China’s tech companies have triumphed in the global marketplace with everything from video sharing apps and mobile games to smartphones and sophisticated telecommunications infrastructure.
But the United States, Australia, Britain and India are among the big markets in which they have been affected by espionage concerns or diplomatic disputes, tying their international ambitions, for now.
“Technology is increasingly becoming a geopolitical issue” and “a strategic priority” for a growing number of countries, said Dexter Thillien, an analyst at Fitch Solutions.
Yet Chinese companies have a massive home market to focus on, even if they can’t pursue international targets: There are some 900 million users at stake, more than the United States and Europe combined.
While the Chinese Internet is tightly controlled by the “Great Firewall”, the ecosystem provides companies with the opportunity to deploy China-specific applications for potentially huge customer bases.
TikTok, for example, is one of the most popular Chinese-made apps in the world, but it is not available in the country.
Instead, its parent ByteDance offers a similar app called Douyin, which according to Bloomberg News surpassed 600 million daily active users in August and generated $ 6.1 billion in revenue over a 12-month period. And the CEO of ByteDance China said he was aiming to double that number over the next year.
The Trump administration has claimed that China could use the popular short video sharing app TikTok to track users and conduct espionage, effectively forcing the sale of its American unit.
Washington has required that the next owner of TikTok’s operations in the United States meet the security requirements.
Countries “see innovation and technology as a direct impact on national security, the economy and social stability,” said Alex Capri, a researcher at the Hinrich Foundation, an independent organization that monitors developments in world trade.
He described the phenomenon as “techno-nationalism.”
Trump has also targeted Huawei with sanctions and called on allies to avoid the company’s 5G equipment, claiming that the Chinese government could use it as a spy tool.
The campaign has had an impact, with Huawei excluded from lucrative 5G launches in big markets like Britain.
Separate tensions between New Delhi and Beijing have also led to the banning of TikTok and other Chinese apps in India, a massive market with hundreds of millions of potential customers.
Huawei, TikTok and the Chinese government have denied the allegations.
But while Chinese app makers and tech companies have complained of being unfairly targeted, they remain big players on the global tech scene.
Despite the security allegations, TikTok was the world’s most downloaded app outside of video games last month, according to SensorTower, a research firm.
Huawei remains one of the world’s largest smartphone manufacturers and is one of the leading manufacturers of the sophisticated 5G equipment needed to build next-generation high-speed communication networks.
And like ByteDance and Huawei, other tech giants in China are targeting growth areas within the world’s second-largest economy, including autonomous vehicles, quantum computing, and biotechnology.
Meanwhile, ByteDance’s competitor, Tencent, has been looking to create an Amazon-owned Twitch-like game streaming service with potentially 300 million users in China, Bloomberg reported last month.
Tencent, whose WeChat messaging app has been targeted by the United States, said on Tuesday it was opening a new office in Singapore to serve as a regional hub “to support our growing business in Southeast Asia and beyond.”
However, international punishments and suspicion continue to hurt, as the large size of the Chinese market is not enough to offset the damage.
The Trump administration has blacklisted Huawei, for example, from sourcing technology from the US, posing a potential bodily blow to its supply chain, including its smartphones.
China does not make its own microchips, the key component of all electronic products, and Washington wants to cut off supply while trying to crush the country’s tech sector.
“The harsh reality is that these US measures have force and Huawei has to fundamentally reconfigure its business to deal with them,” Trivium China, a Beijing-based research firm, said in a recent note.
Furthermore, weak intellectual property protection and corruption in China “hardly fuel the innovative energy necessary for cutting-edge success,” said Larry Ong, senior analyst at risk consultancy SinoInsider.
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