Growing disquiet in China as US steps up war on tech champions

The US war against Chinese tech champions was absent from speeches, presentations and panel discussions onstage at high-profile conferences in China over the weekend, but offstage, the topic was discussed in hushed tones as the industry weighed the costs of an escalating tech cold war.

The US government's requirement that American companies get special permission to do business with Huawei Technologies, the world's No 1 telecommunications network equipment maker, has dominated headlines all week, with a succession of companies from Google, Microsoft to Qualcomm suspending their dealings with the Shenzhen giant.

More companies, like surveillance companies Hikvision and iFlyTek, are reportedly being considered for the trade blacklist, which brought ZTE close to ruin last year by depriving it of access to American technology.

The move prompted Huawei owners outside China to sell their phones for fear they would turn into expensive paperweights. Shares of chip makers like Qualcomm tumbled as investors weighed the potential of retaliatory measures against companies that depended on China for much of their profits.

At the Big Data Expo in Guiyang on Sunday, visitors were greeted by a large screen displaying a letter from Chinese President Xi Jinping, who urged all nations to work together to meet the challenges thrown up by the adoption of new technologies like big data and artificial intelligence.

Miao Wei, the minister for industry and information technology, echoed Xi's letter in his keynote speech. Apple's Greater China managing director Isabel Ge Mahe said that the company was "proud to be able to help with China's economic development", citing its collaboration with Beijing Normal University to create a coding course for children.

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Similarly, no mention of the tech war was made at the ambitiously named Global Artificial Intelligence Technology Conference in Nanjing, where the participants were overwhelmingly from China.

Offstage, though, the topic of Huawei and China's reliance on US technology loomed large.

The chief scientist of a large Chinese financial services company told the Post that no single company, not even an American one, can withstand the full frontal assault like the one that the US is unleashing on Huawei.

"This isn't a tech war, it is a real war, albeit one without guns and cannons," said the chief scientist, who like most of those interviewed, asked not to be named to speak candidly about a politically sensitive topic. "America has a lot of influence and many friends. If Huawei falls, China can only sue for peace. The US can then continue to use this tactic and forever keep China from challenging it for first place."

"One has to see whether China can use strategies like those during the Warring States period (475-221 BC) to give up some interests and weaken America's alliance," the scientist said, displaying a common habit of many Chinese to draw lessons from the country's long history in dealing with external and internal foes. " At present, the situation looks grave, and I feel there's no solution in the short term."

Another executive, who heads the data lab of a major Chinese tech company, similarly expressed concern that the present situation may deteriorate and result in a splintering of the global tech world.

"Not having access to GPU (graphics processing unit) is only the tip of the iceberg, what if it leads to the splintering of the global open-source platforms?" said the executive, who shuttles between Beijing and Silicon Valley for his work. "What are we to do then? Do we have to choose sides?"

Huang Tiejun, a professor at Peking University who is also the secretary general of the Artificial Intelligence Industry Innovation Strategy Alliance, is more sanguine and does not think the tech war will hold China back in terms of achieving its AI ambitions.

The alliance was set up to help the government implement its three-step national AI plan and includes representatives from companies like Huawei and ZTE as well as academia.

"In AI, China has the advantage of volume of data and application uses," Huang said in an interview on the sidelines of the conference in Nanjing. "We will continue to stick to the path of open-source development. If there are friends who are willing to do it together, we will advance a little faster, if not, a little slower."

Another who shared his view of the tech war publicly was Zhou Hongyi, the outspoken chairman and chief executive of internet security firm Qihoo 360.

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He said at a separate forum in Chengdu on Saturday that the US attack on Huawei was motivated by America's fear that it would not easily be able to spy on others if the Chinese company dominated the 5G ultra-fast telecommunications network infrastructure.

This view that American is being two-faced in accusing Huawei of enabling Chinese espionage is gaining popularity in China, judging by comments on popular social media forums.

Zhou said that Qihoo delisted from Nasdaq because "for a cybersecurity firm to make money, it first has to make sure it is in line with the interests of its country, society and people."

"It's only now that US-China relations have reached this stage that people are beginning to realise Qihoo's foresight," he said. Zhou led a group of investors to take Qihoo private in 2015 in a US$9.3 billion (S$12.8 billion) deal.

Semiconductor Manufacturing International (SMIC), China's biggest chip maker, said last week it had notified the New York Stock Exchange of its intention to delist its American depositary receipts (ADRs) from the bourse. SMIC cited low trading volumes of its ADRs and the high costs of maintaining the listing and complying with reporting requirements and related laws.

This article was first published in South China Morning Post