China’s tech companies navigate rough seas amid rising geopolitical tensions, slowing growth at home

Chinese tech firms Hikvision, DJI and Xiaomi are facing mounting pressure in major overseas markets
The stakes have never been higher for Chinese tech firms to expand overseas because of market saturation and slowing growth on the mainland

Zhou Xin

Published: 7:00am, 10 May 2022

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Chinese technology companies have had to confront a barrage of negative headlines over the past few weeks that could impact their operations overseas.

The US government is said to have plans to impose fresh sanctions on Hangzhou-based surveillance camera maker Hikvision Digital Technology Co for its alleged involvement in human rights violations in China’s Muslim-majority Xinjiang region, according to a report last Thursday.

While that report was neither confirmed nor denied by American authorities, it fired the latest salvo in the simmering US-China tech war. Imposing further sanctions on Hikvision, which has been under a US trade blacklist since October 2019, would set a dangerous precedent that could lead to similar actions against other Chinese tech firms.

On April 26, Chinese drone maker DJI Technology Co said it will temporarily suspend all business activities in Russia and Ukraine after an internal assessment of “compliance requirements in various jurisdictions”. That came as a reminder of the fallacy that Chinese tech products and services can replace what the West offers in Russia, which has been hit by trade sanctions after invading Ukraine on February 24.

There is little choice for Chinese tech firms but to reduce, or even cease, their operations in Russia amid the risk of also being slapped with sanctions.

Still, these companies cannot publicly state a wholesale exit from Russia because that would run counter to Beijing’s official policy of opposing such sanctions, while also angering consumers in that vast transcontinental country. After all, there is not much help Beijing can directly offer to any Chinese tech firm targeted with sanctions for breaching Western restrictions on Russia.

Smartphone giant Xiaomi Corp, meanwhile, had US$725 million of its assets in India seized on April 30 by authorities, who accused the Chinese firm’s local subsidiary of breaking the country’s foreign exchange laws by making illegal remittances abroad. This case, which has been widely reported on the mainland, offered another reminder of the potential pitfalls in doing business overseas.

As the world’s second most-populous country and second-largest smartphone market, India has enticed many China tech firms that view the country as fertile ground to grow their businesses by replicating experiences at home. New Delhi, however, has banned more than 270 Chinese-developed apps – including TikTok, WeChat and Taobao – over national security and privacy concerns since June 2020, following a deadly Himalayan border clash between Chinese and Indian troops.

Chinese start-ups follow TikTok’s exit from India amid apps ban

Venturing into overseas markets has always been a tough and complicated enterprise for any technology company. US tech giants, including the likes of Facebook parent Meta Platforms and Google, are expected to face more data constraints in Europe. These US online platform operators have also found it difficult to operate in China, while enjoying unrivalled popularity in Hong Kong.

For Chinese tech companies, the stakes have never been higher to expand overseas and chase new opportunities because of increased market saturation and slowing growth in the world’s second-largest economy.