Facebook’s plan to open a subsidiary in China has fallen apart, with the country withdrawing its approval for the project.
According to Reuters, a Chinese government database had initially showed that Facebook had gained approval to open an office in Zhejiang, but that registration has now disappeared.
The change means that Facebook is the latest company to feel the impact of U.S.-China trade tensions.
“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 did not respond to multiple requests for comment, but it said on Tuesday (July 24) that owning the Chinese company would not change its approach to the country, where it was still learning how to operate.
In fact, its approach to China would be similar to what it did in other countries, including Station F in France, Estacao Hack in Brazil, Tech Hub launch in India and Innovation Hub in Korea.
But sources said that 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 complained that it had not been consulted more closely.
“At first blush it looks like it’s not trade war-related but more free speech-related. China has wanted to control what gets into the public hands, which has made Google and Facebook’s entry difficult there,” Elazar Advisors analyst Chaim Siegel said.
“If the U.S. and China were best buds maybe it could have affected this decision, but I don’t think so,” he added.
The Chinese internet regulator was not immediately available for comment.
“While Facebook had hoped to dip a toe in the market and work with Chinese developers, its very presence appears to have become a large, and incendiary, political question,” said Daniel Morgan, a portfolio manager at Synovus Trust, which holds 73,386 Facebook shares.