It was a perfect ju-jitsu. After weeks of watching US President Donald Trump pressure Chinese tech company ByteDance to sell its social media app TikTok to Microsoft, Beijing struck back, using one of Mr Trump’s own weapons of choice – export controls. Chinese authorities expanded the Middle Kingdom’s list of controlled exports to include algorithms, which are of course TikTok’s main asset. As the mother of a teenager who spends too much time watching 15-second bursts of physical comedy on the app, I can tell you that they are very good at keeping you hooked.
The move is in large part political. TikTok is hardly as strategic as, say, the 5G equipment maker Huawei. Yet as one Chinese investor put it to me, it wouldn’t do for Beijing to allow the Trump administration to appear to “force a liquidation sale” of the viral video app, even at a time when Chinese authorities are clearly keen to avoid any build-up of tensions between the countries before November elections.
But the use of export controls by Beijing to potentially thwart a deal also underscores that it is not just America, but also China, that is moving to decouple its technology industry. Already, emerging nations represent a larger export market for China than the US, according to Gavekal Dragonomics/Macrobond data. Beijing’s Belt and Road Initiative and its trade-based diplomacy in places such as Africa and the Middle East, combined with the rise of the digital renminbi, will make it ever easier for China to grow its exports to places other than the US.
The Trump administration has tried to offset these efforts by denying Huawei the US-made chips and software that it requires for its ambitious global 5G rollout. But no expert that I’ve spoken to on the topic thinks that this will prevent China from executing a longer-term decoupling from the US tech ecosystem. If anything, the restrictions have only sped up China’s efforts to develop its own chip industry.