Winning in China is no easy task for tech firms

BEIJING — Netflix has a nifty new China strategy: Skip it.

In January, the video-streaming service announced an ambitious global expansion. The goal was to beam American hits such as “House of Cards” around the world including, eventually, in China.

“Today you are witnessing the birth of a new global internet TV network,” said Chief Executive Reed Hastings at a tech conference.

Sending racy American content into a country that censors almost everything may have seemed like a leap, but Netflix was confident.

Less than a year later, having launched just about everywhere else, Netflix shelved the streaming project. It opted instead to license some content to Chinese providers for “modest” revenues, according to a quarterly letter. (Representatives of the company declined to comment.)

For some high-flying U.S. internet businesses, the China dream is fading; for others, it looks radically different from what they had hoped. California’s internet companies once dreamed of liberating China with technology, thinking that the system of censorship known as the Great Firewall would inevitably crumble, paving the way for their advance in the world’s most populous nation.

But President Xi Jinping has tightened, rather than loosened, control of the internet and increased restrictions on foreign companies. Six years after Google retreated from China’s searchengine business over censorship and hacking concerns, U.S. firms seem more willing than ever to play the Communist Party’s game — they just can’t win it.

Even if they can gain a foothold, there is practically no way they will be able to overtake the Chinese companies that have comfortably established themselves.

Facebook’s China charm offensive, which included Mark Zuckerberg studying Mandarin, has yielded little. Google’s search business and Twitter remain blocked. LinkedIn and Microsoft censor — and still, neither is a major player in China’s online space. Amazon.com is sputtering along against the Chinese e-commerce giant Alibaba. After great initial success, Apple is being overtaken by local upstarts.

Still, tech companies are pushing, and they are looking to the incoming Trump administration for help breaking in.

Bill Bishop, a tech consultant who writes Sinocism, an influential China newsletter, said he has seen waves of confident U.S. firms humbled by efforts to crack the China market.

“Each generation believes they can find a way, but the Chinese Communist Party has upped their game in terms of censorship, and these companies that nobody has heard about 10 years ago — now they are the biggest companies in the world,” he said, referring to corporate behemoths such as Alibaba, Tencent, Xiaomi and Baidu, sometimes called the Amazon, Facebook, Apple and Google of China.

U.S. companies considering a China move often talk about the “LinkedIn model” — a model that means close local ties and full cooperation with the government.

Acting local — or, indeed, op-

DAVID PAUL MORRIS/BLOOMBERG Netflix’s Reed Hastings had big plans for his company in China last January. But that dream appears to have ended.