International Business Machines Corp (IBM) is shutting a key research division in China in a move affecting more than 1,000 employees, local media including Yicai reported, in the latest pullback by a US name from the world’s No 2 economy.

The company is shuttering two business lines that specialise in research & development (R&D) and testing, Yicai reported, citing an IBM statement. It will instead turn towards serving private enterprises and select multinationals operating in China going forward, Yicai added.

IBM joins a growing list of companies scaling back their ambitions for China as an economic downturn, heightened regulatory scrutiny and a drive to replace foreign technology depress sentiment. Wall Street names such as Morgan Stanley have shifted some operations abroad, while foreign investment has slowed partly because of concerns Beijing is favouring local players.

Tech is a particularly sensitive arena given the US and China are locked in a conflict over crucial spheres from semiconductors to artificial intelligence. Beijing is trying to foster the growth of national champions such as Huawei Technologies Co, worried that restrictions on US technology will hamper the country’s longer-term prospects and curtail its geopolitical clout.

IBM plans to move its Chinese R&D functions to offices elsewhere, The Wall Street Journal reported, citing an employee briefing hosted by Jack Hergenrother, a company vice president. The US company told some employees it’s adding engineers and researchers in places including Bangalore, India, the Journal said, citing employees who were briefed on Monday.

Representatives for the company didn’t respond to requests for comment outside normal working hours.

  - Bloomberg