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Facebook unsure it can enter China because of government regulations

Facebook's CEO had previously visited China in 2010, leading to speculation that the company was preparing to enter the country

China, one of the world's largest Internet markets, could be out of reach of Facebook because of the Chinese government's strict censorship policies, the company said in its filing on Wednesday for an initial public offering (IPO).

The company however continues to "evaluate entering China."

Analysts do not expect conditions to get favorable soon for Facebook in China. The market, which already has popular homespun social networking sites, is also moving to Twitter-like microblogs.

"China is a large potential market for Facebook, but users are generally restricted from accessing Facebook from China," the filing said. "We do not know if we will be able to find an approach to managing content and information that will be acceptable to us and to the Chinese government," it added.

Speculation on Facebook entering the Chinese market mounted in late 2010 when the company's CEO Mark Zuckerberg visited several major IT firms in the country. But to enter the country's market Facebook would have to abide by China's censorship laws, which force sites to delete content critical of the government. Besides Facebook, some other Internet sites like YouTube and Twitter are currently blocked in the country.

The Chinese government was always nervous about Facebook, said Bill Bishop, an independent analyst who watches the Chinese Internet market. Facebook's role last year as a forum for protestors to organize against governments in the Middle East and North Africa only cemented those concerns, he said.

"If Facebook wants to come to China, it would be great, but it's extremely unlikely to happen in the near or medium-term," Bishop added.

Facebook will also have to compete in a market already occupied by strong domestic players, said Mark Natkin, managing director for Beijing-based Marbridge Consulting. Some of these competitors include sites such as Renren, which features a user interface similar to Facebook, and had 137 million users as of Sept. 30.

But many of China's Internet users are moving away from Renren and other Facebook-like social networking sites and instead flocking to Twitter-like microblogs operated by local Chinese companies. Chinese users of these Twitter-like microblogs have reached 250 million users, according to the China Internet Network Information Center.

"From a competitive standpoint, the market has already moved on," he added.

In spite of being blocked in the country, Facebook still has some users in China. Beijing resident Shi Beichen, a Facebook user since 2006, said he visits the site by connecting through a virtual private network (VPN), which allows him to view sites blocked by Chinese authorities.

One reason he uses Facebook is because the site is free of censorship. He also likes the site because it allows him to synchronize his different Internet applications such as Tumblr and Instapaper on to one platform through Facebook, he said.

"I think Facebook will enter China. Zuckerberg wants to come. But it will be extremely difficult," Shi said, noting China's censorship laws and the popularity of social networking sites already operating in the country.

"Foreign Internet companies still don't quite understand the Chinese Internet market or its users' habits. Even if the companies don't involve themselves with sensitive topics, it will still be hard for them to succeed," he added.


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