The Economist July 17th 2021 55
BusinessChinaIncabroadInconspicuous expansion
D
eepglint, a chinese facialrecogni
tion firm, was one of 14 companies
slapped with American sanctions on July
9th for alleged links to humanrights abus
es in China’s farwestern region of Xin
jiang. It is also a globally recognised leader
in its field and has raised money from Se
quoia Capital and other big American in
vestment firms. DeepGlint’s founders, who
graduated from Stanford and Brown uni
versities in America, must now discuss
with their foreign backers the prospect of
decoupling from the Western commercial
sphere. Many Chinese companies have
been forced to hold similar talks.
China Inc appears to be on the back
foot. In America President Joe Biden has
picked up where Donald Trump left off,
placing restrictions on Chinese compa
nies. Last year Congress passed a bill that
may eventually force Chinese firms to de
list from American stock exchanges, which
would affect nearly $2trn in market value.
Huawei, banned from America, has strug
gled to sell its 5gtelecoms kit elsewhere in
the West. ByteDance was nearly forced to
divest from its prized shortvideo app, TikTok, over American fears that the Chinese
regime could access global users’ personal
data. Tencent, another internet giant, is
said to be haggling with American regula
tors worried about its 40% stake in Epic
Games, the developer of Fortnite.
Around the world Chinese companies
are, fairly or not, viewed as instruments of
the Communist Party. Britain’s prime min
ister, Boris Johnson, said on July 7th that
the government would probe the Chinese
acquisition of Newport Wafer Fab, the
country’s largest chipmaker, on national
security grounds. Australia’s defence de
partment could tear up a 99year lease with
a private Chinese company for a big port.
Completed outbound acquisitions by Chi
nese firms shrivelled from some $200bn in
2016 to $36bn in 2020. Crossborder lend
ing, mostly to poor countries, by some of
China’s state banks has stopped growing.
It is not the first time that a wave of Chi
nese corporate expansion has met a frosty
reception. When commodity giants such
as cnooc, an oil firm, began buying for
eign reserves, and rivals, in the 1990s, it
stoked fears of resource colonialism. In the2010s Chinese industrial groups’ aggres
sive pursuit of Western rivals from chemi
cals (ChemChina’s takeover of Syngenta) to
cars (Geely’s of Volvo) reminded some anx
ious richworld governments of Japan’s
corporate conquests in the 1980s. At the
same time, Chinese acquisitions of trophy
assets such as the Waldorf Astoria hotel (by
Anbang, a conglomerate) allowed other
Westerners to dismiss China Inc as unseri
ous or dodgy (a suspicion confirmed by the
subsequent collapse of Anbang and a few
similar groups after charges of fraud).
Now, just as innovative Chinese tech
firms have captivated Wall Street, China’s
increasingly authoritarian regime is itself
reining in its global champions. President
Xi Jinping appears bent on disconnecting
them from Western capital markets and
controlling their data. Tencent and Aliba
ba, an ecommerce behemoth, have be
tween them lost $340bn in market value
since the crackdown began late last year.
Days after its $67bn New York flotation,
Didi found its ridehailing app banned by
Chinese data regulators. ByteDance has
scotched plans to go public in New York. Speak softly and carry a small cheque
All this looks like a treacherous climate for
Chinese companies. Look closer, though,
and a new generation of firms is not just
adapting to it but thriving. Many have
spent years expanding global operations
and now make as much money outside
China as they do within. Some are pursu
ing smaller investments under the radar.H ONG KONG
Chinese companies are adapting to a more hostile global climate—and thriving→Alsointhissection
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