Commentary on Political Economy

Wednesday 18 November 2020


Chinese Tech Companies Need to Disappear for a While

The Trump administration is doing as much as it can to make its combative policies irreversible.

This is a good time for companies in the Trump cross-hairs to stay out of sight.
This is a good time for companies in the Trump cross-hairs to stay out of sight. Photographer: Qilai Shen/Bloomberg

For Chinese technology companies, January can't come soon enough.

Giants from Huawei Technologies Co. to TikTok owner ByteDance Ltd. can have no doubt left: There will be no let-up in the Trump administration's efforts to entrench its China policy before leaving office. That's undermining hopes that a change of U.S. president might lead to an easing in the technology cold war.

The Securities and Exchange Commission's decision to push ahead with a plan that could lead to the delisting of Chinese companies from U.S. stock exchanges is just the latest salvo. Last week, Trump issued an executive order barring investments in Chinese companies that are owned or controlled by the military. Since the Nov. 6 election, the State Department also slapped sanctions on more people accused of undermining Hong Kong's autonomy.

U.S. officials have made no secret of their strategy: “Future U.S. presidents will find it politically suicidal to reverse President Trump’s historic actions,” John Ullyot, a spokesman for the National Security Council, said this week. Shifting the goalposts will make it harder for Joe Biden to move them back, assuming the president-elect even wants to.

The SEC’s action was unusual. Most agencies stop issuing major new policies after a presidential election, particularly when power has changed hands, as Robert Schmidt and Ben Bain of Bloomberg News reported. The issue of allowing U.S. regulators access to the audits of Chinese companies listed on American markets is a longstanding one. The new regulations have been discussed since at least August and it’s unlikely they will be finalized before Donald Trump’s term ends on Jan. 20. That means completing the task would be left to an SEC chief picked by the incoming president.

It may have been fanciful to imagine that the pressure would ease up on China’s technology companies in any case. Global leaders recognize that the core message of Trump’s China policy — that the country is a strategic threat — is here to stay.

“It will be very difficult for any administration, whether it’s Biden or on the outside chance, Trump, to disregard that and just proceed as if the last few years had not taken place,” Singapore Prime Minister Lee Hsien-loong said in an interview with Bloomberg Editor-In-Chief John Micklethwait at the New Economy Forum. (That event is organized by Bloomberg Media Group, a division of Bloomberg LP, the parent company of Bloomberg News and Bloomberg Opinion.)

Chinese companies may need to wait a long time for embargoes to ease and must face the reality that some will stay forever. Huawei, which has been barred from buying U.S. semiconductors, might be allowed to once again procure chips made with American technology but under still-restrictive terms. A ban on selling telecommunications gear to American firms will probably remain.

It’s possible that the Trump administration’s efforts to split video-service TikTok from its Chinese parent will peter out, and a vague attempt to stop the use of Tencent Holdings Ltd.’s WeChat app in the U.S. may be suspended. 

Other measures, such as the long list of companies placed on the Commerce Department’s entity list, are likely to remain because there’s no political impetus in the U.S. to unwind them. As a result, sanctions on surveillance and artificial intelligence companies such as Hangzhou Hikvision Digital Technology Co., Iflytek Co. and Megvii Technology Ltd. are likely to remain. More names may be added in the coming two months.

For China’s technology companies, two months of a lame-duck Trump administration could turn out to be as damaging as the first 46. The best they can hope for is to stay under the radar and not be noticed at all. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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