China’s global ambitions, projected through its tech champion Huawei Technologies, has started to dim. Huawei’s new company campus in southern China, houses replicas of many European cities underscoring their importance to Huawei’s founders.
The same theme is reflected in the Beijing headquarters of TikTok wherein the walls are plastered with posters including a cover of former Google CEO Eric Schmidt’s book “How Google Works”. While the idea of competing with U.S. tech giants is a constant theme across both companies, the path they have chosen to achieve their objectives has resulted in their present quagmire. Both companies which best exemplify China’s ambitions to challenge U.S. tech dominance are now stymied by strains in relations between Beijing and its world dominion ambitions which has strained relations with the United States, India, Australia and Britain.
As a result Chinese companies which have made a name in their respective files, including drone-maker DJI, artificial intelligence firms Megvii, SenseTime and iFlytek, surveillance camera vendor Hikvision as well as e-commerce Alibaba Group, are among the companies who are set to lose market access.
Smaller Chinese companies are also being forced to re-think.
“What we are experiencing now is unprecedented,” said a Chinese startup founder who has operations in the U.S. and and India, on the condition of anonymity since he has now decided to close shop. “My entrepreneurial spirit has been dampened due to all this, let alone global ambitions.”
This is a big shift from just a year ago, when the U.S.-led trade war with China, which highlighted serious security concerns regarding Huawei had little to no impact on other Chinese tech companies.
Months earlier, SenseTime and Megvii, which have the backing of U.S. investors, were eyeing big IPOs. TikTok was enjoying unfettered global growth. Alibaba was touting the global prospects for its cloud business, and DJI was consolidating domination of the drone business. But with U.S. and Indian trade action against Chinese tech, along with other countries condemning Chinese treatment of its Muslim Uighur population and keeping them in concentration camps in its Western province of Xinjiang, Chinese companies are seeing a decline in market access and consequently a drop in their revenues.
U.S. President Donald Trump has also ratcheted up anti-China rhetoric and has adopted a tough stance towards Chinese President Xi Jinping.
In recent months, Beijing has also raised tension with other countries with its ever expansive boundary claims; it also contributed to rising tensions following the imposition of its draconian security laws over Hong Kong.
A border skirmish with Indian troops also led the Modi led Indian government to ban 59 Chinese apps, including TikTok.
As a result of brinkmanship of its leadership, China’s top tech players are seeing their contracts being cancelled, products banned and investments blocked, with more restrictions coming up on the horizon.
ByteDance could be forced to sell TikTok with the U.S. considering a ban of the short video app – a global product that analysts say is worth at least $20 billion.
A ban on Huawei equipment by countries will also see the company losing billions of dollars in annual revenues.
Already, the U.S. Interior Department has grounded the DJI’s drone fleet and has introduced additional measures citing data security risks; more restrictions could be in the offing. DJI has put its IPO plans on ice.
China’s Alibaba Group has cut staff in its office in India, following New Delhi banning its UC Web subsidiary citing data privacy risks.
Chinese companies are watching geopolitical developments “with white knuckles,” said Daniel Ives, managing director of equity research at Wedbush Securities.
Huawei, Alibaba, SenseTime and Megvii declined comment.
ByteDance and Tencent did not respond to requests for comments.
Efforts by Chinese companies to change the minds of the foreign regulators have had little to no effect in the absence of policy changes by Beijing’s top leadership which continues to play foul of international agreements.
One such example is ByteDance’s move to ring-fenced TikTok from its China operations: it has poached a Disney executive to head the unit but this has cut little to no ice with Washington.
“That’s about all you can do,” said Mark Natkin, managing director at Beijing-based Marbridge Consulting. “Push the public relations as hard as you can, hire managers that give you more of a foreign feel, and keep your fingers crossed that there isn’t another geopolitical flashpoint.”