Archives March 2014

Real estate developers’ sales drop

Real estate investment in China slowed in the first two months of this year as property sales declined in the same period, official data showed on Thursday, the latest sign of a slowdown in the country’s housing market.

Property investment grew 19.3 percent year-on-year in the first two months of the year, which is 0.5 percentage points slower than the annual growth in 2013, data released by the National Bureau of Statistics (NBS) showed Thursday.

Sales of properties including residential homes, offices and commercial premises fell 0.1 percent year-on-year in terms of floor space in the period and declined 3.7 percent in terms of value, the data showed.

Meanwhile, Beijing-based Securities Daily reported Thursday that 30 real estate developers saw a sharp decline of sales in February from January.

The 30 companies, including major developers such as Poly Real Estate Group and Gemdale Group, reported total sales revenue of 66.5 billion yuan ($10.83 billion) in February, down 39 percent month-on-month, the report said.

Many of the companies have also shown year-on-year drops during the period. Leading developer Poly Real Estate sold 685,900 square meter of apartments in February, down 24 percent month-on-month and 24.77 percent year-on-year. Its sales contracted 8.38 percent year-on-year to 7.73 billion yuan, the company said Monday.

Developer Gemdale sold 112,000 square meters of apartments in the month, a drop of 25.33 percent month-on-month and 17.04 percent year-on-year, and the value of the sales dropped 16.67 percent year-on-year to 1.35 billion yuan, according to a company statement on Saturday.

Analysts noted that seasonal factors contributed to the month-on-month decline, such as the Spring Festival holidays in early February for which the country had seven days off. However, the more alarming fact is that many of them have reported deteriorating year-on-year performance.

Tight liquidity and sluggish markets in third- and fourth-tier cities are also reasons behind the year-on-year drop in major developers’ performance, analysts said.

In December, 13 cities including Shanghai, Guangzhou and Hangzhou raised required down payment amounts for the purchase of second homes. Beijing may also raise the down payment for property purchase, according to media reports.

Besides, oversupply in some third- and fourth-tier cities has also prompted speculation that prices would drop and some consumers have adopted a wait-and-see attitude.

Hong Kong-listed Central China Real Estate, which mainly focuses on lower-tier cities, has seen its sales revenue dropping 11.1 percent in February, to 400 million yuan.

However, analysts said that developers’ performance may rebound slightly in March, as the month has been a traditional boom season in the past.

Alibaba expands its footprint into media

Alibaba Group Holding Ltd, China’s Internet conglomerate, will spend about $800 million buying the control of a Hong Kong-listed media group, a move that will enable the e-commerce giant to tap into digital content production.

Alibaba will pay HK$6.24 billion ($804 million) for a 60 percent stake in ChinaVision Media Group Ltd, which has a rich business portfolio from print media, television and films to mobile games.

The purchase of ChinaVision Media’s new stock, at a 22 percent discount to the last closing price, will take the stake held by Alibaba and parties acting with it to 70.8 percent, according to a ChinaVision filing to the Hong Kong stock exchange on Tuesday.

The investment from Alibaba pushed the share price of ChinaVision up about 186 percent to HK$1.83 on Wednesday from the previous closing price of HK$0.64.

The deal is Alibaba’s second major move in the merger and acquisitions field this year after the Internet titan bought mapping service AutoNavi Software Co Ltd in February for a price of $1.1 billion.

The deal was designed to help Alibaba to access ChinaVision’s television programs, films and other digital content, which are experiencing surging demand from China’s rapidly growing number of mobile Internet users.

“The demand to acquire data and content over mobile and mobile-related devices is absolutely enormous,” said Colin Light, China digital consulting leader for PricewaterhouseCoopers in Hong Kong. The deal enables Alibaba to leverage its huge mobile and Internet-based users into an adjacent market, namely content media, he added.

In a telephone interview with China Daily, Light said observers have seen a dramatic trend around the world that media consumption is shifting from big screens, such as televisions, to small screens on mobile devices.

The shift is particularly strong in China, where more than 80 percent of Chinese Internet users access the Internet via mobile devices. The shift of media is expected to lead a shift in advertising money, according to a recent report from PricewaterhouseCoopers.

Almost 75 percent of digital advertising comes from search and display in China.

Alibaba offers to buy digital mapping company AutoNavi

There are currently few contenders big enough to take on Baidu Inc’s 80 percent share of the search market. Yet key social media sites such as Sina Weibo and Tencent’s popular mobile messaging app Wechat, which has more than 600 million accounts, are beginning to grab a share of the digital advertisement market, said the report.

