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Sat. October 31, 2020
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China is changing its strategy towards U.S. sanctions

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President Donald Trump signed two executive orders prohibiting any person or company under the jurisdiction of the United States from conducting any transactions with TikTok parent company ByteDance and barring any WeChat-related transactions with WeChat parent company Tencent.

The orders stated that the United States has taken tough actions against TikTok owners to protect American national security. This is another heavy blow by the United States to Chinese telecom technology companies following the suppression of Huawei and ZTE in the technological war, which has a profound impact on China.

Faced with the new wave of US bans, Beijing changed its past strategy of tit-for-tat and retaliation, and claimed that it would no longer follow the US (sanctions) rhythm.

The reasons for banning TikTok and Wechat

According to the prohibition orders signed by Trump, the reasons given by the US government for blocking TikTok and WeChat are as follows: Firstly, all mobile applications developed by Chinese companies (preface) spreading in the United States continue to threaten the national security, foreign policy, and economy of the United States. Both TikTok and WeChat pose a threat.

Secondly, TikTok automatically grabs a large amount of information from users, such as location data, browsing and search history. Data collection may allow the Chinese Communist Party to obtain personal information about Americans, enable China to track the location of U.S. federal employees, and establish personal information files for extortion and commercial espionage. WeChat also automatically grabs a large amount of user information and provides it to the CCP, including obtaining personal information of Chinese citizens in the United States and allowing the CCP to monitor the speech and activities of Chinese citizens overseas.

Thirdly, TikTok censors politically sensitive content identified by the CCP, such as posts about protests in Hong Kong, Beijing's suppression of Uighurs in Xinjiang, or criticism of Xi Jinping. TikTok can also be used for false propaganda to benefit the CCP.

Before President Donald Trump signed the two executive orders, Secretary of State Mike Pompeo announced the "Clean Network" program to ensure that US networks are not affected by the Chinese Communist government. The net clean operation focused on six areas: Clean carrier, clean stores, clean apps, clean cloud, clean cables and clean path. Its purpose is to make sure that Chinese operators are disconnected from the US telecommunications network, to prevent untrusted Chinese smartphone manufacturers from pre-installing applications (programs) in customers’ phones, and to avert sensitive personal information of US citizens from being stored and processed in/by the cloud system of Alibaba, Tencent and Baidu. The program will also ensure that the submarine cables of the U.S. and international networks are not infringed and prevent China from using it to gather intelligence on a large scale. These new measures are an expansion of the „5G Clean Path initiative”, announced on April 29, 2020, to secure data traveling on 5G networks into U.S. diplomatic facilities overseas and within the United States.

The Trump administration has also continued to crack down on China's telecom technology products and their applications. The reasons behind them include: 1. The United States cannot allow China to take the lead in the digital economy. The digital economy is the largest and most critical driving force of the world economy in the next one to two decades. Whoever wins the dominance of the world's digital economy will win the dominance of the future world economy.

2. The sudden global pandemic of the new coronavirus has led to a recession in the U.S. economy and undermined Trump's prospects for reelection. Since Trump criticized China for increasing the intensity of the epidemic, campaign appeals against China have escalated significantly.

3. This is one of the latest measures taken by the Trump administration against the CCP on multiple fronts. In response to issues such as the South China Sea, the "Hong Kong version of the National Security Law," the human rights of Muslims in Xinjiang, and the conflict in the Taiwan Strait, the United States has also taken a series of countermeasures against Beijing.

The Impact of the U.S. sanctions

The two administrative orders and the Clean Network program have a deep impact on China. In the future, companies backed by Chinese capital may face various US reviews and prohibitions. Following WeChat, the United States may continue to take action against other Chinese social software e.g. QQ and MoMo.

Moreover, countries such as the United Kingdom may also follow the US in introducing bans. The German Ministry of Health similarly indicated that it might consider giving up the official account opened on TikTok. In addition, the WeChat ban has a great impact on Chinese in the United States. WeChat official accounts, WeChat red envelopes, and WeChat account splits in app stores are all "WeChat-related" transactions. Banning WeChat means cutting off convenient channels of communication between overseas Chinese and the mainland.

The U.S. ban on WeChat may also affect the business transactions between U.S. companies and China and the contacts between U.S. and Chinese citizens, etc. On August 12, in a conference call with White House officials, more than 10 American companies that do business with China expressed their opposition to the Donald J. Trump administration’s plan to restrict commercial transactions involving WeChat, saying that this might weaken the competitiveness of these companies in the world's second largest economy. These American companies include Apple Inc., Ford Motor Co., Walmart Inc., and Walt Disney Co.

China‘s new strategy

In the face of a new wave of American bans, Beijing has changed its past tough strategy of retaliating and tik for tat. During the U.S. sanctions on ZTE and the blockade of Huawei, China made various strong protests and reciprocal retaliations in the past. Now, the official media “Dwnews.com” stated that China would not retaliate against American companies just because of the U.S. government's sanctions on ByteDance and other technology companies. Beijing's welcoming posture to U.S.-funded companies would not have changed.

