Facebook (FB) Boosts China Efforts With A New Appointment

Per The Wall Street Journal, Facebook Inc (NASDAQ:FB) has appointed an ex Chinese official William Shuai to a newly created post to bolster its China efforts. Shuai will work with Facebook’s chief representative of China, Wang-Li Moser.

Shuai has worked with Microsoft’s (NASDAQ:MSFT) LinkedIn (NYSE:LNKD) where he acted as a government relations executive for its China operations. Quoting a source familiar with the matter, WSJ stated that Shuai played a pivotal role in LinkedIn’s “sevenfold growth since 2014 to a member base of more than 30 million” in the region. Prior to his stint at LinkedIn, he was Baidu’s (NASDAQ:BIDU) government relations executive and prior to that he worked with China’s National Development and Reform Commission, adds WSJ.

Shuai’s extensive experience in dealing with the Chinese government should come in handy for Facebook, which, for long, has been trying to break the China Wall but to no avail.

Facebook, Inc. Price

Facebook, Inc. Price | Facebook, Inc. Quote

Facebook was banned in China in July 2009 following Ürümqi riots where the protestors used the platform as part of their communication network. Consequently, Beijing cracked down hard on Facebook and banned the social media site as a preventive measure. Beijing is very strict as far as Internet censorship is concerned and any potential threat is severely dealt with.

Since then, Facebook CEO has been looking to regain lost ground. His efforts, learning Mandarin and holding several high profile meetings with Beijing, have so far been unfruitful.

Facebook has a gargantuan user base of more than 2 billion despite being blocked in China, the world’s most populous country. Zuckerberg has been quoted by medai reports saying, “Obviously you can’t have a mission of wanting to connect everyone in the world and leave out the biggest country. Over the long term, that is a situation we will need to figure out a way forward on.”

Per an analyst with TheStreet, Facebook now has a bigger problem. With Xi Jinping elected as the Chinese premier in 2013, the country has stepped up its censorship measures. Consequently, Facebook will have to put in place extensive “intrusive” censorship measures to block any post that can be deemed offensive by Beijing. If Facebook gives in to this demand, it will have to deal with the public relations disaster that it will face back home. Also, the stringent rules of the Chinese government have helped the local companies. So, even if Facebook breaks into the space, it will face severe opposition, observes the analyst.

At present, though Facebook’s main service is banned in China, it is available in Macau, Taiwan and Hong Kong. Facebook has also set up an office in Shanghai for its VR unit, Oculus. It also sells a lot of ads to Chinese firms who are seeking to expand their business in the foreign markets.

Not just Facebook, China is a major market for most of the tech behemoths. Recently, Apple Inc (NASDAQ:AAPL) appointed Isabel Ge Mahe to a newly created post of vice president and managing director of Greater China. Creation of the post of managing director for China operations underscores the importance of the market. China is one of Apple’s biggest markets.

Over the past few quarters, the company has been losing ground on account of sluggish demand in the region for its flagship product, iPhone. Additionally, mounting competition from local players such as Huawei and Oppo is also hindering growth prospects. However, with the new iPhone, Apple is expected to see a reversal in its declining sales as there is a “significant pent up demand” for the new edition dubbed as iPhone X that could see a 170% year over year surge in sales of iPhone per a survey by Maxim Group in May.

Zacks Rank and Share Price Movement

At present, Facebook carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We note that Facebook has outperformed the industry in the last year. The company’s shares increased 32.8% compared with the industry’s gain of 14.4%.

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