“Through building online retail platforms, Alibaba serves as a commodity trader. In the same way, it can become a digital content trader. The investment fits naturally with Alibaba’s business model,” said Light.

According to ChinaVision Media’s official website, the company participated in the production and distribution of some very well known movies and television dramas in China.

In addition, the company co-manages the Beijing Times, the biggest morning newspaper in the Chinese capital, and has been jointly developing a mobile television business with People.cn, an information interaction online platform created by People’s Daily, a major State-own media company in China.

“When a company grows to a certain size, it is only a matter of time before they look to own media channels to gain a certain sway in public opinion,” said Tian Hou, chief analyst with T.H. Capital LLC, an independent research and investment advisory firm.

She added that getting involved in media content production is also in line with Alibaba’s mobile strategy. The company announced earlier this year it would enter the mobile gaming industry. ChinaVision media also produces mobile games.

Privately funded banks to be launched

Ten private companies will launch five banks that are entirely funded by private capital in Tianjin, Shanghai, Guangdong Province and Zhejiang Province as part of a pilot program, Shang Fulin, head of the China Banking Regulatory Commission, said Tuesday.

The establishment of the private banks, which was approved by the central government in January, is considered a vital step in the country’s financial reform and its opening-up of the banking sector to private capital.

Internet giants Tencent Holdings and Alibaba Group will be among the 10 companies approved to participate in the pilot program, Shang said, adding that the five private banks should have differentiated market positioning.

Shang did not provide details about the names of the five banks, or the amount invested in them.

The website of People’s Daily quoted Shang as saying on Monday that the 10 companies will also include Fosun International, a real estate conglomerate, and Chint Electrics Co, an electrical equipment maker.

Each bank must have two private investors, Shang said, and they will be allowed to open for business when they have made sufficient preparations.

The private bank that Tencent plans to initiate will specialize in providing products for the burgeoning online finance sector, a staff member of Tencent told the Global Times Tuesday on condition of anonymity.

“Tencent will utilize its advantages in the Internet service industry, and [launch] online financial products based on the services provided by the traditional banking sector,” the source said.

The staff member said the bank will be located in Qianhai, a district of Shenzhen in South China’s Guangdong Province. Qianhai was approved by the State Council in 2010 as a test ground for the free cross-border flow of the yuan and financial innovations.

A staff member of Alibaba, which is a partner in Yu’ebao, one of the country’s most popular online money market funds, told the Global Times Tuesday that Alibaba is working with China Wanxiang Holdings Co to apply for a private bank license.

“Now our application materials are still being reviewed,” said the staff member, who wished to remain anonymous.

Wanxiang Holdings is part of China’s biggest auto parts company Wanxiang Group, which is based in Hangzhou, East China’s Zhejiang Province.

The Alibaba source declined to comment on the location or market positioning of the bank.

Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, told the Global Times Tuesday that the private banks will offer loans of up to 1 million yuan ($162,879) that will mature in less than two years.

The banks’ major customers will be those that have difficulty in getting loans from large commercial banks, Dong said, such as small and micro-sized businesses. That is why the new program will not have a disruptive impact on the banking sector or influence the interest rate, he said.

According to Shang, the private banks will be regulated in the same way as large commercial banks, but their performance will be more market-based.

Milestones in opening up to private investment

May 23, 2012 The State Council required sectors including railways, telecoms and banking to draw up detailed rules for encouraging private investment.

May 26, 2012 The China Banking Regulatory Commission (CBRC) said it would encourage greater private investment in the banking sector, without imposing restrictive or other additional conditions.

Jun 19, 2013 The State Council said China should set up private banks and financial lease companies that bear the burden of risk on their own.

Mar 11, 2014 CBRC chief Shang Fulin said China will set up five private banks on a trial basis.

Salary hikes will kick-start consumption

When China’s economic growth is targeted at 7.5 percent and domestic demand becomes the main engine driving growth, it is crucial to implement measures to increase salaries and create an economy more conducive to consumption, officials and executives agree.

In working to hike domestic demand, China will focus on boosting consumption, Premier Li Keqiang said in his recent work report to the National People’s Congress.

But since consumption is dependent on disposable income, salary increases become more significant and should be in line with the growth of the Consumer Price Index, CPPCC members said during a panel discussion.

