SINO-US RELATIONS

Xi Jinping's US visit could mark breakthrough in bilateral tech trade and investment: experts

PUBLISHED : Tuesday, 15 September, 2015, 7:00am
UPDATED : Tuesday, 15 September, 2015, 7:00am

Chinese president Xi Jinping's state visit next week to the United States may open new doors for trade and investment in the information technology markets of both countries, while helping narrow their differences over protectionist policies and cybersecurity.

That would serve as a strong follow-up to the breakthrough bilateral deal reached between Xi and US president Barack Obama in Beijing last November, which ultimately led to a new multilateral agreement in July to expand the range of tariff-free information technology and communications products.

Analysts predict mainland China's "Internet Plus" action plan, which was unveiled by the government in July, to become the focal point of new business opportunities for foreign technology companies in the country that Xi will discuss during his state visit.

READ MORE: Ahead of Xi-Obama summit, Chinese leader to meet Google, Facebook and other US tech firms hurt by China internet censorship

Premier Li Keqiang first spoke of Internet Plus as a new engine for economic growth at the opening of the National People's Congress in March.

The strategy was designed to integrate key technologies including mobile internet, cloud computing, big data analytics and the so-called internet of things with advanced manufacturing to foster the development of new businesses and highly innovative industries.

"Internet Plus will see China draw up more policies that encourage major global companies, such as tech giants Microsoft and IBM, to make investments around the country's digital transformation," Forrester Research principal analyst Charlie Dai told the South China Morning Post.

The action plan was being pushed forward at a time when mainland China's overall economy is slowing down. There are also heightened concerns about the central government wanting less foreign technology used in the public sector, and the recent anti-monopoly investigations against Microsoft and Qualcomm.

US technology suppliers in mainland China have been put under greater scrutiny by government authorities and been the subject of unflattering reports in Chinese media since Washington indicted five Chinese military officers for industrial cyber-theft in May last year.

READ MORE: White House should threaten Great Firewall to curb Chinese cyber attacks, experts say as Obama-Xi summit nears

The two nations, however, put their cybersecurity issues aside in November to advance the expansion of the 1997 multilateral pact called the Information Technology Agreement (ITA). Trade negotiators from 54 economies approved in Geneva a broader ITA coverage in July, enabling about US$1 trillion in annual sales of information and communications products to have zero duty from July next year.

"We've shown that US-China cooperation can end up not only being good for the two countries, but for the world as a whole," Obama said in November.

Forrester has forecast mainland China's total government and enterprise spending in information technology goods and services this year to reach US$132 billion, up 6.4 per cent from last year. The country will remain the world's third-largest technology market behind the US and Japan.

"Despite concerns about protectionism, China continues to provide many growth opportunities for US tech companies," said Sandy Shen, a research director at Gartner.

"That is why tech start-ups such as Uber and Airbnb, as well as other established foreign tech companies, are keen on expanding their businesses in China."

Shen pointed out that high-level discussions in Washington should look at how there are comparatively fewer mainland Chinese tech companies that have made inroads in the US, the world's biggest tech market.

"At present, there are more US tech companies that have been doing business for more than a decade and profited tremendously in the China market," she said.

"Chinese tech companies have just started their journey in the US, and many are still trying to find their way."

In recent years, Chinese internet companies led by Alibaba Group, Tencent Holdings and Baidu have made a splash in building up their assets, alliances and operations in the US.

Lenovo Group, the world's largest supplier of personal computers, had long been the role model on how strategic acquisitions can enable a Chinese technology company to succeed in the US and other overseas markets.

The firm's international expansion was accelerated by its purchase of IBM's personal computer division for US$1.75 billion in 2005. That was followed by its two biggest investments last year, when it bought smartphone supplier Motorola Mobility for US$2.9 billion from Google and IBM's commodity server business for US$2.1 billion.

But national security fears in the US have prevented Chinese telecommunications equipment manufacturers Huawei Technologies and ZTE from participating in major carrier and public communications infrastructure expansion projects.

Forrester's Dai predicted that bilateral discussions in Washington next week could see the US government "drive more business opportunities for Chinese internet companies" in the areas of e-commerce, cloud computing, social networks and gaming.

Prior to the talks with Obama, Xi is expected to speak before tech industry leaders at the eighth US-China Internet Industry Forum in Seattle. The technology conference is co-organised by Microsoft and the Internet Society of China.

A Microsoft spokesman said the company has no comment on the matter. A spokeswoman for Lenovo, which has dual headquarters in Beijing and Morrisville, North Carolina in the US, declined to comment.

Xi is scheduled to attend a roundtable meeting with senior Chinese and US industry executives at think-tank The Paulson Institute, according to Quartz. He is also expected to have dinner at the home of Microsoft co-founder Bill Gates, a Wall Street Journal report said.