Facebook Discusses Investment Possibility in Chinese Smartphone Maker Xiaomi

Facebook CEO Mark Zuckerberg has reportedly discussed investment options in China's top smartphone manufacturer Xiaomi.

According to Reuters, Zuckerberg met with Xiaomi's CEO Lei Jun at a private dinner in China before Xiaomi's $1.1 billion fundraising event. However, no specific investment decisions were taken during the meeting as both the CEO's weighed political as well as commercial proposition of Facebook in China.

Significantly, Facebook is banned in China since 2009, along with Google and Twitter, for the security reasons. Evidently, Facebook is eager to enter the most-populated country of the world.

The Reuters report states that a strategic alliance with Xiaomi may help in lifting of the ban on Facebook, but Xiaomi CEO Lei fears that selling its stake to Facebook may result in a political fallout at this time when the U.S.-based social networking site is banned in the country.

Xiaomi also fears a tie-up with Facebook could threaten its relationship with Google Inc., a crucial business partner.

Xiaomi's phones feature Google's Android operating system. Last month, Xiaomi announced that it had raised $1.1 billion from investors including Hong Kong-based tech fund All Stars Investment; DST Global, a private equity firm that has invested in Facebook and Alibaba Group; Singapore sovereign wealth fund GIC; Chinese fund Hopu Management; and Alibaba founder Jack Ma's Yunfeng Capital.

The fundraising valued Beijing-based Xiaomi at $45 billion just three years after it sold its first smartphone. The company had revenue of close to $12 billion in 2014.

Zuckerberg had eyed China as a critical piece of his vision to connect the global population. But, like Google and Twitter, the social networking giant has been blocked by China's internet censors, who cite national security concerns.

"Facebook wants to get into China, and Xiaomi is keen to expand outside, so they both recognize the importance of working together," said one of the knowledgeable individuals, none of whom wanted to be named due to the sensitivity of the matter.

Xiaomi and Facebook declined to comment on the issue.

The two CEOs knew each other from before, but got to know each other better only last year. In October, Zuckerberg was invited for dinner at Lei's Beijing home along with Facebook's business development chief John Lagerling and China head Vaughan Smith.

The next day, Zuckerberg - whose wife is a Chinese-American - addressed the prestigious Tsinghua University and won plaudits for speaking in Mandarin during a 30-minute Q&A session.

As Xiaomi sought financing last year, ICONIQ Capital - a San Francisco-based fund that manages several individuals' personal wealth including Zuckerberg's - also considered buying shares but ultimately did not, several people with knowledge of the matter said. Talks about ICONIQ taking part in Xiaomi's financing were not led by Zuckerberg himself.

(With inputs from Reuters)