“The government should have a specific target in improving the payroll level and release a guiding index,” said Yang Yuanqing, chairman and chief executive officer of Lenovo Group Ltd.

Public institutions currently are finding it difficult to catch up with CPI growth, let alone private companies.

“Government offices are supposed to be the leader of salary increases,” said Yang.

China’s domestic consumption accounts for less than half of its GDP. Economic growth still relies on exports and investments, according to Yang.

“Once consumption is expanded, the economy will be less reliant on the changeable overseas markets. It will ease China’s conflicts with trading partners,” he said.

Still, the problem of creating consumption hot spots and getting people to spend more at home remains a tough one.

Chinese tourists tend to prefer shopping overseas. Creating a better consuming environment will be a critical part of pulling them back.

More than two-thirds of luxury spending by Chinese mainlanders was carried out overseas in 2013, up from 2012, according to the China Luxury Market Study from consultancy Bain & Co.

Of course, with the rise of e-commerce, the price of goods is more transparent, and the cost of logistics is lower.

“Still, the government can prompt a new round of consumption tax reform and lower high tariffs on imported luxury goods,” said Yang.

Zhu Zhixin, vice-chairman of the National Development and Reform Commission, agreed, saying there is hope for salary reforms.

“We are now suggesting that residents’ income should be in accordance with the increase of GDP,” said Zhu.

In fact, salaries in China continue to rise. The trend has made the nation’s workforce more expensive than in neighboring countries, according to Zhu.

“But for years, wages in government offices and public institutions were kept almost constant,” said Zhu.

The government’s work report also mentions that the government will support nongovernmental investors in various types of services, with a focus on elderly care, health, tourism and culture, as well as implementing a new system of paid vacations.

The number of domestic tourists amounted to 3.25 billion and total income in the sector reached 2.9 trillion yuan in 2013.

“Although we have rules on paid vacations, we are not strictly implementing these rules,” said Zhang Xuewu, president of China National Travel Services Group.

IBM fires 19 in labor dispute

Tensions rose at an IBM factory in Shenzhen as 19 workers were fired on Monday, ostensibly for violating company policies, according to one of the strikers.

More than 1,000 workers at IBM Systems Technology Co (ISTC), the server-making unit of IBM Corp, spontaneously walked off the job on March 3 to protest the factory’s offer of severance packages ahead of a scheduled acquisition by personal computer giant Lenovo later this year.

“The factory terminated the labor contracts of 19 worker representatives. We were fired immediately and got no compensation. It’s a sort of revenge,” said Wen Yong, who has been working at the factory for 10 years.

The fired employees were said to have violated company policies by causing a production shutdown, Wen said.

Most strikers remained sober and non-violent as the strike entered its eighth day. But some of the workers staged sit-in protests on Monday evening.

The strike was triggered when workers at ISTC were notified on March 3 to that they had one week to decide whether to resign or stay on as Lenovo employees. The factory offered a 6,000 yuan ($980) severance payment for workers who chose to leave before March 7.

On Sunday, in an apparent sign of compromise, ISTC management said that workers who are willing to sign contracts with Lenovo before March 12 would get an extra 30,000 yuan bonus, half of which would be paid by the end of April and the rest in the first month after Lenovo takes the reins.

But workers who accept the new plan are required to resume production immediately and to ensure normal operations and good product quality.

According to Wen, about 100 of the strikers signed the contracts, but the rest continued to “protect their rights and fight for their benefits”.

Apart from the dissatisfaction about the severance packages, many of the strikers expressed anger about what they said was the company’s rude and abrupt decision to proceed without seeking their input, forcing them to make a life-changing choice on short notice.

“I have been working for the factory for 20 years and felt it’s a part of my life. But obviously the company doesn’t think the same way,” said Hou Hongbo.

The district government, local human resources managers and trade unions are working hard to mediate between the IBM management and the workers, said Wen Xianqing, a press official at Futian district government.

One official, who asked not to be identified, said IBM was too rough in its handling of the workers, though its actions are legal.

“The company is backed by a powerful legal team, so its move is in line with Chinese laws, but the decision is merciless to the workers,” the official said.

Lawyer Li Jianyong called the workers “unreasonably troublesome”, and said they would hurt the healthy development of the companies.

“IBM is offering much more than what the law requires to the workers. They have no reason to strike and suspend production,” he said.

