The China tech industry is finding itself at a crossroads between geopolitics and the nation’s unstable economy.

The recovery of China’s economy, the focus on domestic consumption, and the Covid-induced technological growth… all are benefiting the tech industry. Yet, risks are still prevalent. According to analyst Charlie Chai at 86 Research, while the pandemic leads to digitalization in big businesses, it also results in investment cuts. In fact, tech leaders like Baidu, Alibaba, and Tencent, tend to prioritize their profit margins, especially with ongoing geopolitical and economical instabilities.

Digitalization in midst of the pandemic

China, the origin of the Covid-19 pandemic, had had to shut down over half of the nation since early February for pandemic control, leading to a 6.8% economic reduction during the first quarter of 2020. As the situation improved and businesses started to reopen in March, however, China’s GPD in the second quarter had seen a 3.2% rise.

In isolation, people had started to depend more on digital services, from e-commerce to video games. Abishur Prakash, a geopolitical futurist at Center for Innovating the Future (CIF), also acknowledged that China had never demanded technology as much as today. From healthcare to finance, technological projects being carried out is expected to completely turn China over a new page, making technology the heart of this nation.

And this hype had further established the standing of China’s large tech firms: Alibaba’s stock price had increased 30% in this year alone, and its second quarter revenue had seen a 34% rise as compared to the year before. Tencent also saw better operations than expected, with stable business results thanks to the firm’s game operations.

Mr. Chai also expressed that digitalized and “on cloud” companies were back to their full speed as the pandemic dwindle. Remote working and cooperation tools were basically booming in China, America, and Europe, with Alibaba’s DingTalk and Tencent’s WeChat being prime representatives.

Technology and healthcare

According to the World’s Heath Organization (WHO), at the moment there are around 200 Covid-19 vaccines being researched across the world, and 40 among those had moved onto the experimental stage – all expected to put a full stop to this pandemic.

Chinese tech firms meanwhile saw their opportunities in healthcare. Many had redirected to fields like remote doctor consultant or vaccine development algorithms. Now, even as Covid was long past its peak, this healthcare trend continues on.

Baidu is also discussing with its investors to raise total capital to 2 billion USD in 3 years for a new biotech company. JD Health International, JD.com’s online healthcare subsidiary, has applied for IPO.

Tech segregation

Recent trends have proven that globalization is putting us under supervision. In confrontation, the US president Donald Trump is presenting “deglobalization”, just as economists points out that Covid-19 had severely affected globalization.

The US-China trade war is still ongoing, and businesses find themselves stuck between two lines. Huawei was banned from accessing US technologies, and with it went a major semiconductor supplier for China. Washington also imposed sanctions on SMIC – China’s largest chip manufacturer, thus hindering Beijing’s semiconductor production attempts. Even ByteDance’s short video platform TikTok was called a national security threat and accused of steal data from US users to send back to the mainland.

TikTok has thus become a part of a new deal forced by the US government, which may lead to the birth of TikTok Global – 20% owned by Oracle and Walmart. While ByteDance maintained that the firm still own 80% of TikTok shares, Oracle countered such claim, saying that ByteDance had no rights to TikTok Global. Further discussions, it seems, are still on the way.

The aforementioned events are evident to what we call “tech segregation” – where technologies from China and the USA are separate ecosystems that functions independently. And this all happens amid China’s ambition to conquer the international tech market.

On the other hand, US tech firms are also facing US and EU politicians and managers. Some are even banned in China. The US government also fears that these firms are holding too much power, and thus had held an antitrust hearing with CEOs from Amazon, Apple, Facebook, and Google in July.

But what do these all mean to the tech giants of both the East and West? Prakash said they gave way to “a new business reality”.

In China, this reality may define the tech products provided. For example, if Huawei cannot gain access to the chip they need, will they be able to produce their next generation of smartphones? This also affect the talent market – and China’s worldwide ambitions were quick to halt.

“They were forced to play by the new rules – to sell themselves or to banned,” said Prakash. “This however means that as Chinese tech firms wander around the geopolitic tech world, they may discover a new way of operation. And this may become a new business blueprint for companies around the world.”

Source: ICTNews

Related posts: