China-US Tech Crackdowns: The Next Phase of Competition

The Interplay of Technology and Global Politics

The TechCrunch Global Affairs Project investigates the increasingly complex connection between the technology industry and international political landscapes. This article initiates a comparative analysis of the tech crackdowns enacted by the United States and China, examining the geopolitical ramifications of each nation’s distinct strategies.

Tech Industry Scrutiny: A Global Trend

Currently, it presents challenges for major technology companies to thrive. In China, previously independent tech firms enjoyed a degree of operational freedom. Leaders such as Jack Ma of Alibaba and Jean Liu of Didi were prominent figures on the global stage, symbolizing Chinese innovation. This is no longer the case.

Following a critical speech regarding Chinese regulators, Alibaba’s IPO was halted, and Ma was largely absent from public view for several months. Tencent faced substantial fines for violating antitrust regulations, resulting in a combined loss of over $300 billion in market value for both companies. Didi’s stock price declined by 40% after being removed from domestic app stores. Recently, Chinese authorities have implemented new restrictions on educational technology and gaming, and have completely prohibited cryptocurrency.

Government Oversight in the U.S. and Beyond

While American tech leaders retain certain freedoms, their businesses are also facing increased governmental scrutiny. Key antitrust proponents, including Lina Khan, Tim Wu, and Jonathan Kanter, now hold senior positions within the Biden administration. Congress is also debating new legislation to regulate technology concerning issues like privacy and age restrictions.

A growing consensus exists in Beijing, Washington, and Brussels – that large technology companies have become excessively powerful and lack sufficient accountability. Politicians across the ideological spectrum believe that government intervention is necessary to protect the public interest. Consequently, political risk for founders, executives, and investors has reached unprecedented levels.

Divergent Approaches to Antitrust

Despite superficial similarities, the implications of the two countries’ antitrust strategies are markedly different. In China, antitrust enforcement serves as a tool of the ruling Communist Party. The objectives of the U.S. antitrust movement, however, are varied and less unified.

China is implementing decisive measures while the U.S. is only beginning to explore options. However, China’s emphasis on data privacy and limiting screen time for children are largely superficial justifications for its primary goal: complete political and economic control. With a limited independent civil society, the tech sector represented one of the few areas where power resided outside the Communist Party. In Xi Jinping’s increasingly repressive regime, such independent power structures are unacceptable.

Projecting Power Through Technology

Furthermore, China aims to project its power globally. It has consistently sought to control the next generation of technology and actively works to establish standards for crucial industries, including 5G, AI, renewable energy, and advanced manufacturing, as part of its China Standards 2035 project. While quietly dominating international standard-setting organizations is a key component of this strategy, controlling the companies developing these technologies is equally vital.

Huawei, Xiaomi, and TikTok may not engage in espionage as some Western politicians suggest, but their widespread adoption contributes to the global acceptance of Chinese standards. In contrast, the fate of Jack Ma differs from that of Huawei’s founding family. While Ma is a Communist Party member, Huawei’s success in establishing Chinese technology as the default 5G infrastructure enhances China’s technological credibility.

Loyalty and its Rewards

Huawei has benefited from its close ties to Beijing, but has also accepted the associated risks. Concerns regarding its connections to Chinese security services led to the arrest of CFO Meng Wanzhou in Canada, accused of violating U.S. sanctions against Iran. However, Beijing responded by arresting two Canadians and securing Meng’s release through a negotiated deal. This demonstrates that loyalty is rewarded within the Chinese system.

China’s crackdown has stifled investment, depleted talent, and potentially diminished the entrepreneurial spirit that fueled its tech sector’s growth. Nevertheless, it has effectively brought its tech giants under control, serving the interests of Chinese power.

The U.S. Approach: A Lack of Strategic Vision

While Beijing is aligning its tech giants with national interests, the U.S. is struggling to define its objectives. U.S. antitrust advocates are concerned about the power of tech companies, but lack a clear strategic vision for a more competitive sector. American tech giants have argued that their size is essential for U.S. competitiveness, but neither they nor the government view them as instruments of American power.

The hope among antitrust supporters is that breaking up or regulating companies like Google and Apple will foster competition, benefiting both the public and the U.S. tech sector. However, it remains unclear whether splitting off AWS from Amazon or Instagram from Facebook would help the U.S. maintain its technological leadership.

The Strength of the American System

America’s historically hands-off, capitalist system – open, flat, and democratic – has consistently produced groundbreaking innovations. It has benefited from government-funded research, but has thrived despite government involvement, not because of it. This has fostered trust in U.S. firms worldwide, as they are known for adhering to the rule of law.

The U.S.-China tech race will test this premise: Can a decentralized, independent industry maintain its edge against one orchestrated by a superpower?

Optimism and a Call for Collaboration

I remain optimistic that American innovation will prevail, as openness fosters ingenuity. U.S. research and startups are unparalleled. A focus on competition promises further growth. However, a limited national strategy is warranted.

Rather than adopting China’s industrial policy, which has resulted in significant waste, American lawmakers should collaborate with their European counterparts to develop a sensible framework for global competition standards. The U.S.-EU Trade and Technology Council and Quad technology working group can establish a democratic technology bloc that promotes cooperation and fair play.

This approach – providing government support without dictating commercial outcomes – has historical precedent. It is the best way to safeguard the U.S. tech industry while preserving its entrepreneurial spirit. As Congress and the administration consider how to address tech competition, they must recognize that it is not merely about resolving current issues, but about shaping the future of American technology and economic leadership.