In January, Lenovo, the world’s biggest producer of personal computers, said it would buy IBM’s x86 server unit for $2.3 billion. The deal is expected to close in the fourth quarter of 2014, according to Lenovo Chief Financial Officer Wong Wai-ming.

Tencent to buy 15 pct stake in JD.com

Chinese Internet firm Tencent plans to buy a 15 percent stake in JD.com, a major online direct sales company in China, before the latter launches its initial public offering (IPO) in the United States.

The purchase, representing 251,678,637 outstanding JD ordinary shares, will cost Tencent 214.6 million U.S. dollars and its e-commerce branches, according to Tencent’s statement filed with Hong Kong exchange on Monday.

After the purchase, Tencent will continue to buy 5 percent of JD’s outstanding ordinary shares on a post-IPO basis, the statement said.

In return, JD will take over Tencent’s business-to-consumer (B2C) and consumer-to-consumer (C2C) platforms wanggou.com and paipai.com, with all capital, assets, liabilities transferred to JD. It will also gain a minor stake in Tencent’s other online shopping website yixun.com and the right to buy the site’s remaining shares.

The cooperation, dubbed as the two companies’ overall business collaboration in e-commerce business, aims to win a leverage in the competition with another Chinese e-commerce firm Alibaba, which owns and operates the country’s largest online purchase platform.

In addition, Tencent will offer JD level 1 access points at WeChat and Mobile QQ, two of the most popular communication mobile applications developed by Tencent, to boost the latter’s growth in physical goods e-commerce, the statement said.

The two firms will also further ties in mobile applications and payment solutions, with JD being regarded as Tencent’s preferred partner in certain business areas.

Liu Chiping, president of Tencent, will become a member of JD’s board after the purchase agreement.

Waiting and searching for missing flight continue

China is making all-out efforts to locate the missing passengers on board Malaysia Airlines flight MH370, almost two-thirds of them from China, as family members prepared to fly to Malaysia. [Special coverage]

Forty-seven hours after the aircraft lost contact with ground control center, relatives of the passengers on board the missing flight who are settled in Hotel of Lido in Beijing, seems calmer than earlier Sunday.

Malaysia Airlines will help relatives of passengers on board its missing flight to fly from Beijing to Kuala Lumpur, said the airline’s spokesman on Sunday.

As of 10 pm, most of the relatives are applying passports and visas, however they are still overwhelmed by sadness.

An old man surnamed Li from the nearby Hebei Province, who has never been abroad, decided to go “see his kid for the last time”.

However some are still hesitating about the trip. An old couple whose children were on the plane worried that the language barrier would not help them getting more useful information.

The carrier will arrange for five relatives of each passenger on the MH370 flight to go to Kuala Lumpur, its point of departure, but the first departure will carry only two relatives of each passenger, said Ignatius Ong Ming Choy, representative of Malaysia Airlines, at a press conference.

Beijing police launched an emergency mechanism to make sure the relatives of passengers can get their passports within one hour.

Ahmad Jauhari Yahya, the airline’s Chief Executive Officer, said a 93-person work group has come from the company’s Kuala Lumpur headquarters to take care of passengers’ families and handle their passports and visas.

The Boeing 777-200 aircraft left Kuala Lumpur International Airport at 0:41 a.m. Beijing time on Saturday and was expected to land in Beijing at 6:30 a.m.

Contact with the flight was lost along with its radar signal at 2:40 a.m. Beijing time on Saturday when it was flying over the Ho Chi Minh air traffic control area in Vietnam.

The flight was carrying 12 crew members and 227 passengers, including 154 Chinese.

ALL-OUT EFFORTS

The whole country has joined the families of passengers on board the missing plane to pray for their safety.

Chinese President Xi Jinping on Saturday ordered the Ministry of Foreign Affairs as well as Chinese embassies and consulates overseas to strengthen contact with departments of relevant countries and pay close attention to the search and rescue work.

All-out efforts must be made for any emergency treatment necessary in the aftermath of the incident, Xi said in his instruction.

The CAAC demanded its air traffic management office keep in touch with its Malaysian counterpart, and ordered Beijing Capital International Airport to comfort relatives and friends of the passengers on board the missing flight.

An emergency response team assembled by the Ministry of Transport (MOT) set out early Sunday from south China’s Sanya Port in Hainan Province to the sea area where it is thought the missing Malaysia Airlines flight MH370 might have crashed.

