Mark Zuckerberg is back in China as Facebook eyes opportunity to finally enter the country

• Alex Heath
 

• Oct. 28, 2017, 1:26 PM
• 8,379

Zuckerberg meets with students from the Tsinghua School of Economics and Management in Beijing on Saturday.Facebook

• Facebook CEO Mark Zuckerberg's annual trip to China is underway.
• The timing of this trip is significant because Facebook is currently showing signs of increased efforts to begin business in the country.
•  One analyst recently said there is "a realistic opportunity" for Facebook to finally enter China in 2018.

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Mark Zuckerberg is back in China.

The Facebook CEO posted a photo of him visiting with Chinese students at the Tsinghua School of Economics and Management in Beijing on Saturday, more than one year after his last public trip to the country.

Zuckerberg's latest visit to China comes as Facebook eyes what one analyst recently said is "a realistic opportunity" for the company to finally enter the world's largest internet market by users in 2018.

While Facebook's service has been banned in China since 2009, the social network recently tapped William Shuai from LinkedIn to lead relations with the Chinese government. Facebook has also been covertly testing a photo-sharing app in China and is said to be on the hunt for a Shanghai office for its fledgling consumer hardware division, Building 8.

In his Facebook post on Saturday, Zuckerberg said he was in China for a meeting of the Tsinghua school's advisory board, of which he has been a member since 2014. "Every year this trip is a great way to keep up with the pace of innovation and entrepreneurship in China," he wrote.

Facebook has flirted with the idea of entering China for years, a move that could give it access to a vast new market of users and advertisers at a time when the company is under pressure to continue showing strong growth to investors. Zuckerberg has learned Mandarin well enough to become a proficient speaker of the language. 

Facebook could create its own censorship tool for China

Mark Zuckerberg jogged through Tiananmen Square during a trip to Beijing in 2016. Facebook

During his last public trip to China in March 2016, Zuckerberg met with the country's propaganda chief and other government leaders. It's unclear whether he plans to meet with government officials again during this trip — a Facebook spokesperson didn't immediately respond to a request for comment on his trip schedule.

As the world's largest concentration of internet users, China is an attractive but challenging region for American tech companies like Facebook to break into. The government recently blocked Facebook-owned WhatsApp amidst a crackdown of online censorship.

Google famously pulled its search engine service out of mainland China in 2010, after claiming that the country's censorship requirements had become too onerous and saying it had traced efforts to breach its users' accounts to China.

One way Facebook has considered getting back into China is by creating its own censorship tool that would automatically suppress certain posts in specific geographic areas, The New York Times reported last year. It's unclear if the tool is still being developed.

Facebook's window of opportunity to begin business in the country could be drawing near as Chinese President Xi Jinping begins his second term in November, according to Mizuho analyst James Lee, who recently noted that "media scrutiny and sensitivity are much less during an administration’s second term."

According to Lee, Facebook's current approach of helping Chinese advertisers sell ads overseas also "appears to be aligned with Chinese government’s policy to globalize local companies," and could finally lead to the company securing the coveted Internet Content Provider (ICP) license needed to officially do business in China.

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SEE ALSO: Here's why Facebook has 'a realistic opportunity' to enter China in 2018

NOW WATCH: An old video of Mark Zuckerberg shows the teenager in flannel pajamas opening his Harvard acceptance e-mail

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At midday: Robust earnings, Aecon deal help lift TSX

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Specialist Meric Greenbaum, left, Executive Floor Governor Rudy Mass, center, and trader William McInerney work on the floor of the New York Stock Exchange, Thursday, Oct. 26.

RICHARD DREW/AP

REUTERS

1 HOUR AGOOCTOBER 26, 2017

Canada's main stock index rose on Thursday as a slew of earnings and CCC International Holding Ltd's acquisition of Aecon Group Inc drove gains.

Suncor Energy rose 2.1 per cent to $43.02, while Husky Energy Inc added 1.7 per cent to $16.53 after both companies reported better-than-expected third-quarter profits.

Oil and gas companies as a group climbed 0.2 per cent.

Aecon Group surged 16.6 percent to $19.26 on news that it agreed to be bought by the Chinese construction firm in a deal with an enterprise value of $1.51-billion.

The overall industrials sector rallied broadly as well, climbing 1.1 per cent.

The Toronto Stock Exchange's S&P/TSX composite index rose 42.99 points, or 0.27 per cent, to 15,897.76, putting it back on track toward a new record high.

Seven of the index's 10 key groups advanced.

The weighty financial services group rose 0.5 per cent, while tech stocks advanced 0.7 per cent.

Telecom stocks were up 0.9 per cent as Telus Corp extended its previous session's gains, rising 1.4 per cent to $47.76.

The materials group, which includes precious and base metals miners and fertilizer companies, lost 0.9 per cent, weighed down by Barrick Gold Corp and Teck Resources Ltd.

Barrick sank 5.5 per cent to $19.08 after disappointing quarterly results and uncertainty surrounding its gold mine in Tanzania, which is embroiled in a multi-billion dollar tax dispute.

Teck slumped 6.8 per cent to $27.30 after reporting weaker-than-expected third-quarter results and forecasting softer prices for its coal in the fourth quarter.

Potash Corp was down 1.3 per cent to $24.81 after the fertilizer producer posted a smaller-than-expected quarterly profit and narrowed its full-year forecast.

Unexpectedly better quarterly results for Agnico Eagle Mines Ltd and Goldcorp Inc tempered some of the mining losses. Agnico gained 6.9 per cent to $60.05 and Goldcorp was up 5.3 per cent to $17.37.

