The rejection of Chinese tech – what it really means

In March 2023, the short-video app TikTok was challenged by a bipartisan USA Congress committee over its Chinese ownership. TikTok’s parent company, ByteDance, shared details of a $1.5 billion project with Oracle designed to safeguard the data and content of its 150 million American users from Chinese influence. But, despite this, the members of the energy and commerce committee remained unmoved.

“I still believe that the Beijing communist government will still control and have the ability to influence what you’re doing,” said democratic congressman Frank Pallone. Multiple government and legislative bodies have banned Tik Tok usage by its employees based on fears of profiling and tracing technologies.

It is not just data spying that concerns the West. Another reason is the anticipated ubiquity of Internet of Things (IoT) devices, and these being used as trojan horses for attacks. With multiple connected devices in any one home, there is a greater potential to inflict damage on a national level. If every washing machine in the UK switched on simultaneously, for example, it could overload the National Grid while also causing a temporary water shortage.

That being said, these new attack vectors have been widely known for a while now. Taking a step back to look at the bigger picture, security is simply the tip of a very large iceberg. What lies underneath are issues of power and money.

In the bigger geopolitical picture, cyber security is really about cyber politics and cyber economics. Cyber security is more visible at the moment, partly due to things like spy balloons and Huawei being designated ‘high risk’ in the UK and USA (among others). Over the next decade, we will see cyber concerns change the global political and economic status quo.

The End of Globalisation

Globalisation of supply chains has been the status quo since the late 1980s. China became the world’s factory, developing its economy using cheap labour and a wealth of natural resources. The trade-off for cheap, innovative products has been a reduction in security. As standards became globalised, imports were less closely monitored.

However, China has now reached the stage of being an affluent country with a thriving middle class. In fact, it is now the largest single market in the world, making China less interested in the global economy.

As such, there is a move away from globalisation. Prices are rising and China is starting to dominate both economically and technologically. Feeling threatened, the Western world is seeking greater protection of its economy and technology.

The current Western concern around securing networks and devices will extend outward to cover the entire supply chain, allowing countries to secure economic and political power while still sharing in technological advances.

While it’s unlikely that we’ll return to the protectionist policies of the early 20th century, we will see a greater bifurcation of technology. We are already seeing it when it comes to things like semiconductors and applications ─ there is one set of technologies operating in the West, one in China, another in Russia, and so on.

Changing Pace of Innovation

Zooming out, it seems clear that the world moves in big cycles, shifting back and forth between protectionism and globalisation. In the coming, more protected, cycle, consumers will still enjoy a lot of the benefits of technology but things like 6G will take longer to roll out and likely cost much more.

The growing bifurcation of technologies and protection of national interests will likely lead to a slowing of innovation. We are already seeing tech giants cutting jobs in anticipation of things slowing down, readjusting the levels of investment that delivered the tech boom of the past two decades.

And with China no longer serving as the world’s factory, products will also become more expensive. Shifting manufacturing out of China will likely cause a lot of friction and disruption of supply chains in the near future. In the longer term, however, this shift may help rebalance job creation and wealth distribution, especially in developing regions like Africa.

The good news is that the learnings and development will still be shared; the global market won’t be closed just yet. Rather, organisations like the Mobile Ecosystem Forum (MEF) will step in to become facilitators of collaboration and development, helping manufacturers, software engineers and application developers work closely together to create technologies that work seamlessly across different regions, networks and devices.

Control of Standards

One of the ways globalisation has helped technology work seamlessly over the past few decades is through aligned global standards. This has helped to ensure that development and innovation have remained open yet still relatively secure.

Interestingly, China has been careful to keep itself somewhat removed from these global standards while still using them to manufacture technology. As such, there is essentially a ‘Chinese internet’ that differs from the rest of the world.

As China stops playing manufacturer and grows into a large, mature market, the rest of the world has come to recognise the power that this separation has afforded the Chinese government. In its internal market, China can control technologies, social media platforms, applications, and information centrally – something the global West is ideologically opposed to.

Yet, as technology companies have grown, so too has the need to gain some level of control over how technologies and information are used. If Facebook is bigger than any individual country and there is no control over how the company uses data, it has the potential to become incredibly powerful, as illustrated by the Cambridge Analytica scandal.

As a result, the EU and US are now going down a path of trying to control various internet players. The pushback has come in the form of decentralised Web 3.0 which provides new de facto standards. Concerned about sovereignty and security, national governments are trying to reign in Web 3.0 technologies and/or create their own.

This may end up in much more localised standards and technologies. The UK government, for example, is currently working on a central bank digital currency (CBDC), based on Web 3.0 principles. Much like other cryptocurrencies, the UK CBDC may operate using different standards to other countries.

It will be interesting to see whether Web 3.0 will become Chinese vs the rest of the world or whether there will be a more granular differentiation of digital standards. It already seems that the EU is challenging the dominance of US-based tech giants by developing its own standards, such as the Digital Markets Act (DMA) and the Digital Services Act (DSA), to try to gain greater control and regulation of digital markets and services.

Summary

The focus on China as a malicious security threat is somewhat of a distraction. The real battle is in military and economic power. Security, through this lens, is about protecting the entire supply chain in order to be able to protect national interests.

This end-to-end protection of service delivery will likely lead to a bifurcation of technologies and standards, potentially creating localised services tied to particular nations, regions, and/or technology providers, and a shift away from globalisation.

It will be interesting to see how this plays out on a geopolitical stage. There will likely be some short-term friction causing innovation to slow and costs to rise but which, in the longer term, could lead to a more balanced global economy.

Dario Betti is CEO of MEF (Mobile Ecosystem Forum), a global trade body established in 2000 and headquartered in the UK with members across the world. As the voice of the mobile ecosystem, it focuses on cross-industry best practices, anti-fraud and monetisation. The Forum provides its members with global and cross-sector platforms for networking, collaboration and advancing industry solutions.  

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