The largest patrol vessel in South China Sea “Haixun 31” departed from Sanya on Sunday afternoon and is scheduled to arrive at the site on Tuesday afternoon, carrying 50 rescuers and facilities such as a maritime helicopter and sonar systems.

Rescue vessel “South China Sea Rescue 101” is carrying 12 divers and salvagers, and will join another rescue vessel, “South China Sea Rescue 115,” at the rescue site.

The latter ship is scheduled to arrive at the site on Monday afternoon, while “South China Sea Rescue 101” will get there on Tuesday afternoon, according to the MOT.

“South China Sea Rescue 101” is 109.7 meters long, with 6,200 tonnes of full load displacement.

Meanwhile, another rescue vessel, “Tai Shun Hai” of China Ocean Shipping (Group) Company arrived at the possible site at 9 a.m. Sunday and started searching, according to the MOT.

POPPING UP MYSTERIES

Two passengers were confirmed boarded the plane operated by the Malaysian Airlines with stolen passports, according to the international police agency Interpol.

China’s Ministry of Public Security has decided to send a work team to Malaysia to investigate the case after the confirmation of Interpol and was made after a consultation with the Malaysian side that called for a joint investigation into the matter, said the ministry late Sunday.

“We will join the investigation. Communication with Malaysian civil aviation authorities is underway. We’ll keep updating the latest news,” according to Li Jun, deputy director of CAAC.

A large oil slick stretching 100 nautical miles was found near Tok Bali, Kelantan Sunday by Malaysian Maritime Enforcement Agency, and chemical test has been done with no result has been published.

Late Sunday afternoon, Vietnam sent a boat to investigate a ” strange object” spotted by a Singapore search plane near Vietnam’s Tho Chu island.

The objects were suspected to come from the Boeing 777 aircraft, Vietnamese press reported earlier. But Rahman has ruled out the possibility that they were from the ill-fated jet.

UNSETTLED WHEREABOUTS

Rescue work remains challenging as there is no exact location of the possible crash site.

The searching vessel has detected no clues yet after a 9-hour-search covering about 145 nautical miles, according to the MOT.

Another Chinese coast guard vessel also reported no findings of the missing plane and is expanding searching area with technical aids.

The airline has told the passengers’ families to “prepare for the worst result.”

But the public has continued blessing for good news.

“To all 239 lives and 154 compatriots, how are you? The rescue continues and we are still waiting, please do not give up. We know that you are delayed but we don’t believe in your not coming home. MH370, China is ready for pickup, to welcome you home.” a post on China’s twitter-like Sina Weibo read.

Shanghai housing index climbs at slower speed

Shanghai’s existing housing index rose for another month in February, albeit at a slower pace.

The index, which checks price changes of pre-owned homes across the city, rose 2 points, or 0.06 percent, to 2,943 points last month, extending gains for the 21st straight month, the Shanghai Existing House Index Office said yesterday.

In January the index rose 0.26 percent, and 0.63 percent in December.

Citywide, the pre-owned home prices climbed in 49 of the 130 areas monitored by the office while 31 saw a decline. Prices were flat in the remaining 50 areas, the office said.

Baidu to be buying, doing more mobile applications

Nation’s largest search engine ready to shift toward new platforms

Baidu Inc, China’s largest online search company, is working to develop new products that can replace the search engine to become its most recognized gateway in the mobile Internet era, said Robin Li, the company’s chief executive officer.

Li didn’t elaborate on the new products but said that last year Baidu spent about 4 billion yuan on research and development. Most of it, he said, was used to develop products that will be as vital to the mobile era as the search engine has been in the personal computer-based one.

“If we had only wanted to maintain our leading position in search, we would have spent only about 20 percent of that amount on R&D,” said the 45-old-year Li, who, with a net worth of $12.1 billion, is ranked the third-richest man on the Chinese mainland, according to the latest world’s billionaires list from Forbes.

Li shared his vision about innovation and the Internet in an interview with China Central Television on the sidelines of the annual session of the National Committee of the Chinese People’s Political Consultative Conference.

He said his Beijing-based company’s main competitor is the changing Internet landscape in China, where more than 500 million out of the roughly 600 million Internet users in the country have access to the Internet through mobile phones.

“In the PC era, the search engine was the sole gateway for people to find information on the Internet. But now the channels to gain access are diverse. People have various applications on their smartphones to meet different kinds of demands,” he said.

