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Tuesday, 05 July 2011 11:40

China looking to buy sizable stake in Facebook

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Facebook revolution gets new meaning
Chinese officials are reportedly mulling a major investment in Facebook that would give Chinese authorities a say in the way Facebook is operated.

The investment would be channelled through a sovereign wealth fund, hence the move has prompted concerns that the Chinese Communist Party would be able to exercise some level of control over the social networking giant, despite the fact that the Chinese are apparently interested in non-voting stock.

Chinese sovereign funds, as well as government controlled investment funds from all over the world are already major players in the US economy, and every other developed economy for that matter. Hence, the criticism seems somewhat misplaced. Imposing any restrictions on such a transaction would probably send a very bad message to other investors. Besides, one could hardly describe Facebook as instrumental to national security. After all we are talking about Facebook, teen ramblings and family photos, something the boffins at RAND Corporation or Lawrence Livermore National Laboratory would hardly be interested in.

In any case, Facebook is apparently planning a $100 billion IPO, so even a sizable Chinese investment would not make much of an impact. Even if the sovereign fund chooses to buy voting stock at some point in the future, it would have to make a huge investment to exert any control over Facebook.

It is also worth noting that the number of Chinese Facebook users is booming, while the number of US users is declining. China’s booming middle class is picking up western consumerism and getting hooked on the internet, so the move makes a lot of sense in the long term and it probably has a lot more to do with capitalist dividends than communist ideology.

More here.

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