Amazon.com announced last week that it would close its Kindle ebook service in China, representing the latest retreat from the hectic and highly competitive Chinese market.
The list of U.S tech firms that have partially or even fully deserted their China efforts is evident by how many have found the market a losing endeavour, but also the success others are enjoying in other markets.
“Due to its sheer size, China is perhaps the most fiercely competitive internet market in the world, and nearly all Western digital companies struggled to compete with local firms,” said Feng Li, chair of information management at the Bayes Business School, City, University of London. “Cultural differences, and the deteriorating U.S- China relations have further complicated things.”
Airbnb (ticker: ABNB) is currently in the process of winding things down in China, citing the pandemic and local competitors, many of which have had a longer history and have more experience in the country. On Friday it announced that it was preparing to help hosts migrate to its customers, such as Meituan (3690.Hong Kong) and Alibaba Group Holding (ticker: BABA).
One of the earliest major entrants into the Chinese market, Yahoo, shut down its remaining presence in the country in November. “In recognition of the increasingly challenging business and legal environment in China, Yahoo’s suite of services will no longer be accessible to mainland China as of November 1”, the company said in a statement. As if to further reinforce the issue, Microsoft’s (ticker: MSFT) LinkedIn also announced plans to close its social media platform in China.
The latest U.S tech heavyweight to exit the market is Amazon (ticker: AMZN). The company issued a statement saying that “as a global business, we periodically evaluate our offerings and make adjustments, wherever we operate.” The company went on the emphasize that it was not pulling back due to government pressure or censorship. However, the company complied with Beijing’s prohibition on content deemed sensitive and faced a host of local competitors in the e-reader and ebook markets, many with much lower prices.
Tencent Holdings (700.Hong Kong), Xiaomi (1810. Hong Kong), Huawei, and state-owned iFlytek (002230.China) are only a few of Amazon’s fierce competitors in China. The ebook withdrawal comes after Amazon’s 2019 shuttering of its e-commerce store in China, after not being able to gain significant market share from Alibaba and JD.com.
Interestingly, Amazon, LinkedIn, and Yahoo held on for much longer than most other U.S firms. Google’s 2006- 2010 search engine presence in China ended in a vicious way after censorship disputes and alleged hacking that Google said put Chinese citizens at risk put the relationship in the red.
“We do know that it was very organized and the attack came from China and Political dissidents and people interested in human rights in China were clearly targeted,” said David Drummond, the then senior vice-president and chief legal officer at the time.
Although every company that’s exited China cites the fierce competition as the reason, experts say there’s a bigger force at play.
“The specifics are different for each individual company failure in China, but overall the pattern is easy to explain,” said J. Stewart Black, professor at the INSEAD business school.