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SHANGHAI: The latest additions to China’s list of banned technology exports could disrupt a wide range of industries and raise the possibility that some global tech giants will have to split up their Chinese operations, legal experts said.
The new list of export-banned technologies announced on August 28 came as an unpleasant surprise for an industry already grappling with the uncertainty posed by trade tensions between China and the United States.
The move was initially seen as a way to give Beijing a voice in any sale of the TikTok video app, but advisers to Chinese and foreign companies say the potential consequences go much further.
“The rules came as a surprise to many in the market, and there is a lot of tension in the tech space right now,” said Alex Roberts, corporate advisor for the Shanghai office of law firm Linklaters.
In addition to recommendation algorithms such as those used by ByteDance-owned TikTok, the new list of “partially restricted exports” includes cybersecurity and drone technology, speech recognition software, and handwriting scanning software.
The reviews could also affect a group of multinational companies conducting research and development within China, adds Nicolas Bahmanyar, a senior cybersecurity consultant at the LEAF law firm in Beijing.
“It is very likely that a company with R&D centers in China will face a choice: keep their R&D center in China, just for China, or leave China to be able to use the technology they develop anywhere in the world. world, “he said.
The Commerce Ministry was quick to respond to speculation that the new rules were primarily directed at TikTok, saying they were not directed at any particular company.
READ: TikTok Owner Will Invest Billions, Recruit Hundreds In Singapore Over 3 Years: Source
Lawyers who have taken a close look at the changes say their wide scope means they could affect a wide range of companies in different business sectors.
They could change the mindset of companies like Microsoft, consumer drone maker SZ DJI Technology, video streaming service Zoom Video Communications and Tencent, which exports games around the world and has a cloud services business in the fast-growing foreigner.
A source at Tencent, which has a large number of overseas subsidiaries and companies with investments, said the company was waiting for clarification on what the rules for technology sharing with these units would mean.
“In general, it will affect the business of Chinese companies abroad, mainly those that provide cross-border services,” said Raymond Wang, managing partner of the Beijing Anli Partners law firm.
Zoom, for example, employs approximately 500 people in China as engineers working on product development, according to its prospectus. Microsoft hosts Microsoft Research Asia in Beijing, which has been the origin of a number of advancements in AI.
Zoom and DJI declined to comment. Microsoft and Tencent did not respond to Reuters requests for comment.
“Overall, from the market reaction, it is clear that many companies with operations in mainland China need to think of something,” said Linklaters’ Roberts.
