Beginning last week, any professional in China trying to create a new LinkedIn account ran into an unwelcome surprise. LinkedIn, one of the few American social media platforms available in the country, froze all new sign-ups, preventing the company from expanding its huge Chinese user base of 52 million. 

In a cryptic statement that produced a flurry of speculation, LinkedIn said it was temporarily pausing new sign ups while working “to ensure we remain in compliance with local law.” The company, a unit of Microsoft, did not specify what regulation was at issue. 

The announcement was a setback for LinkedIn, which operates in China under an agreement that requires the company to play by the local rules — meaning, among other things, censoring posts the Chinese government deems politically sensitive. But now, LinkedIn is apparently being punished by Chinese internet regulators for not being aggressive enough in censoring those posts, according to a report published in The New York Times.

The company is now required to conduct a self evaluation and halt new registrations for 30 days. Though it’s unclear exactly what content landed the company in the hot seat, The Times said the offensive posts were circulating around the time of China’s annual legislative meetings, which typically results in a period of tighter censorship throughout the country. 

“The core thing here is that LinkedIn has decided to comply with Chinese censorship in a way that has met Chinese officials standards so far,” says Graham Webster, editor in chief of the Stanford–New America DigiChina Project at the Stanford University Cyber Policy Center and a fellow at New America, a Washington, D.C.-based think tank. But given heightened political pressure and ever tightening controls on online expression in China, the company’s censorship is apparently not effective enough.

The decision came at a particularly inopportune time for its parent company, Microsoft, which had just announced that its services were the target of a massive hacking campaign likely carried out by a state-sponsored Chinese cyber espionage group. Initially, some experts had speculated that Beijing may have frozen new accounts to penalize LinkedIn for Microsoft’s statement that it believed Chinese hackers were behind a major breach. But a LinkedIn spokesperson told The Wire that the company’s “decision to suspend new accounts is unrelated to the hack.”

The hack, which exploited vulnerabilities in the company’s email software, was perpetrated by Hafnium, a state-sponsored Chinese hacking group, according to a company statement. Experts estimate that at least 30,000 American organizations were targeted by the hack, including federal agencies, small businesses and city governments. 

The incident also came shortly after a spate of other serious Chinese-linked online breaches, including cyber espionage targeted at U.S. vaccine data, American universities, and even the National Security Agency’s own hacking tools. 

LinkedIn entered China in 2014, when it introduced a Chinese-language site. At the time, the company had about four million users in China, customers who were accessing its English language site. After setting up a local operation, that figure jumped to 20 million by 2016 and then more recently to 52 million, making China the company’s third largest market, after the U.S. and India. Still, LinkedIn now faces fierce competition from local business networking sites like Zhaopin, 51job.com and Maimai. 

The company’s Chinese operation was set up as a joint venture with Sequoia Capital China, an affiliate of the American venture capital firm, and China Broadband Capital Partners, which was founded by Edward Tian, a highly connected telecom investor who has done business with the son of China’s former president, Jiang Zemin. 

You can’t last as an American tech company in a country like China without bending to some extent on censorship and data storage rules. LinkedIn has been willing to compromise.

Justin Sherman, a fellow at the Atlantic Council’s Cyber Statecraft Initiative

From the beginning, LinkedIn has been willing to adapt its platform to please the Chinese government. Not only do they censor politically sensitive content, they also block certain functions on the platform, like the ability to form online groups among local users. The company has come under fire among U.S. users for not being transparent about these censorship guidelines.

“You can’t last as an American tech company in a country like China without bending to some extent on censorship and data storage rules,” says Justin Sherman, a fellow at the Atlantic Council’s Cyber Statecraft Initiative. “LinkedIn has been willing to compromise.” 

LinkedIn, which was bought for $26.2 billion in 2016 by Microsoft, may also have benefitted from its parent company’s experience in the country, and its close ties to the government. Microsoft entered China in 1992, and since then, the company has engineered computer systems for the Chinese government, operated an extensive research and development lab in China, and successfully kept its search engine, Bing, available in China.

“One of the big reasons why LinkedIn is in China is because Microsoft is in China. Despite watching as other companies like Google and Amazon left, Microsoft has been there for a very long time,” says Min Jiang, a professor at the University of North Carolina at Charlotte who studies Chinese cyber policy. “Now, it is a crisis moment for them.”

In some ways, this incident mirrors the challenges that Google faced in 2010, adds Jiang. After Google was the target of extensive Chinese hacking, the company decided its operations, including the censored version of its search engine, were untenable. The company moved its operations to Hong Kong, where it operates an uncensored, Chinese language search engine. (Of course, Google continued to sell services, including its Android mobile phone operating system to Chinese companies.) 

If the example of Google is any indicator, LinkedIn may face some tough decisions about its China operations down the road. In 2019, LinkedIn announced that it would shutter Chitu, a Chinese-only networking app targeted at younger users, which the company hoped would further expand its presence in a highly competitive market. 

Even now, as the Chinese economy is rebounding from Covid-19 faster than other countries and more employment opportunities are available, Chinese job-seekers are setting up accounts with local competitors, and LinkedIn is left unable to capitalize on the moment, since new account registrations have been frozen.

But some say that even after reprimanding the company for loose censorship this week, China is probably not seeking to oust LinkedIn from the country. “The Chinese government wants to keep Linkedin still operating in China,” says Adam Segal, director of the digital and cyberspace policy program at the Council on Foreign Relations. “Because then they can point and say, ‘Look, we do allow American social media, they just need to comply with our rules.’” 

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