Airbnb Will Store Personal Data of China Users Locally

A population of more than 1.3 billion people, plus an increasingly affluent middle class, has made China an alluring market for foreign companies with global ambitions.

The case was been proven true again as Airbnb announced in a blog post late last week that it will store the personal data of their Chinese users locally in compliance with Chinese laws and regulations.

According to statistics from Airbnb, there have been more than 3.5 million guest arrivals by Chinese travelers at Airbnb listings all over the world. Outbound travel from China grew 500% in 2015 alone, making China one of the fastest growing outbound markets for the short-term rental sharing company.

Airbnb is one of the few U.S. technology firms that have been able to seize on the opportunities presented by the world's second largest economy, thriving in a marketplace where Uber, Alphabet  (GOOGL)  , Amazon (AMZN) , Facebook (FB) and eBay (EBAY) have "struggled."

Like Airbnb, Apple (AAPL) has also stayed in the game by agreeing to keep the personal data of some Chinese users on servers in mainland China. Chinese Apple users' data have been kept on servers provided by the country's third-largest wireless carrier China Telecom since 2014.

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"There is no legitimate policy reason for the Chinese government to make this demand," said Robert Atkinson, president of the Information Technology and Innovation Foundation, a nonprofit public policy think tank. "This is, first and foremost, data mercantilism. There is nothing to do with privacy or security. This is simply the Chinese government wanting to build up their data center, cloud computer industry and jobs related to that."

By storing their customer data on local servers, Airbnb, Apple and other tech companies would be forced to analyze their data separately from other global data, which would result in the adjustment of their business models and eventually extra costs, according to Atkinson.

The advantage, however, is the market access gained through proactive compliance with Chinese data and security laws that foreign tech companies cannot escape regardless of where they store customers' data.

In comparison, Uber which is also built on the concept of the sharing economy, had to sell its China operations to chief local rival Didi Chuxing in August this year after losing $2 billion in China during its two years there.

Meanwhile, Airbnb's success in breaking into the Chinese market does not guarantee its dominance in the rental sharing industry in China. Local competitions like Xiaozhu.com and Tujia.com have pushed for value-added services such as staff visits to provide tips for improved listings and cleaning services for high-end listings, Reuters reported.

Some experts hold different views, believing that government protectionism has limited U.S. tech firms' access to the Chinese market, forced them to do joint ventures and ultimately replace them with Chinese counterparts.

"American internet players can succeed in China - they just have to follow Chinese law, understand the Chinese consumer and localize services," said Shaun Rein, Managing Director at Shanghai-based China Market Research Group. "Most western internet players have failed in China not because of government protectionism but because they simply did not understand the market and went against aggressive, well capitalized local players."

Atkinson, of the ITIF, added: "They have not had a hard time breaking into any other market in the world. They dominate every market in the world because they are the best companies in the states. They don't dominate in China because the government chooses to not let them, that's all this is."

Even with its recent China struggles, Airbnb is one of a host of private companies that are said to be contemplating listing on the public markets. Other candidates include: Snapchat, Pinterest, Spotify and Dropbox, among a host of others.

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