This research aims to explain the factors behind the closure of Yahoo! Inc.’s business operations in China by 2015. Yahoo! Inc. chose to withdraw from China as the country posted rapid domestic economic growth and massive internet penetration developments. Besides, the foreign investment environment in China is also very friendly which is shown by the country’s position as the second largest FDI inflows recipient in the world. So, what actually causes Yahoo! Inc. to close its business in China? This research builds on the theoretical approach of obsolescing bargain theory and Porter’s five forces model. Obsolescing bargain theory assumes the relationship between MNC and host country is influenced by the constellation of bargaining power of each party. In the initial stages, MNC has bargaining advantage, but over time, the advantage is increasingly eroded and leads to the shift of bargaining advantage to the host country. Meanwhile, Porter’s five forces model presents the assumption that the competitiveness of industry depends on five “forces”; rivalry among existing competitors, the power of buyers, the power of suppliers, the threat of substitutes, and the threat of entrants. If a company lacks power over these five factors then it is certain to face difficulties in running its business operations. In addition, this study used qualitative methods based on library research as a research method. The research based on qualitative data which can be primary sources (regulations and legal basis) and secondary sources (journals, handbooks, textbooks, scientific papers, reports, press releases, and news). Through the theoretical approach mentioned earlier, this research can conclude that the Yahoo! Inc.’s withdrawal from the Chinese market due to the accumulation of the increasingly stringent Chinese Government regulation on the internet and the increasingly competitive domestic internet viiindustry. Strict regulation is representation of the “shift of bargaining advantage” while market competitiveness is evidence of Yahoo! Inc.’s lack of competitive advantage. Keywords: China, internet, Multinational Corporations, Yahoo! Inc