China’s tech juggernaut steams ahead

When the Notre-Dame cathedral in Paris caught fire last year, Chinese-made drones were deployed to fly close to the blaze. They relayed video to the firefighters, helping them to direct their hoses and ultimately save the cathedral’s structure. 

The deployment was hailed in China as a big success for homegrown technology. But there was another aspect to the story. Before the drones could fly, French authorities had to lift restrictions that in normal times prevent them from buzzing through Parisian skies.

This dichotomy between technology and permission is crucial. China’s tech these days is often world-class, but its leading companies remain largely peripheral outside their home market. Now, as they embark upon global ambitions, the west is rapidly erecting a great wall of opposition. 

A bipolar world is starting to take shape, some analysts say. Around one pole are those countries that welcome Chinese technology and the multibillion-dollar investments of its corporations. Around the other is the US-led west that is closing its door, in varying degrees, to a lengthening list of what are regarded as sensitive Chinese technologies and investments.

The tit-for-tat closures of Chinese and US consulates this week mark the lowest point in bilateral ties since the 1970s. They are only likely to accentuate this polarisation. “We already have a bipolar world in parts of the tech stack, such as . . . social media, search and payments applications that are largely different in China and the US,” says Paul Triolo, a China tech expert at Eurasia Group, a consultancy.

To be sure, China’s nativist policies have done much to shape this reality. The Great Firewall it has installed in recent decades to sequester its domestic internet from the rest of the world has nurtured a “Galápagos kingdom” of distinct and hugely powerful tech players. 

Baidu, not Google, is the main search engine but is subject to heavy censorship. Alipay, which has 1.2bn users, is similar to its US counterpart, PayPal, but is part of a company that also runs the world’s largest money market fund, does credit ratings and owns an online bank. Similarly, China’s WeChat is different from WhatsApp in that it offers many more functions.

In recent years, such corporations have hopped over the firewall to seek their fortunes in the global arena. Some struggled to adapt but many have enjoyed significant success. They include Alibaba and Tencent, both of which are among the world’s top 10 largest companies, and the telecoms equipment giant Huawei. 

However, a backlash from politicians and regulators in the US, India and some European countries such as the UK is now playing havoc with the international ambitions of China Inc.

TikTok, a wildly popular video-streaming app with some 800m users worldwide, is a prime example. US officials told the Financial Times this month that Washington was considering blacklisting ByteDance, TikTok’s parent company, to prevent Beijing harvesting US personal data.

Underlining his objection, Mike Pompeo, US secretary of state, said that downloading the TikTok app would put “your private information in the hands of the Chinese Communist party”. TikTok has about 26.5m active monthly users in the US, most between the ages of 16 and 24.

Such charges are not without basis. One of Beijing’s laws, the 2017 National Intelligence Law, orders that “any organisation or citizen shall support, assist and co-operate with state intelligence work in accordance with the law”. In addition, it is hard for companies such as TikTok, which denies it has handed over user data to the Chinese government, to prove the absence of such action.

Mr Triolo says a “watershed moment” has been reached. Scores of Chinese companies have been added to US blacklists over the past 18 months, and many are finding it difficult or impossible to source critical components such as semiconductors from US suppliers. 

But will all this be enough to bring China’s tech juggernaut to a shuddering halt? A quick glance at the big picture, says Michael Power, strategist at NinetyOne, an asset management firm, makes clear that the answer is no.

For one thing, Chinese tech companies are backed by ample financial resources. For instance, the Ant Group, which owns Alipay and is planning to list on the Hong Kong and Shanghai stock markets soon, is valued at around $200bn.

For another, says Mr Power, China is home to the world’s largest and most innovative technology supply chain. In many technologies, he adds, “China is winning fair and square”. 

Chinese companies are widely recognised as world leaders, or as being at the cutting edge, in 5G telecoms equipment, high-speed rail, high-voltage transmission lines, renewables, new energy vehicles, digital payments, areas of artificial intelligence and other fields.

The drones that helped save Notre-Dame also reveal a homegrown dynamism. DJI, the company that developed them, was started in a university dorm room by student entrepreneurs.

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