Is China Looking to Invest in Facebook?

July 4, 2011Investingby EW News Desk Team


China’s sovereign wealth fund, China Investment Corp (CIC), could be on the verge of acquiring a stake in Facebook, if a report in Business Insider is to be believed.

According to Business Insider sources, financial firm Citibank has been trying to obtain as much as US$1.2 billion worth of Facebook stocks on behalf of two sovereign wealth funds - one from China and another from the Middle East.

The Business Insider article added that the news would go in line with recent comments made by Facebook co-founder Mark Zuckerberg, who expressed his desire for the company to enter the Chinese market.

Currently, Facebook is banned in China, though numerous copycat sites have sprung up including Renren and Lian Pu.

A purchase of Facebook stocks by the Chinese sovereign wealth fund could open up an avenue for the social networking giant to penetrate the market.

As Business Insider points out, “One big reason American firms stumble in China is that the government tends to favour locals when it comes to regulation. One way to make sure that doesn't happen is to allow the government to own a stake.

However, rumours of the purchase have raised concern among netizens in regards to the sensitive and private information that Facebook currently stores on its site.

Gordon Chang of Forbes Magazine, warns that “Beijing wants to own stakes in foreign firms because it is trying to control them. Its ambitions may at the moment look unrealistic to us, but that does not mean swaggering—and strategic-thinking—Communist Party officials do not hold them.”

Facebook Chief Operating Officer Sheryl Sandberg has also been reported to be “wary about the compromises Facebook would have to make to do business there (in China).”

However, Facebook’s co-founder and Chief Executive Officer appears to be determined for Facebook to access the world’s largest online community. Zuckerberg visited China last December and will return again in September this year in order to push for Facebook’s approval in the country.

The Business Insider report also dismissed fears of any potential privacy infringement by the Chinese Government.

“There's little need for such concern. For one, even a billion dollar stake isn't a very big stake in Facebook, these days. The company is expected to IPO at a $100 billion valuation. For another, China would be buying non-voting stock and would have no say in Facebok's operations. And finally, it's not like shareholders in Facebook have some special privilege that allows them to see what users are doing or saying.

Importantly, sovereign wealth funds are pretty distinct from their governments.”

Story from Business Insider

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