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U.S. actions against Chinese tech companies portend harm for both
China will continue to be an active participant in global trade and investment. And it will open up wider to foreign investors and support globalization. However, it is "naive to believe that forced technological decoupling, trade sanctions, or forced changes to global supply chains will put an end to China's economic growth
By Wen Qing  ·  2020-08-21  ·   Source: NO.35 AUGUST 27, 2020
WeChat or iPhone? It might become an either-or choice for consumers. On August 6, U.S. President Donald Trump issued executive orders that would ban TikTok and WeChat from operating in the U.S. in 45 days if they are not sold by their Chinese parent companies.

A likely scenario is that WeChat and TikTok will be removed from Apple's App Store, which will directly impact Apple's Chinese market as WeChat is the most prevalent messaging and mobile payment app in China.

WeChat, a popular social media platform, has 1.2 billion monthly active users worldwide, according to its parent company Tencent. TikTok, the globally popular short video platform, is owned by Internet technology firm ByteDance. Trump issued another executive order on August 14 directing ByteDance to divest interest in TikTok's U.S. operations within the next 90 days.

The TikTok and WeChat ban will affect many Americans adversely, including their freedom of choice, observers said. They also think that all such moves, including the relentless crackdown on Chinese telecommunication giant Huawei, could fuel U.S. decoupling from China, which will be a mutually harmful unstrategic choice.

Negative repercussions

The reaction of the U.S. commercial community to this ban is very clear and consistent. Besides Apple, more than a dozen companies, including Ford, Walmart, Goldman Sachs, Intel, Morgan Stanley, Procter & Gamble and United Parcel Service, are all said to have taken part in a call with White House officials, detailing the adverse impacts that a ban on WeChat could have on their businesses, according to a Wall Street Journal report on August 12.

What WeChat is to the Chinese can be viewed as what a combination of Facebook, WhatsApp and Apple Pay is to the West. People use WeChat to make payments, send messages, videochat, read news and do more.

Without WeChat, the iPhone would seem useless to many Chinese users. In a recent poll on Chinese social media Weibo, 94 percent of the participants said they would switch to another brand if WeChat cannot be used on iPhone.

Many Americans stay in touch with their Chinese friends, business partners or colleagues on WeChat. If WeChat is banned, their communication and business exchanges would be affected. Some users said they plan to continue accessing WeChat in the U.S. by using a virtual private network that will allow them to circumvent the ban.

Although Apple reacted strongly against this order, it was embroiled in a dispute with WeChat in 2017. WeChat allows users to tip certified content providers who publish articles and circulate them on the app. Apple claimed that this cash gift constituted an in-store purchase, and therefore, a portion of the money was payable to it. WeChat was temporarily obliged to suspend the tipping but ultimately, the two companies reached an agreement. This, to some extent, guaranteed the increasing shipment of iPhones in the Chinese market.

Apart from threatening to ban WeChat and TikTok, the U.S. imposed further restrictions on Huawei, aimed at cutting off its access to commercially available chips. All such moves were taken the ground of national security. However, in the past 30 years of Huawei's operation, not a single country has produced evidence that the company was involved in any cybersecurity incident. As for TikTok, a U.S. Central Intelligence Agency assessment said there's no evidence that the Chinese Government intercepted TikTok data or used the app for espionage through cellphones.
An Apple store in downtown Beijing on July 17 (XINHUA)

This is a stark contrast with American companies. Cisco and Apple admitted years ago that there were security loopholes in their equipment. Besides, the U.S. intelligence has long been running illegal and indiscriminate surveillance programs on foreign governments, businesses and individuals, including its own allies.

"It is widely believed that the Chinese and U.S. economies are closely intertwined and decoupling seems impossible," Jia Qingguo, Director of the Institute for Global Cooperation and Understanding, Peking University, said. "Decoupling the Sino-U.S. economies will lead to the reversal of economic globalization, the fragmentation of the world market, and a significant reduction in the efficiency of the global economy."

Jia added that the benefits that countries obtain from their comparative advantages through international trade would be greatly reduced. Moreover, economic decoupling would reduce the common economic interests and interdependency and increase the possibility of military conflict or even war.

No easy act

However, decoupling is easier said than done.

With a population of 1.4 billion, China's huge market potential is hard to resist. "Smart entrepreneurs, including Americans, will never give up this market," Tao Wenzhao, a researcher with the Institute of American Studies at the Chinese Academy of Social Sciences, told Beijing Review.

China also enjoys a competent workforce that has matured in the four decades since reform and opening up began in 1978. That is attractive to many U.S. enterprises, Tao pointed out.

If the U.S. is pinning its hope on technological decoupling to contain China's growth, the attempt will prove futile. It is wrong to assume that China's "continued economic growth depends almost entirely on the maintenance of the global free trade system and access to Western technology," Zhang Jun, Dean of the School of Economics, Fudan University in Shanghai, said. "The real drivers of China's economic performance over the last decade or so have been rapid growth in its huge purchasing power and fixed assets investments including in the country's thriving technology sector."

China will continue to be an active participant in global trade and investment. And it will open up wider to foreign investors and support globalization. However, it is "naive to believe that forced technological decoupling, trade sanctions, or forced changes to global supply chains will put an end to China's economic growth," Zhang concluded.

(Print Edition Title: The Decoupling Myth)

Copyedited by Sudeshna Sarkar

Comments to wenqing@bjreview.com

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