Big Blue leaves

US tech group shutters China unit

It’s known as Big Blue but in recent years IBM has been better known for singing the blues after disappointing financial results. After a string of attempts at reinvention on the global stage, the company is trying to fight back again with a further reorganisation based around cloud computing and artificial intelligence (AI).

That’s not the story that is making headlines in China, however. Instead the domestic media is reporting that IBM has just shut its research institute there, one of 12 it has worldwide. The closure is being described as the end of an era not just for IBM but as another signal of a wider tech ‘Cold War’, after Yahoo closed its research unit in 2015, followed by Oracle in 2019.

The IBM closure is especially symbolic, given how long the company has been active in China. Indeed, its history there is a microcosm of wider Sino-US relations. In 1928, Otto Braitmayer, one of the original employees from the Tabulating Machine Company that morphed into IBM, set sail to China with a view to growing its business there. IBM formally set up shop a few years later in 1936, only to close down after the People’s Republic of China was founded in 1949.

The company’s fortunes then foreshadowed a thaw in Sino-US relations a few decades later when IBM programmer Jack Howard captained the US table tennis team on a visit in 1971 that was dubbed as ‘ping-pong diplomacy’. The more formal breakthrough happened a year later when Richard Nixon visited Mao Zedong in Beijing (for more on that historic trip and Margaret Macmillan’s excellent book about it, see WiC12).

IBM was at the vanguard once more in 1979 when China’s reformist leader Deng Xiaoping launched the country’s Open Door policy and foreign companies started streaming back into the Chinese market.

In 1995, IBM was the first multinational to establish a China R&D centre. Its closure has been lamented locally, with one feature article on Huixu.com despairing that “the wonderful sight of US company employees wearing suits and ties, drinking coffee and speaking English is disappearing”. Escalating tensions between Beijing and Washington – particularly in the technology field – have been blamed but another factor is rising labour costs. One international executive told Huxiu.com that his company finds that it’s now cheaper to hire staff in Hong Kong and Taiwan rather than mainland China. Another factor is that the prestige of working for a foreign firm is not what it once was. “When I was looking for jobs, IBM was the company that many students dreamed of joining,” one former employee told QQ.com. But today there’s the competing appeal of local unicorn start-ups and homegrown tech giants.

“The BAT [Baidu, Alibaba, Tencent] troika pay a lot more money than IBM now and there’s an element of national pride working for them,” the ex-IBM employee added.

Another tech staffer told QQ.com that they still prefer working for foreign companies like IBM because they offer a better work-life balance than the 996-culture (9am to 9pm, six days a week; see WiC449) that many Chinese tech companies operate under.

“There’s more opportunities working for a foreign company as a woman,” another of IBM’s former female employees added. “My new employer has gender and age preferences and girls are pushed into operational, or communications roles. But I want to work at the sharper end of the tech industry.”

One of the other notable aspects about IBM’s Chinese media coverage is the racist attention focused on its new CEO, Arvind Krishna. The long-time IBM staffer took over last year and is one of the main drivers behind the reorganisation, having previously overseen its cloud and cognitive software divisions.

However, it is his Indian nationality that interests Chinese netizens more – as well as the domestic media that has been republishing their comments. “Another tech champion destroyed by Indians,” fumed one netizen. “Why are there so many Indians running foreign tech firms?” queried another. “Perhaps this explains why they’re facing issues.”

Krishna studied in the US and stayed on to work there. That was viewed in a negative light too. “If a country’s talent works in a foreign country, that shows there aren’t enough jobs locally,” another netizen scoffed. “There’s not much future for countries whose talent runs away.”

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.