Chinese tech firms may follow DJI to cut Russia and Ukraine exposure to minimise political, sanctions risk, experts say

DJI has temporarily suspended operations in Russia and Ukraine, after being accused that its products were used for military activities in the Ukraine war
Previous sanctions by the US government have seen DJI’s market share fall to 54 per cent last year from nearly 80 per cent a year earlier

DJI

Jiaxing Li

Published: 6:00pm, 2 May 2022

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Chinese companies are expected to follow drone maker DJI in halting operations in Russia and Ukraine, in a bid to appear neutral and shake off mounting political pressure from both Beijing and Washington amid the Ukraine war, experts say.

Unlike their Western counterparts, few tech Chinese companies have stepped up to make their positions clear on their Russian businesses partly because the Chinese government officially opposes sanctions imposed by Western countries on Moscow. At the same time, Chinese companies are quietly assessing the risk of “secondary sanctions” if they keep supplying Russia with products that may involve US technologies.

Last week, Shenzhen-based DJI said that it would temporarily suspend all businesses in Russia and Ukraine, after being accused that its products were used for military activities in the Ukraine war.

It is the first time a Chinese company has publicly announced suspension of business in Russia despite Beijing’s official stance. Huawei Technologies, a Chinese telecoms equipment giant already under US sanctions, has reportedly suspended certain operations in Russia, although the company has not confirmed the reports.

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Experts say DJI’s decision to curtail business in both countries might set a precedent for Chinese companies trying to walk a fine line between China’s political push and US sanctions.

Companies do not have to take explicit sides if they withdraw from both Russia and Ukraine, said Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics. “I expect many Chinese firms to simply withdraw from both markets, appearing neutral in their approach,” he said.

Founded in 2006 by aerospace engineer Frank Wang, DJI once dominated the global market with nearly 80 per cent market share in 2020. In late 2020, the US Commerce Department added DJI to a trade blacklist, which restricts American firms from selling products to the company because of national security concerns.

Last December, the US imposed another investment restriction on the drone maker, as its technology was allegedly used for the surveillance of Uygur Muslims in China. The sanctions have caused DJI’s market share to drop to 54 per cent last year, according to DroneAnalyst.

Privately held DJI has maintained it has no ties to the Chinese government, saying it “has not received any Chinese government investments”.

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DJI’s business suspension in both Russia and Ukraine is not contrary to Beijing’s stance and can also help it to avoid sanctions risks, said Dong Yizhi, a lawyer at Shanghai-based Joint-Win Partners.

With the relationship between Beijing and Washington getting increasingly tense amid the Ukraine war, a growing number of Chinese companies are now finding themselves in a tricky position.

While the US has been actively firing warning shots at Chinese companies and threatening to impose “sanctions from every angle” on those helping Russia to evade penalties, Beijing has repeatedly voiced its opposition to Western sanctions against Russia and pressured Chinese companies with operations in the country to stay.