Xiaomi: Facebook considered investing in $45bn Chinese smartphone giant

Mark Zuckerberg met with Xiaomi CEO Lei Jun to discuss a potential investment in the Chinese phone maker ahead of its recent $1.1bn (£720m) funding round.

Conversations were held between the two chief executives at a private dinner when Zuckerberg visited Beijing in October last year but the talks were never formalised, sources familiar with them told Reuters.

The two men are said to have weighed up the political and commercial implications of Facebook - banned in China since 2009 - investing in Xiaomi, which is valued at $45bn and has been described as the Apple of China.

One source said: "Facebook wants to get into China, and Xiaomi is keen to expand outside, so they both recognise the importance of working together."

Having only made its first smartphone in 2011, Xiaomi has seen phenomenal growth in its native China and is now the world's third-largest smartphone maker. CEO Lei recently said: "Within five or 10 years, we have the opportunity to become the number one smartphone company in the world," surpassing both Apple and current leader Samsung.

Despite the headlines investment by Facebook would no doubt create, one insider downplayed the potential funding as "not huge" but the very fact the two companies considered it shows how much closer US and Chinese companies have become as China's technology industry grows.

While Facebook has the potential to give Xiaomi the kudos of earning investment from a major US tech company with 1.3 billion customers, Facebook - which has yearned to enter the smartphone market for years - would also benefit.

Zuckerberg's company partnered with HTC to create the First, a handset that came with the social network's Android software skin pre-installed. However, neither the phone nor the software, which was available for other Android phones, were a success.

But Lei was ultimately put off selling a stake in his company to Facebook for fear of political fallout in China, two of the sources said, adding Lei also had concerns over how the deal would affect his company's ties with Google, a crucial business partner given Xiaomi phones run the search company's Android operating system.

In late December, Xiaomi announced a $1.1bn investment round, valuing the company at $45bn; the company closed 2014 with annual revenues close to $12bn.