International prospects dim for China’s tech businesses

US China relations

Huawei Technologies founder Ren Zhengfei’s global ambitions are marked in mortar and bricks in a business campus in China, where the buildings are replicas from European towns.


  • Attitudes towards China and Chinese companies have been impacted by a series of events both in China and around the world
  • The allegedly opaque relationship between the Chinese communist government and the companies is potentially driving much of the action
  • Chinese companies that have been impacted include Huawei Technologies, ByteDance, Tencent and a myriad of companies either seeking investment, or access to foreign markets
  • India, the United States, France and the UK are amongst those taking action

Zhang Yiming, founder of ByteDance, the operator of wildly popular video app TikTok, has plastered his Beijing headquarters together with posters such as a pay of former Google Chief Executive Eric Schmidt’s book “How Google Works”, also has long said he will build a international company that could compete with American tech giants.

But the two firms which best exemplify China’s aspirations to challenge US tech dominance are becoming stymied by strains in relations between China and countries such as the United States, India, Australia and the UK.

Chinese firms with technologies — such as drone-maker DJI, artificial intelligence businesses Megvii, SenseTime and iFlytek, surveillance camera seller Hikvision along with conglomerate Alibaba Group — will also be one of those access to markets.

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“What we are experiencing now is unprecedented,” said a Chinese start-up creator that has operations in the United States and India but asked not to be recognized as he’s currently contemplating walking away.

It’s a big shift from a year ago, when the US-led trade war with China and safety worries regarding Huawei were getting little effect on most Chinese technology champions.

SenseTime and Megvii, backed by US investors, eye big IPOs. ByteDance’s TikTok unit enjoyed unfettered growth. Alibaba was denying that the global prospects for the own cloud business, and DJI consolidated domination of their business.

In the US, President Trump has ratcheted up his anti-China rhetoric since he attempts re-election and Chinese President Xi Jinping has taken a tough line. Tensions have climbed between Beijing and other countries over new security legislation passed for Hong Kong, and also a border skirmish with Indian troops resulted in an increasingly India government ban on 59 Chinese programs.

Now China’s top tech players are getting contracts, products prohibited and investments obstructed, with more restrictions over the horizon.

ByteDance could be made to market TikTok as Washington believes following India in prohibiting the brief movie app, a product that analysts say is worth at least $20 billion.

Huawei is lose billions of dollars in revenue from bans on its own network equipment, and additional countries could follow the United States, the UK and others.

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Even the US Interior Department has grounded the privately held DJI’s fleet and stopped extra purchases due to data security risks, and more restrictions may be in the offing.

Alibaba Group is cutting team in its UC Web subsidiary in India following its mobile Web browser was banned by the authorities. DJI has put IPO plans on ice.

The organisations are watching geopolitical developments “with white knuckles,” said Daniel Ives, managing director of equity research at Wedbush Securities.

ByteDance and Tencent didn’t respond to requests for comment.

China’s foreign ministry said it encourages and directs the nation’s powerful organisations to invest abroad in a compliant manner, and expects other nations will safeguard the rights and interests of Chinese businesses.

International investment is an important engine driver for economic growth.

Tencent Holdings has experienced some of its apps in India prohibited, but not popular games such as PlayerUnknown’s Battlegrounds. The business recently introduced a brand new California-based gaming studio also plans such operations.

A massive domestic market is definitely the biggest profit centre for China’s tech firms, and a few countries stay keen to take Chinese investment.

“Global markets are big and Southeast Asia and Europe should still be open to Chinese companies,” stated one Beijing-based, internet-focused hedge fund investor.

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However, some startups from Southeast Asia that were formerly open to taking Chinese money are getting more reluctant,” said David Chang, managing director of Hong Kong-based MindWorks Capital.

“For example, if I take ByteDance on my (equity) capitalisation table and then ByteDance gets blocked and blacklisted in the US, my dream of listing on the Nasdaq is limited,” he stated, speaking to the US stock exchange popular with tech firms.

Efforts by Chinese companies to modify the overseas regulators’ heads have had little effect in the absence of policy changes from Beijing.

ByteDance says it’s ring-fenced TikTok out of the China operations and poached a Disney executive to go to the device. That’s failed to assuage Washington.

“That’s about all you can do,” said Mark Natkin, managing director at Beijing-based Marbridge Consulting.

The team at Platform Executive hope you have enjoyed the ‘International prospects dim for China’s tech businesses‘ article. Initial reporting via our content partners at Thomson Reuters. Reporting by Brenda Goh and Josh Horwitz in Shanghai, Yingzhi Yang in Shanghai, Kane Wu in Hong Kong and David Kirton in Shenzhen. Writing by Brenda Goh and Jonathan Weber. Editing by Timothy Heritage.

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