With regard to the U.S. ban on Tik Tok and WeChat, China announced this time the official opening of China's Beidou-3 global satellite navigation system and initiated a whole-nation system to overcome the industrial bottleneck of chips and software. Beijing no longer "concentrates" on fighting with the United States, but concentrates on enhancing its overall national strength, that is, relying on China's huge market to establish its own product system, indorsing economic "outer circulation" through the Belt and Road initiative countries, and promoting China's core technology to achieve qualitative breakthroughs in the near future, said the official media. 

In defense of the US's blockade of Chinese industries, China started its own "huge market" system and "progressive change" to get rid of its dependence on American technology. At present, in terms of industrial technology, the Chinese government's response to the United States is the so called "no harmony, no war" and the focusing on conquering core technologies. Beijing has decided to get rid of the dependence and "blood transfusion" of Chinese industries on American companies, to provide market guarantee for China to break through Western technical barriers and market monopoly through the establishment of an „domestic economic cycle”, and to develop China's independent technology industry system.

China will complete the second transformation based on domestic and international "double cycles" in the development of high-end core technology and the expansion of the basic industrial chain. China will also continue to complete the previously postponed "Made in China 2025" strategic plan and realize a basic "internal cycle" based on key basic materials, core basic components, advanced basic technology, and industrial technology. In the key core technologies of high-end chips, integrated circuit equipment and process technology, integrated circuit key materials, integrated circuit design tools, basic software, industrial software, and application software, China will seek to achieve breakthroughs within 5 to 10 years and form China supply and application systems in the domestic market.

According to the Ministry of Industry and Information Technology of China, as early as July 27, the State Council of China had approved and issued a notice on "Several Policies to Promote the High-quality Development of Integrated Circuit Industry and Software Industry in the New Era". On the word of the requirements of this policy, the Chinese government will implement substantial preferential policies and plans for the integrated circuit and software industry in eight aspects, including finance and taxation, investment and financing, research and development, import and export, talented person, intellectual property rights, market applications, and international cooperation. The notice shows that China will carry out a whole nation system to overcome key technical problems.

The reason why China changed its strategy toward the United States is that Beijing has lost its expectations and illusions about the United States implementing its strategy of blocking China. In the eyes of the CCP leadership, Beijing's call for the United States to rationally return to the “correct” Sino-U.S. relationship has become an extravagant hope. Even if China chooses to compromise, the United States would not open its doors. Instead of being restrained by others, it would be better to find another way. Another consideration for China's abandonment of countermeasures is that Americans should not be allowed to lead Beijing by the nose, so as to help Trump win the election and make China's reputation worse in the United States and Western society. This allowed China's senior policymakers to make their final determination to start the "big cycle" of China's domestic economy and to respond to further threats from the United States through the closed-loop operation of China's industrial chain and business.

“If China was still afraid of the containment and decoupling of the United States before, then after the "dual cycle" and "domestic big economic cycle" strategies have been proposed, China will no longer have any fears”, said the official media.

The consequences

Beijing’s response is actually an act of last resort, because the questions of how effective it is, whether it will offset the consequences of the US ban, and whether Beijing can continue to maintain China’s status as the world’s second largest country and the momentum of the economic rise through its new strategy remain unanswerable. The fact is that Beijing is unwilling to see the current rapidly deteriorating relationship between the United States and China, but it is unable to prevent the United States from blocking and deterring offensives. Therefore, Beijing is ready to reduce its dependence on the United States and the West in terms of high-end technology and taking the road of its own R&D and production.

At the end of 2018, in the downward spiral of Sino-US relations, the adjustment of the United States' China policy almost completed a 180-degree turn, and there was unofficial news that Beijing had already set a "21-character policy" against Washington: no confrontation, no cold war, openness at the pace, and no concession to the core national interests.

However, if Beijing takes the road of its own independent high-technologic research and development, it will require a long time and a large amount of investment and cannot be able to offset the shortcomings and losses caused by the U.S. bans in the short term (despite the implementation of economic internal circulation plan). Obviously, China will face a cold winter of technology and the outer circle of the industrial chain, and the pace of China's rise will be seriously hindered because of the U.S. containment strategy.

Nonetheless, the bans by the United States could also force China to be even tougher and more independent in the development of science and technology and thus harm the interests of American high-tech companies. According to the US Federal Communications Commission (FCC), performing a full replacement of all Huawei and ZTE hardware on American wireless networks will cost $1.837bn in total. This may be a by-product derived from the U.S. ban policy. 

Tao Peng, Ph.D., is an editorial writer and a senior columnist for World Journal in New York focusing on Chinese politics, international relations and geopolitics. He obtained his master's and Ph.D. degree in political science and sociology at the University of Münster in Germany, served as a visiting scholar at the National Chengchi University (NCCU) in Taiwan, and taught political science and sociology at FHöV NRW in Germany.

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