IBM is in the process of shutting down its research and development (R&D) departments in China, local media outlets say, becoming the latest American tech giant to scale back its presence in the increasingly restrictive China-based market.
The decision by the Armonk, New York-based tech service provider will affect its more than 1,000 employees across China, local staff told multiple Chinese media outlets, including Jiemian, a news site owned by a Shanghai municipal government.
An IBM spokesperson said in a media statement that the company adjusts its operations “based on needs.”
“These changes will not impact our ability to support customers in China,” the spokesperson said.
IBM was among the first significant Western companies to invest in the Chinese market in the 1980s, according to China’s state media.
In January 2021, IBM quietly closed its China Research Laboratory, a Beijing-based R&D center that focused on quantum computing, big data analysis, and other cutting-edge technology.
China Pullout
IBM joins a growing list of Western tech companies that have been pulling out or scaling back their presence in the Chinese market amid increasing regulatory pressures from the Chinese Communist Party (CCP).
LinkedIn pulled the plug on its services in China in 2021. Owned by U.S. internet giant Microsoft, the career networking company attributed the decision to “a significantly more challenging operating environment and greater compliance requirements in China.”
The company had previously drawn criticism over its decisions to block the profiles of researchers and journalists whose work involved China. LinkedIn later launched a job-search-only platform, called InCareer, for Chinese business professionals. However, due to “fierce competition” and “a challenging macroeconomic climate,” the app was ultimately phased out in August 2023.
Another U.S. tech giant, Yahoo, joined LinkedIn in announcing its withdrawal from mainland China in November 2021. The Sunnyvale, California-based internet giant stated that the move was in recognition of “the increasingly challenging business and legal environment in China.”
In May 2022, the vacation rental company Airbnb also decided to retreat from China. While the San Francisco-based company didn’t offer any reasons, the decision came as repeated lockdowns and other stringent zero-COVID measures dented China’s economy and caused disruptions for almost every industry in the country.
In June 2022, U.S. e-commerce giant Amazon pulled its Kindle service out of the Chinese market.
Most recently, Microsoft asked its China-based employees to consider relocating to other countries.
While the regime’s leaders have sought to improve its appeal to foreign investors in recent years, its raids on foreign companies and arrests of businesspeople on national security grounds have had a chilling effect on the business community—particularly for foreigners.
Foreign investors have also expressed growing concerns about a series of anti-espionage and data-controlling regulations. In February, the regime extended its already broad state secrets law, tightening control of what it deems sensitive information by introducing the concept of “work secrets.”
‘No Level Playing Field’
IBM’s move also comes amid flaring trade tensions between the United States and communist China.In response to the CCP’s trade practices that have placed U.S. companies and workers at a competitive disadvantage, the Biden administration has significantly increased tariffs on imported electric vehicles, solar panels, and other imports hurting U.S. industries.
U.S. lawmakers are pushing the federal government to combat Beijing’s other unfair trade practices, particularly the CCP’s efforts to acquire American technological know-how. Through tactics including intellectual property theft and forced technology transfer, the CCP aims to leverage advanced technology to power its economy and advance its military.
U.S. Ambassador to China Nicholas Burns has warned that there is “no level playing field” for American companies in China.
“Intellectual property rights violations, forced technology transfer, massive subsidies—not just from the government in Beijing, but from provincial governments in China to Chinese companies, thereby putting their American rivals competitors at a distinct disadvantage,” Burns said during a Brookings Institution event in December 2023.
