The subtle rise of a China, U.S. tech cold war

Stakes have been mounting between two of the world’s major superpowers; however, the matter has shied away from ideologies and nuclear weapons and has moved matters into a realm etched into the very fabric of our everyday life: technology.

Noticeably everything sharply ignited by former U.S. president Donald Trump’s blacklisting of Chinese tech titan Huawei back in 2019, tensions have trickled down to other facets in the tech sphere.

But while many have titled these tensions as an uneasy peace between both superpowers, tensions can be felt throughout the entirety of the global tech ecosystem.

The U.S. has made moves to curb the reach of China’s technological power among its allies, by merely pressuring them to block Chinese tech companies from being included within the rollout and deployment of the fifth generation of mobile networks citing data security and cybersecurity at the helm. 

But now, matters have escalated forward, going from a trade war to tech war; and China is starting to fight back.

Taming the tech dragon

The first escalation was seen when the eastern country began taming its very own tech sector, especially those that deal with large private user data, its security, as well as overseas listings.

On the surface, this move seems as though China is shooting itself in the foot, by curbing the scale of which its tech sector could innovate, while scaring off investors; but a closer look would show that the eastern superpower is aligning its most dangerous weapons with its political agenda.

But while China’s Premier Li Keqianq declared during the country’s annual legislative session in March that “the state supports the innovation and development of platform companies,” Beijing had subtly pushed another message for its tech giants: No matter how big or innovative they may be, commercial success is secondary to the mission of bolstering Chinese technological security.

An example was made from e-commerce behemoth Alibaba and its FinTech subsidiary Ant Group; the former was slapped with a whopping $2.8 billion fine by regulators citing anti-competitive tactics earlier in April, while the latter was suspended from debuting its ballooning IPO in November of last year.

And now the pressure has intensified.

Injured giants

According to report by Bloomberg, due to continuous pressure from China’s regulators, the country’s tech giants have lost a combined $823 billion in market share since their peak in February.

This was followed by the issuance of a sweeping warning on Tuesday to the country’s Big Tech companies, that the government intends to buckle down on its oversight of data security and oversees listing; a timely move, as local ride hailing Didi had concluded its initial public offering in the U.S.

Prior to that, the country’s internet watchdog pushed matters further by opening a security review into Didi last week, while demanding that the app be removed from local app stores; a move which stunned everyone, including the company’s biggest backer Tencent.

Bloomberg highlighted that these moves have increased pressure not only on the companies themselves, but on their investors who are indirectly being forced to sell their stocks within some of the country’s biggest tech names including Tencent, Alibaba, JD, Baidu, and Meituan.

“The Hang Seng Tech Index, whose members include many of China’s biggest tech companies, fell as much as 1.9 percent before paring losses to 0.6 percent Wednesday, marking its sixth consecutive day of declines. Tencent slid 1.9 percent, among the biggest decliner on the Hang Seng Index. Alibaba dropped 1.7 percent, while Meituan fell 1.3 percent,” Bloomberg’s report explained.

This has rendered any Chinese tech investments in the near future as caveat emptor.

Hong Kong’s collateral damage

With these actions and steps to crack down on its tech sector, the move will likely reflect Beijing’s political belief and strategy of weeding off those who doesn’t succumb to its agenda.

Meanwhile on the side of the camp, U.S.-based tech firms are making threats to pull out of the Hong Kong market due a new security law which aims at curbing doxing.

Doxing is the act of searching and publishing private or identifiable information found online for malicious reasons; this tactic was used during the 2019 mass-democracy protests in Hong Kong. During the events, everyone bore witness to personal details being released by all sides of the spectrum targeting law enforcement, journalists, activists, and their families.

In a letter penned by a coalition representing tech giants such as Facebook, Google, Apple, Twitter, and LinkedIn, the Asia Internet Coalition (AIC) warned the city’s Privacy Commissioner that the laws in the bill could unleash “severe sanctions” on individuals and organizations for what it deems as doxing.

The AIC described the law to be “not aligned with global norms and trends.”

“The only way to avoid these sanctions for technology companies would be to refrain from investing and offering their services in Hong Kong, thereby depriving Hong Kong businesses and consumers, whilst also creating new barriers to trade,” the letter said.

But while Hong Kong’s chief executive, Carrie Lam, refuted those claims and stressed that the proposed law only targets “illegal doxing,” it was still internationally condemned, especially with regards to its vagueness.

Lam argued that the law, which was introduced last year, has been successful in maintaining order and stability in the city.

The letter, signed by AIC managing director, Jeff Paine, highlighted that the language used in the draft law would subject intermediaries and local subsidiaries to criminal investigations and prosecution for doxing offences, including for not removing material from platforms.

“This is a completely disproportionate and unnecessary response to doxing, given that intermediaries are neutral platforms with no editorial control over the doxing posts, and are not the persons publishing personal data,” it said.

“In reality, most intermediaries already have notice and takedown regimes in place to deal with doxing content and such requests would be responded to without undue delay.”

This battle could be interpreted as a point of pressure for Beijing – who has started exerting its influence on the metropolitan city – since an exit of such vital tech resources would track back Hong Kong’s ability to remain as a tech innovator across the board.

The semiconductors Frontier

The rising economic and technological tensions between both superpowers have evolved drastically over the years, from a trade war to a tech war, and now stands at the heart of the world’s largest innovation and competition rivalry.

Escalations will continue to simmer over this slow burn, especially as U.S. president Joe Biden looks to bolster the western country’s position in the tech world, by banking on technology’s biggest resource: semi-conductors.

Earlier last month, The U.S. Senate overwhelmingly approved the Innovation and Competition Act – a rare show of unity between Democrats and Republicans – with Beijing responding to the bill and labelling it “filled with cold war zero-sum mentality.”