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Blocked in China, Facebook Is Said to Seek a Shanghai Office

  • The social media site is banned in China.
  • The offices would house employees working on Facebook's effort to make hardware.
  • The plans would depend on approval from the Chinese government.
Founder and CEO of Facebook Mark Zuckerberg
Photo by Bloomberg
Founder and CEO of Facebook Mark Zuckerberg

Facebook is blocked in China, but it is feeling comfortable enough there to look for its own place.

The social media giant in recent months has quietly scouted for office space in Shanghai, according to two people with knowledge of its efforts there. Those offices would house employees working on Facebook's effort to make hardware but could also help with its broader ambitions in China, said the people, who spoke on the condition of anonymity because they were not authorized to publicly discuss the plans.

Facebook's plans are tentative, the people said, and would depend on approval from the Chinese government. But if successful, it would be a symbolic victory for the social network, which has long worked to get into China despite being blocked there for nearly a decade.

"We have long said that we are interested in China, and are spending time understanding and learning more about the country in different ways," a Facebook spokeswoman said in response to questions about the office plans.

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Facebook has been looking for momentum in China, home of the world's largest population of online users. Earlier this year, it quietly authorized the release by a small local company of a Chinese version of its Moments photo-managing app.

Despite being obstructed in China, Facebook has many reasons to continue pursuing business there. The social network sells advertising to Chinese companies hoping to reach the rest of the world. The Chinese ad sales, supported from its office in Hong Kong, are some of the largest in Asia. Even China's government propaganda organs use it.

Facebook's new hardware ambitions would require a Chinese presence as well. The initiatives would require plugging into China's electronics supply chain, which helps build some of the world's most popular gadgets, like Apple's iPhone. The office would first be used by employees of Facebook's hardware effort, called Building 8, according to the people with knowledge of the plans. Anything from an internet-connected medical device to a drone requires coordination with dozens of Chinese producers and assemblers, mostly located in the southern part of the country.

Facebook has for years entertained the idea of a Chinese office. In late 2015, it obtained a license to open an office in Beijing, but the permit lasted only three months and it could not establish a space in that time. Oculus, the virtual reality company Facebook bought three years ago, already has a Shanghai office.

At the moment, Facebook uses third parties and its own employees to sell ads in China. Because of cybersecurity concerns, Facebook employees run special security software on devices when they travel in China and do not have access to secretive or critical business information.

Opening an office in Shanghai allows more support for its employees when they are in China, but also raises security questions. The Building 8 teams, which focus on their own hardware projects, would have less need to access sensitive Facebook data when in China, one person said. The office could also help Facebook work more with local Chinese companies.

If it opens a Shanghai office, Facebook would not be the only Western internet company banned in the country to have some space there. Google, which pulled its servers out of China in 2010 after it decided to stop censoring search results, retained offices in Beijing and Shanghai that support both advertising and research and development. Google still maintains extensive advertising sales and research facilities there.

Facebook over the past three years has pulled out all the stops to court the Chinese government and gain approval for its network. Mark Zuckerberg, Facebook's founder and chief executive, has showed off his Mandarin at one of the country's top universities and has directly courted Xi Jinping, China's president.

The office search comes just months after Facebook released the Chinese-language version of Moments. That app, called Colorful Balloons, originally went largely unnoticed but briefly rose into the top 50 in the photo and video section of China's iPhone app store after The New York Times reported its release last month, according to app research company App Annie.

Like other cities in China, Shanghai has been eager to attract technology start-ups and other internet-related investments.

Earlier this year, a woman listed as the executive director of the company that released Colorful Balloons on Facebook's behalf was photographed at a meeting between Shanghai government officials and Facebook. In order to open an office in Shanghai, Facebook will likely have to register a branch company in Shanghai as well.

That the Colorful Balloons app has not come down could be a sign that Facebook has done something right with the government, said Teng Bingsheng, a professor at Cheung Kong Graduate School of Business. Opening an office, if it happens, would be another sign.

"It has symbolic meaning," Mr. Teng said, "because it must be the result of good communication with the government."