Chinese tech startups thrive, yet bear ‘original sin’ accused by the U.S.
The “controversial” and “unsolved” allegations against Chinese technology firms have been stacking up under the Trump administration, destroying the credibility of China’s high-tech supply chain and arousing widespread sentiment of Chinese companies’ being unfairly targeted by the Western government and media, a Financial Times editor says.
According to Hurun Research Institute, China is home to 227 unicorns (companies are valued above $1 billion), comprising nearly 40% of the world’s total, second only to America. The future of these high-growth Chinese startups in their quests to Western markets, however, is left in limbo after the recent bans surrounding Chinese tech giants such as Huawei, Tencent’s Wechat, ByteDance’s Tiktok over the U.S.’s national security concerns.
“With one example for a company like Huawei or Wechat or Tiktok, they have justifiable grounds to go after them,” Financial Times senior editor Wang Feng said about the unfair attack from the U.S. on Chinese companies.
He cited various explicit reasons for this attack as “original sins”, including whether or not the Chinese company was state-owned or had executives related to the government; operated in sensitive fields such as defense, aviation, chips, artificial intelligence (AI), bio-tech; linked with China’s “Belt and Road Initiative”; employed minorities; invested in firms with access to a large amount of personal data; or built R&D centers in the West.
“If your answer is yes to any of these questions, then, unfortunately, you come under some sort of suspicion from a Western perspective,” Feng said.
Last year, three Chinese leading AI unicorns, SenseTime, Megvii, and Yitu, which were included in the Trump administration’s Entity List, were accused of involving in the Chinese government campaign against Xinjiang province’s ethnic minorities. The backlisting means that those companies could not trade with or purchase technology from U.S. firms, given that China’s fast-growing AI industry is reported to be able to beat the U.S. supremacy in five to 10 years, according to The Global AI Index published in 2019 by the London-based Tortoise Intelligence.
A representative of Megvii said in a statement that the company “strongly objects” its ill-grounded inclusion on the list. The statement clarified that while the Human Rights Watch report on a surveillance app in Xinjiang initially implicated Megvii’s Face++ solution, the organization then corrected and reissued the report without highlighting Megvii name as there was no evidence of its involvement.
“We believe our inclusion on the list reflects a misunderstanding of our company and our technology, and we will be engaging with the U.S. government on this basis,” the statement said.
“By this stage, the U.S. is just striking at any Chinese company, any national champion,” Feng said, emphasizing that the rising “dodgy stories” related to China’s possibilities of threatening cybersecurity, committing intellectual property theft, violating human rights, or evading taxes are just justifications during President Trump’s tech cold war with China.
Given that the “original sins” were entrenched, it could not dampen Chinese tech startups’ demands to be listed on the world’s largest capital market, which is three times larger than all China’s stock markets combined.
In September, Jumpstart reported that six more Chinese startups had filed for U.S. initial public offerings (IPOs), regardless of the new bill from the U.S. Senate that could force nearly 800 Chinese firms to give up their listings if they do not comply with the U.S. audit requirements and certify themselves as “not owned or controlled by a foreign government.”
Those aggressive moves from the U.S. government sometimes receive backlash from the global business community and think tanks.
In June, the content platform Tiktok, owned by one of the most valuable Chinese startups in the world ByteDance, was claimed to “threaten the national security, foreign policy, and economy of the United States” in an executive order signed by President Trump to prevent the app from operating in the U.S.
In a Facebook meeting in August, BuzzFeed reported that the company’s CEO Mark Zuckerberg, though sympathizing with the Trump administration’s concerns, considered the ban “a really bad long-term precedent”. He alluded to the idea that other countries might target Facebook’s products later as a consequence.
CNN also cited critics’ opinions that the U.S. government’s attempt to control its citizens using the internet via Tiktok could set an anti-democratic precedent.
“When a country like the U.S. begins to erode the ideas of democracy, it naturally opens the door for other countries to do the same,” CNN quoted Nanjala Nyabola, an author and political analyst specializing in politics in the digital age.
As China is the world’s largest and fast-growing consumer market, the U.S. tech industry, on the flip side, is also not operating unscathed in the midst of the mounting tension between the two countries.
“Revenue from that big market fuels our big research investments, which allows us to innovate and drive America’s economic growth and national security,” the president and chief executive of the U.S.’s Semiconductor Industry Association John Neuffer told The New York Times after the Commerce Department considers adopting a proposal to block transactions between American companies and Chinese counterparts.
“It [China] is fully integrated into the global economy. It is inexorably tied with the United States,” said Jon R. Taylor, professor of Political Science at the University of Texas in San Antonio and a columnist of Bejing Review. “Whether certain people want to talk about decoupling or not, that decoupling is almost impossible given our global trading system.”