American technology giant Microsoft announced today that it will pull its professional social network LinkedIn from the Chinese market later this year.
Microsoft purchased LinkedIn for more than $26 billion back in 2016.
The news comes amidst a flurry of regulatory changes in the Asian nation, as well as rising tensions between the company and the country. Two weeks past, Microsoft came under heavy scrutiny for its decision to block the profiles of certain U.S. journalists in China.
The company is hardly the only American enterprise to find it hard to balance the authoritarian demands of the Chinese government and its own business goals. Here, Microsoft has taken a sharp approach to a problem that likely would have only become exacerbated over time; the software giant could choose to either bow to the demands of the Chinese government to limit access of individual profiles it found unacceptable — that journalists were suffering from blocks is not a surprise, given the media environment inside China — or walk.
It chose the latter.
In a blog post discussing the news, LinkedIn wrote that the company described its 2014 decision to enter the Chinese market, which meant “adherence to requirements of the Chinese government on Internet platforms” despite it also “strongly support[ing] freedom of expression.”
But LinkedIn wrote that it is now “facing a significantly more challenging operating environment and greater compliance requirements in China.” That changed market landscape led to the company making the “decision to sunset the current localized version of LinkedIn, which is how people in China access LinkedIn’s global social media platform, later this year.”
Shares of Microsoft are up around 1.6% in morning trading, up roughly as much as the technology-focused Nasdaq Composite index. Investors are shrugging off the news, in other words.
What the decision will mean for Microsoft’s relationship with the Chinese market and state is not clear as this juncture. The Chinese Communist Party has been making changes in its domestic cloud market, for example, that could limit its commercial future for foreign companies. Microsoft’s Chinese LinkedIn decision could be viewed through the lens of a possible longer-term decoupling of the tech shop and the nation.