Chinese tech is caught in between growing global suspicion of Big Tech and of Chinese government influence.
In a far-flung Himalayan valley on June 15, Indian and Chinese troops engaged in a deadly standoff over disputed territory that resulted in the deaths of 20 Indian personnel and an undisclosed number of Chinese casualties.
On June 29, citing data security concerns, India then banned 59 Chinese mobile apps including the popular video platform TikTok.
Not too long before the Galwan clash, anti-Chinese sentiment had been festering as apps like ‘Delete China Apps’ were immensely popular as part of a boycott against Chinese goods.
After US President Donald Trump’s announcement to ban TikTok on July 31, Washington appears next in line to move against Chinese apps.
In what was perhaps a case of rhetorical bluster to sound tough on China has now given way to commercial advantage: Microsoft is in talks with TikTok’s parent company ByteDance to acquire the app’s US operations. ByteDance may have no choice but to sell or relocate.
The actions being pursued against Chinese tech by the Indian and US governments reflect how the digital domain is rife with strategic implications for nation-states.
For geopolitical futurist Abishur Prakash, the singling out of TikTok in a game of geopolitical hot potato underlies a fundamental shift.
“It’s about the emergence of new alternative ecosystems, platforms and services that are not American,” Prakash told TRT World.
“For the US, this threatens its footprint and power. For China, this is the ultimate way to build global power and create a Chinese world order.”
Meanwhile Huawei, which has leveraged state support to become the world’s largest telecom equipment manufacturer, has also been in the crosshairs of multiple governments.
“The world is witnessing the first real fight over technology. Many nations have played their card: banning. Now, the ball is in China’s court. What will Beijing do? Play hardball or pursue diplomacy?
“More than likely, it’s going to be the former.”
Uneasy geopolitical dance
Considered the world’s most valuable startup at $140 billion, ByteDance and its most recognised product exemplify the can-do spirit of a generation of Chinese tech companies that aspire to follow home-grown giants Alibaba and Tencent.
ByteDance operates a China-only version of the app called Douyin and its overseas version TikTok is headed by ex-Disney CEO, Kevin Mayer. With 800 million users overall, it is the world’s seventh largest social media platform.
While TikTok is the first Chinese-produced internet service to achieve global success, there are many more waiting in the wings.
However, with concerns over consumer data mounting and rising political tensions as Beijing flexes on the world stage, Chinese apps like TikTok have become ensnared in two simultaneous trends: global suspicion of Big Tech on the one hand and of Chinese government influence on the other.
Before the ban, India was TikTok’s largest market with over 80 million monthly active users (MAUs); a US embargo would mean losing a further 30 million MAUs. ByteDance forecasts a loss of more than $6 billion resulting from the Indian ban.
The app has found itself in hot water in many other countries as well: Australia and Turkey have opened investigations; Japanese lawmakers have proposed restrictions; South Korea has slapped fines; and Pakistan has issued a “final warning” over “vulgar content”.
The effort to dismantle TikTok’s global ambitions can be construed as part of a larger strategy to hinder the overseas growth of China’s internet firms.
Prakash believes the TikTok saga is just the beginning.
“There’s an entire cohort of Chinese technology firms that are watching how TikTok and others are being treated and the challenges they are facing,” he said.
He offered the example of Didi, China’s version of Uber, which has global plans.
“Now imagine if young people in Istanbul are taking Didi vehicles and being incentivised to pay in Digital Yuan. All of a sudden, Chinese startups are not just driving de-dollarisation, they are also challenging the dominance of domestic currencies.”
The internet is already a splintered place – and the movement toward banning apps only threatens to intensify it further in that direction.
The promise of a free cybernetic space as a force for political liberation has faded in recent years. Today, the web has become a heightened zone of competition.
And China shares much of the blame.
Beijing has long championed cyber sovereignty – compelling foreign firms to secure local partners and distributors, and curtailing investment in areas like online banking. Having invoked national security as the motivating force behind its “Great Firewall,” it now wishes for the world to embrace its firms and jettison interpretations centred on domestic security.
In the latest phase of the digital revolution, data constitutes the ‘oil’ of the digital economy and a resource ripe for exploitation.
Tech giants like Google, Amazon and Facebook have established a new logic of accumulation – “surveillance capitalism” – a model that is built to enable major platforms to accrue power from controlling and mining data for profit.
Governments have now begun to grasp the importance of this emergent global infrastructure – and the data economy. Citizen’s privacy is not the only worry; data can also reveal information about a country’s defences. If a digital record is stored abroad, law enforcement becomes a tricky task.
And so, virtual borders have started to spring up: EU imposes GDPR requirements; India blocks payment info from leaving the country; Russia requires data to be processed and stored on internal servers; China blocks the majority of global data flows.
If Microsoft's acquisition of TikTok goes through, ‘data localisation’ is set to get a boost. The software giant has ensured that all private data of the app’s American users would be transferred to and remain in the US, and deleted from foreign servers after being transferred.
With both India and the EU pushing for ‘data sovereignty’ and China already there, the move from a US company will only push other countries to follow suit.
Such uncoordinated efforts to regain data sovereignty now undergird an emergent digital mercantilism – what is known as ‘techno-nationalism’: an approach which links technological innovation and capacity directly to a country’s national security and economic success.
In seeking to gain competitive advantage, intervention against hostile state or non-state actors is wielded as a policy tool, and industrial policy heretically supplants free markets.
As trends towards de-globalisation accelerate, homegrown technologies are preferred over imported, as nations find ways to develop their own local products and services. Made in China 2025 and ‘Make in India’ programs are notable examples.
The precipitous rise of new technologies that clash against existing political, economic and social systems is what Prakash calls “Next Geopolitics,” which describes “the impact that new and emerging tech, like artificial intelligence (AI), quantum computing, virtual reality, robotics, blockchain and gene editing will have on geopolitics.”
The implications are significant for global superpowers and hegemonic upstarts alike.
“Technology is driving the biggest fight for geopolitical power since WWII.”
The scepticism of political officials toward Chinese apps like TikTok mirrors concerns about hardware providers like Huawei, which could also potentially be used for collecting private data en masse.
Most recently, the UK ban of the tech giant from Britain’s 5G telecoms network was, in part, geopolitically motivated.
Amidst a global ‘Sino techlash’, one of the main issues Chinese companies face is one of trust.
“If China wants to be a global superpower, it has to operate on a global level, and being in Western markets is part of this,” said Prakash.
“Chinese technology firms have to find innovative and creative ways to bridge the lack of trust. This could mean creating joint holding companies that involve local firms or localising operations to such a degree that governments feel comfortable.”
“But if a government truly wants to single out a Chinese company, like in the US, there is little it can do except deal with the blows.”
Whereas Chinese-owned companies are presumed to march in lockstep with Beijing, TikTok has tried to establish its independence.
Nevertheless, establishing independence is a key hurdle for Chinese tech conglomerates if they are to expand beyond China’s borders.
“China is going to face real competition, from commercial challenges to setting the global rules to being pushed out of entire markets. Chinese companies now need a real, innovative geopolitical strategy.”
For the moment, as long as geopolitical tensions between China and other countries continue to escalate, the digital economy – and the new technologies that underpin it – will be intertwined with nations’ foreign policies.