Wall Street was higher on Thursday, driven by gains in financial and technology stocks and ahead of earnings from marquee companies, including Google-parent Alphabet and Amazon.

The earnings season has been largely positive, with 75 per cent of the S&P 500 companies that have reported so far topping expectations.

However, with U.S. indexes at record levels, investors are taking a closer look at earnings to see if they justify stretched valuations.

Celgene's 20-per-cent fall was the biggest drag on the S&P 500 and the Nasdaq, after the company reported lower-than-expected sales for its flagship multiple myeloma drug Revlimid and its psoriasis drug Otezla.

"You're always going to see reactions to the misses, and that's going to make the headlines. But stock prices tend to follow the bigger picture," said Brad McMillan, chief investment officer for Commonwealth Financial Network in Waltham, Massachusetts.

"Perhaps companies have done a little bit more in guiding expectations than usual."

Market is also closely watching on any news around President Donald Trump's nomination of the next Federal Reserve chair.

Mr. Trump's search has come down to Fed Governor Jerome Powell and Stanford University economist John Taylor, according to a Politico report. A White House official told Reuters that no final decision had been made.

In a step closer towards enacting Mr. Trump's tax cut plan, the U.S. House of Representatives voted to clear a procedural path forward for the tax bill, which is expected to be unveiled next week.

The Dow Jones Industrial Average was up 117.86 points, or 0.51 per cent, at 23,447.32, the S&P 500 was up 8.32 points, or 0.33 per cent, at 2,565.47 and the Nasdaq Composite was up 14.17 points, or 0.22 per cent, at 6,578.06.

Healthcare was the only laggard among the 11 major S&P sectors.

Bristol-Myers Squibb fell 3.6 per cent after the company said its gross margin, as a percentage of revenue, fell.

AbbVie dropped 1.8 per cent after reporting deaths in psoriasis studies.

Tech sector's 0.65-per-cent rise led the gainers. Microsoft and Intel are the other big companies set to report after the bell.

A more than 1-per-cent rise in JPMorgan and Bank of America led gains in the financial index.

Twitter jumped 15 per cent after the company said it could turn its first ever profit in the fourth quarter, helped by cost cuts and new sources of revenue.

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One of Trump's top picks to replace Janet Yellen could be a headache for markets Myles UdlandYahoo FinanceOctober 26, 2017

President Donald Trump’s search to find the next chair of the Federal Reserve appears to be winding down.

On Wednesday, Bloomberg reported that Gary Cohn, his chief economic advisor and the former president of Goldman Sachs (GS) would not get the nod. On Thursday, Ben White at Politico reported that one White House source said neither current Fed chair Janet Yellen nor former Fed governor Kevin Warsh would get the job.

This leaves Jerome Powell, current Fed governor, and Stanford economist John Taylor as the only two finalists. And while White cited another source who said Trump “changes his mind about [the Fed nomination] every day,” betting markets on Thursday morning saw Powell and Taylor as the two most likely candidates.

And on this backdrop, at least two Wall Street economists have published notes in the last week highlighting the risks that a Taylor-run Fed pose to markets.

John Taylor and his “rule”

Taylor has made his name in the economics field by developing the “Taylor rule,” which is essentially a formula for where benchmark interest rates ought to be based on how the economy is performing. (For more color on the Taylor rule, read former Fed chair Ben Bernanke.)

Torsten Sløk, an economist at Deutsche Bank, noted in an email on Thursday that this rule says the Fed Funds rate should by around 4% right now, well above the 1.16% that the Fed’s benchmark rate is at right now.

View photos

One of President Donald Trump’s possible nominees for Fed chair developed a rule that would make interest rate policy look a lot different. (Source: Deutsche Bank)

Earlier this week, Chris Condon and Matt Boesler at Bloomberg sketched out how Taylor could impact the Fed and noted that earlier this month, Taylor spoke at the Boston Fed and said his rule is a “guideline.”

Taylor added that he, “made no suggestion that the rule should be written into law, or even that it be used to monitor policy, or hold central banks accountable… the objective was to help central bankers make their interest rate decisions in a less discretionary and more rule-like manner.”

Sløk says, however, that one of the most influential ideas in monetary policy being named for the sitting Fed chair would create a communication headache for a Taylor-led Fed.

“The biggest challenge for John Taylor is to explain whether he wants to follow his own Taylor rule or not,” Sløk wrote in an email on Thursday. “He is likely to be asked about this at most, if not all, of his future press conferences and Congress hearings.

“If he says no, then he will be asked about the reasons why he wants to deviate substantially from his own rule, and markets will be very interested in understanding if his reasons are politically motivated or based on economic fundamentals, because his answers will have a significant impact on inflation expectations and the long end of the yield curve. This will be a big potential challenge for Fed communication.”

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Stanford economist John Taylor, who is reportedly one of two final candidates to be nominated Fed chair by President Donald Trump. Andrew Harrer | Bloomberg | Getty Images.

At Capital Economics, Andrew Hunter writes that while markets don’t appear to be concerned with the possibility of Taylor getting the nomination, “there is clearly a risk of a more hawkish Fed under Taylor’s leadership.”

And while some experts have said that the Fed staff drives a lot of the thinking at the central bank — thus limiting the impact that one chair can have on policy over the long term — Hunter sees a more hawkish bent emerging with Taylor at the helm of the central bank.

“Although Taylor would only have one vote on the FOMC, he would still exert a significant influence on Fed policy as Chair,” Hunter writes. “The Chair plays a key role in shaping the Fed’s policy debates and communication.”