Rumor: China wants to buy a stake in Facebook

A new rumor suggests that China wants to invest as much as $1.2 billion in Facebook.
Written by Emil Protalinski, Contributor

China reportedly wants to buy a huge chunk of Facebook. The sources for the rumor vary from people at a fund that buys stock from former Facebook employees to people at a very influential investment bank in Silicon Valley. Unsurprisingly, representatives from Facebook are declining to comment.

China approached one such source to see if he could help put together a stake large enough "to matter." Citibank may currently be trying to acquire as much as $1.2 billion worth of Facebook stock on behalf of two sovereign wealth funds – China's and another from the Middle East, according to Business Insider.

Facebook's approximately 750 million users may be worried if China were to suddenly own a chunk of the social network, especially given that the country's government doesn't believe in privacy online. Thankfully, such a deal would not affect users of the website.

First of all, A $1.2 billion dollar stake in Facebook isn't very large for a company expected to start with a valuation of $100 billion or more when it goes public,. Secondly, China would be buying non-voting stock and would have no say in Facebook's operations, not to mention that Facebook shareholders can't see what users are doing on the site in the first place.

Last but not least, because it's a private company, Facebook would have to approve any sale of its stock to China. On the other hand, Facebook co-founder and CEO Mark Zuckerberg is interested in having Facebook move into China, given that the country has the world's largest Internet population. The Chinese government tends to favor local companies when it comes to regulation, and one way to avoid this problem is to allow the government to own a stake in your venture.

It's important to remember that this is still just a rumor. Three months ago, there was a rumor that Facebook was entering China with help from Baidu which was quickly countered with another one saying that Facebook had not signed a deal in China.

In December 2010, Zuckerberg visited China, which obviously received a lot of media coverage. Two months later, the number of Facebook users in China septupled. This is despite the fact that Facebook is banned in the country by the ruling Communist Party. After events like these, it's not surprising that rumors about Facebook and China keep cropping up.

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