AOL closes China R&D base as economy slides

America Online will close a research and development base in Beijing but keep trying to break into China's market amid the sliding global economy.

The Beijing office, which opened in 2007 and has 56 staff, will be shut down by midyear given poor economic circumstances and reorganization plans, an AOL spokeswoman in the U.S. said via e-mail.

But AOL's Web portal for mainland China, launched last year, will continue to operate from the company's Hong Kong regional base, the spokeswoman said. So will AOL sites that are separate from the portal, such as the Chinese version of technology blog engadget.com. AOL also launched Web portals in Taiwan and Hong Kong last year, both of which will keep going.

The shutdown of the development base is AOL's second setback in China. The company formed a joint venture with Chinese PC maker Lenovo in 2001 to offer narrowband Internet service and a Chinese Web portal, but the venture was closed in 2004.

AOL appeared to be expanding its international focus as it opened foreign portals and acquired global social-networking site Bebo last year, said Greg Sterling, an analyst at Sterling Market Intelligence.

"There's this paradox of expansion, seemingly, but then the layoffs," he said.

"Either they're sort of pulling back to focus on markets that are more developed and more certain ... or they see themselves as not as competitive in the Chinese market, and they're not going to try to aggressively compete there," he said.