Facebook’s Zuckerberg Seeks China Entree At Tsinghua

Facebook’s Zuckerberg visits China

I previously wrote that Apple’s (Nasdaq: AAPL) plain-spoken CEO Tim Cook should consider buying a second home in China due to his frequent visits to the country, and the same could be said for Facebook’s (Nasdaq: FB) more brash founder and CEO Mark Zuckerberg. While Cook’s frequent visits are quite official and include many stops at government and company offices, Zuckerberg has been far more low-key in his equally regular visits due to Facebook’s lack of official presence in the country where its website is formally blocked. But Zuckerberg wants desperately to find a way to enter the market, which explains his latest low-key appearance at an event this week in Beijing at Tsinghua University, China’s equivalent of MIT.

Each time Zuckerberg or another Facebook top executive visits China, I’m always trying to forecast when the company may finally find a way to enter the market and through what kind of investment. I made my latest prediction earlier this year when Facebook was in the process of opening a sales office in Beijing, saying the company was likely to launch some kind of social networking (SNS) venture in China within the next 2 years. (previous post)

Zuckerberg’s latest trip to China shows he’s quite determined to achieve that goal, and frankly speaking I think Beijing might also welcome the world’s biggest SNS company in the current climate. Such a move would help to deflect recent criticism that China is hostile to foreign companies, amid a recent series of antitrust probes against mostly major multinationals. Allowing Facebook to enter would also help to deflect separate criticism leveled by foreigners who say China’s strict censorship policies are aimed at quashing free speech. Those strict censorship policies are believed to be the main reason why Facebook’s global website has been blocked in China for the last 5 years.

All that said, let’s look at the latest reports that say Zuckerberg came to Beijing to attend a dialogue at an event where he was also nominated as an advisory member of Tsinghua’s School of Economics and Management. (Chinese article) Other top executives at the event included IBM (NYSE: IBM) chief executive Virginia Rometty and Anheuser-Busch InBev (NYSE: BUD) CEO Carlos Brito. During the visit Zuckerberg said he would push for more cooperation with Tsinghua.

If I were feeling bold, I might predict that Facebook could be considering entering China through a partnership with Tsinghua, which has shown a recent penchant for doing business with foreign firms. The university was one of China’s early tech manufacturing leaders with its Tongfang Group. More recently it has emerged as a consolidator for China’s high-tech microchip industry through its purchase of US-listed smartphone chip makers RDA Microelectronics and Spreadtrum. It later merged those companies into a single microchip maker, and sold 20 percent of it to Intel (Nasdaq: INTC) last month. (previous post)

Facebook’s main site was blocked by Beijing in 2009, but Zuckerberg has said repeatedly since then that he wants his company to enter the market. He makes frequent trip to China, often traveling as a private citizen rather than a company executive. Three years ago he reportedly met with a number of executives from major Internet firms, including Internet search leader Baidu (Nasdaq: BIDU),  to discuss a potential joint venture. But nothing ever came of those talks.

All of this brings us back to the second issue I raised earlier, namely what kind of vehicle Facebook might use to finally enter China. I suspect that Zuckerberg isn’t really sure himself how to best proceed, and the subject of a potential tie-up with Tsinghua almost certainly came when he met with university officials. Such a tie-up would certainly be a major achievement for Tsinghua, whose strong government connections could help it to convince Beijing to take a chance on finally opening its doors to the world’s leading SNS company.

Bottom line: The latest trip to China by Facebook founder Mark Zuckerberg underscores his determination to enter the market, possibly through a tie-up with Tsinghua University within the next 2 years.

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