Jul 27, 2012 · 2 minutes

LinkedIn founder Reid Hoffman has been visiting China in recent months, and several sources have indicated the professional social network is gearing up for a serious push into the market. Reports suggest it already has 2 million users in China, even though it hasn't even applied for a license to operate here. The service has a country-specific domain name, cn.linkedin.com, and a Chinese-language version is due any minute now. All of which begs the question: Why isn't the company here already? And why has there so far been no dominant equivalent?

In Beijing, Yirong Xu, the founder of social shopping service Meilishuo, told me that LinkedIn might not work very well in China because business people here are very protective of their contacts. They don't want to make them public or connect with them outside of the offline realm because they consider their business networks a private advantage. Xu, half jokingly, called those offline networks "Invisible LinkedIn".

An opposing perspective suggests that there is nothing in the culture that is holding back a LinkedIn-type service, but the Internet ecosystem, especially for human resources professionals, is just under-developed compared to the Western world. That's the position held by Dominic Penaloza, co-founder and CEO of Ushi, which is just like LinkedIn but with a few key differences.

"The development of the HR profession is still in a very early stage in China," says Penaloza. "That means that although there’s literally millions of HR people in China, their usage of the internet is only just beginning.”

In the US, the HR industry has been crucial to LinkedIn's success, thanks to the company's proprietary recruiting tools, which account for a large chunk of its revenue. While North American GDP is only 1.6 times larger than the Chinese GDP, however, the online recruiting market size is seven times bigger, says Penaloza. 

Penaloza's technical co-founder came to Ushi from Tianji, another LinkedIn-style service, which claims more than 6 million users. As with all Internet services in China, it is difficult to assess the veracity of these numbers. Ushi has only 800,000 users, but that's because the company started by seeking only top-tier executives, says Penaloza. The company launched with a private-invite beta, using the logic that users would better appreciate a high quality professional environment. Penaloza claims that of the 800,000 members, more than 50,000 are CEO-level.

Because the market is so under-developed – Penaloza likens it to the US in 2006 – Ushi has added a human service element to its business. There are six people on staff who are dedicated to using Ushi's backend to help recruiters find potential employees. Ushi has also partnered with the Gerson Lehrman Group, which invested $3 million in the company, to boost its international expert network.

Despite the obvious challenge posed by LinkedIn's impending arrival, Ushi won't back down. Penaloza points out that no foreign Internet company has done particularly well in China. (LinkedIn also doesn't seem to have done that well in Japan.)

"So far no foreign-headquartered internet company has ever become number one in its space in China," he says. "So LinkedIn will clearly have a shot at it, but if they do they’ll be the first in Chinese history to become number one in their segment.”

Of course, Chinese Internet history is only 12 years old. That's not insignificant, but it is perhaps still young enough to change its ways.

[Kind of weird image from Shutterstock.com]