through use of force and imprisonment; and most recently the disappearance of tennis star Peng Shuai after accusing a former top official of sexual assault.

Women’s Tennis Association chairman Steve Simon said last week the organization is poised to cease operations in China and potentially lose hundreds of millions of dollars if Chinese authorities fail to properly investigate Peng’s allegations.

On November 2, the same day the allegations surfaced on Peng’s verified social media account, Yahoo announced it was pulling out of the Chinese market due to “the increasingly challenging business and legal environment.” Days earlier, LinkedIn had also cited a significantly tougher operating environment in its decision to close the Chinese version of its networking site, despite saying it would maintain a simple Chinese job board with no social feed or the ability to share articles.

Yahoo had been downsizing its China operations for years as business in the country had declined due to censorship and competition from local actors. In 2007, the company was heavily criticized in the US for forwarding emails from two Chinese political dissidents to the Beijing authorities that were used as evidence in their indictment; they were later arrested. Yahoo ceased its email service in China in 2013 and closed its Beijing office in 2015.

However, the company has stuck to the Chinese market until now. While Yahoo did not elaborate on the reasons for leaving China, the announcement came at the time the new Data Protection Act went into effect on Nov. 1, which industry leaders said would require multinational companies to make significant and costly changes to the way they process and store files .

China’s rising cost of business is prompting some companies to leave