In order to move quickly in the rapidly changing market, Baidu last August bought app store 91 Wireless for $1.9 billion and picked up 59 percent of group-buying website Nuomi the same month. The company moved to gain full control of Nuomi earlier this year.

The US-listed company saw its investment pay off, as mobile accounted for more than 20 percent of Baidu’s total revenues in the fourth quarter of last year, the company said in an unaudited 2013 finance report released at the end of February. Apart from shifting to mobile, Li sees opportunities ahead because the Internet has revolutionized many traditional sectors, from retail to finance.

China’s online shopping market has grown rapidly to become the world’s largest. Many Internet companies, including Baidu, launched financial services last year to offer users better returns than typical bank deposits in a convenient format.

“I don’t know much about finance,” Li said. “What we do here is to use Internet thinking to improve the efficiency of traditional finance, to simplify purchasing procedures and give better user experience,” he added.

Li said that in the future, there will be no dedicated Internet companies, “because every company will somehow embrace the Internet in some way”.

Li’s self-made Baidu has become involved in finance, online video, tourism and publishing. He said it will certainly expand into new sectors.

“With Internet thinking, there is a lot of room in terms of efficiency improvement in healthcare and education,” he said.

How LinkedIn Plans to Conquer China

With more than 277 million users worldwide, LinkedIn (NYSE: LNKD ) is not only the largest professional social network, it is also one of the best-monetized websites ever created. Unlike Facebook (NASDAQ: FB ) or Google, which mainly rely on advertisements to generate revenue, LinkedIn obtains revenue from its users through advertising, premium memberships, and human resources solutions.

However, despite being one of the best-monetized websites, it is becoming increasingly difficult for LinkedIn to continue growing. In the fourth quarter of 2013, revenue came in at $447 million, up 47%. That being said, management predicted revenue of $455 million-$460 million for this quarter, well below the Street consensus. The company’s projections raised worries that it may be starting to have trouble mining its audience for more revenue. At the same time, the company added only 18 million accounts in the fourth quarter, which barely matched the average of additional accounts that LinkedIn has gained in the previous quarters. To improve revenue and user metrics, the company recently announced the introduction of a Chinese-language website. Can LinkedIn succeed in China?

A great opportunity
LinkedIn will be offering a localized version of its website, after more than a decade of having an English-language site there. The company will also be establishing a joint venture with top private equity firms China Broadband Capital and Sequoia China, to attempt to connect more than 140 million Chinese professionals.

Without any doubt, China represents a huge business opportunity for LinkedIn, which already has more than 4 million members in the world’s second-largest economy. With a labor force of more than 800 million people, China also has a huge population of active Internet users. Most companies in China still do not use LinkedIn or similar alternatives as recruiting tools, but this could change if LinkedIn succeeds in registering enough users.

Note that LinkedIn will become one of the few U.S. social networks with direct exposure to China. Facebook, the largest social network, recently reported revenue of $2.59 billion for the fourth quarter of 2013, an increase of 55%, year over year. However, it has no official presence in China. Eventually, this will become a big problem for the company, which already has more than 1 billion registered users.

Several challenges ahead
LinkedIn will have to compete against several social networks that are already present in the Chinese market. Tianji, a networking site owned by Viadeo, has more than 15 million users in China, where it has been in the market since 2005. Tianji is popular due to some highly social features, like the ability to invite friends and colleagues to evaluate themselves using a Myers-Briggs-type online personality test.

Ushi is an important competitor that released an invitation-only platform in 2010. The company raised $1.5 million in a first round of funding, and has several chief executives registered in its user base. Ushi, which monetizes its site by charging for some premium features, has a deep understanding of Chinese business customs. Before the release, the team spent months in face-to-face meetings with several top executives and business leaders in order to convince them to become early members. This allowed Ushi to become an exclusive hub for elite professionals at an early stage.

On top of competition, LinkedIn will have to comply with several local rules in order to remain online. Complex regulations in China are a reason for the absence of U.S. social media companies in the world’s second-largest economy. Facebook has been blocked by firewalls since mid-2009.

Final Foolish takeaway
LinkedIn, the largest social network oriented to professionals, will release a localized version of its website for the Chinese market. This is a privilege, and LinkedIn will become one of the few U.S. social media companies with direct exposure to China. However, there are several challenges ahead, including fierce competition from local competitors like Tianji and Ushi. To succeed in this market, LinkedIn will need to adopt a growth strategy based on a deep understanding of Chinese business customs.

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