“Tensions over alleged human rights violations and the ongoing trade war between China and the US has seen legislative moves, new sanctions, and tit-for-tat trade barriers erected that significantly disrupt the flow of physical security products between the two nations, and the ability of their respective manufacturers to trade in their respective markets,” explains our latest security report. “The impact has been so profound that the market is at risk of dividing into a two-track system, with one set of technologies, manufacturer products, systems and protocols being used in China, and a totally separate and parallel one operating in Western Nations.”
The geopolitical friction between the world’s two superpowers is creating immediate challenges and long-term concern in many technology-driven sectors. Global trade has always been a political chess match between the world’s biggest economies, but during the Trump administration, the usual supply chain value wrestling spilled over into market entry barriers, human-rights sanctions, and bitter political antagonism on the world stage.
This escalating tit-for-tat war of words, sanctions, and taxes could divide the future of technology in two. From security to smart buildings and the internet itself, a two-track system could impact many technology markets, creating what many are now calling “Cold War 2.0”. And, like the original cold war between the USA and the former USSR —Europe is caught in the middle.
“China’s Communist Party lies, and makes those who tell the truth disappear. The regime has a Marxist-Leninist core no less than the Soviet Union did, and indeed, perhaps more so. The party has always put itself first. Its actions flow from its ideology. And it’s paranoid about free societies. We have to explain what kind of scrutiny we must give to Chinese investment and why. And we have to talk to them about what sorts of alliances are needed to be built between the United States and Europe and around the world, and how we will retool to withstand and resist this threat,” said then US Foreign Minister Mike Pompeo, in Prague on August 12th 2020.
“With China deeply interconnected with the world, decoupling from China means decoupling from development opportunities and from the most dynamic market. As two major economies in the world, China and Europe must stay committed to free trade, safeguard the stability of global industrial and supply chains. China and Europe need to set an example of advancing global governance by jointly strengthening the UN’s coordinating role in international affairs. We need to reject the practices of putting one’s own country first at the expense of others. We need to jointly build a community with a shared future for mankind,” said the Chinese Foreign Minister Wang Yi, in Paris on August 30, 2020.
In the EU, many officials have been calling for a stop to deals with Chinese video surveillance provider Hikvision and, in support of the Uyghur minority in China, thousands of EU staff have rejected the use of Hikvision technologies in their workplaces. The UK has already banned the use of Huawei equipment in its 5G networks, after pressure from President Trump, and the UK Foreign Affairs Committee called for a ban on all Huawei devices in July, which parliament has not yet passed. Europe, which collectively makes up the third-largest hub of power in the world, has not been shy to discuss the threat of a two-track system, while the UN fights for a connected world.
“I believe we need to move away from the false possibilities we are currently offered, whereby only two models would exist: a complete self-management, without governance, and a compartmented Internet, entirely monitored by strong and authoritarian states. To be very politically incorrect, we are seeing two types of Internet emerge: there is a Californian form of Internet, and a Chinese Internet,” said French President, Emanuel Macron, in 2018.
“We are at a critical point for technology governance. Digital connectivity is indispensable, both to overcome the pandemic and for a sustainable and inclusive recovery. But we cannot let technology trends get ahead of our ability to steer them and protect the public good. If we do not come together now around using technology for good, we will lose a significant opportunity to manage its impact, and we could see further fragmentation of the Internet, to the detriment of all,” warned UN Secretary General, Antonio Guterres, in 2020.
Our in-depth physical security market report explores the complex geopolitical interrelationships between the world’s superpowers and the rest of the world, and its impact on the security business. In India, for example, with the sixth most Hikvision and Dahua surveillance camera networks of any country, tensions are growing around how embedded Chinese firms are in the domestic surveillance industry. Several contracts have now been canceled and Indian military officials have been consistently questioned about the potential threat. While, in the Asia-Pacific region, the proximity to China is driving a more diplomatic response to the escalating trade war.
“Asia Pacific sees it in their best interests to maintain good relations with both China and the US while supporting other regional powers. The entire region could pay a huge price if it has to pick a side, or if nations are forced to choose self-preservation over multilateral cooperation,” said Lee Hsien Loong, Prime Minister of Singapore, told Foreign Affairs Magazine.
The uncertain political landscape is having a direct impact on business operations and aspirations for all kinds of digital and tech companies. Long before bans on Chinese video surveillance cameras began, Chinese users had been prevented from accessing major US platforms including Facebook, Twitter, Dropbox, and Pinterest. That was all part of the “Great Firewall of China” that also blocks many Western news sources and most stories on civil unrest in China and around the world.
"In one of the biggest markets in the world, tech companies are leaving because they can't fully operate how they want to, by freely sharing information online," Hyunjin Seo, associate professor at the University of Kansas's journalism department, told the BBC. "Since China has replaced Western media with their own apps and sites, they don't really need western tech companies."
Amazon shut down its online store in China in the face of poor sales relative to local giant Alibaba. Google secretly worked on a censored version of its search engine to go up against Chinese-born Baidu, but the project was later scrapped. Apple has maintained a presence in China but not without concessions, like complying with requests to remove certain apps, including Skype and the New York Times. Similarly, LinkedIn remains open to Chinese users but only if it hides politically sensitive international content from local users. Each instance of a ban, or insurmountable challenge, from either nation on a company from the other, increases the digital divide.
"I think the most likely scenario now is not a splintering, but rather a bifurcation into a Chinese-led internet and a non-Chinese internet led by America," said former Google CEO, Eric Schmidt, and this will have knock-on effects for physical security and other digitally-driven markets.
In the security market, increasing press coverage of the geopolitical tensions have directly impacted end-user perceptions towards technology from particular nations. Many integrators in the West report that their clients had become much warier of Chinese products, for example. An April 2020 survey by Pew Research Center found that 90% of Americans now view China as a threat compared to 48% in 2018, while a YouGov survey found that trust in Huawei had plummeted after bad press in the UK, 22% of those surveyed said they’d “never” choose the firm’s devices again.
Supply chain disruptions in this escalating crisis have already encouraged some major technology companies to consider moving manufacturing facilities to other Asian nations offering some but not all the benefits of China. While major exits from China are still limited, any significant threat to the nation’s manufacturing industry would not be taken lightly, potentially triggering a de-escalation but maybe even further escalation. While bans of Chinese companies continue to increase in the West, and around the world, it seems that the crisis is set to get worse before it gets better.
"Digital censorship relates to the legitimacy of the Chinese Communist Party and promoting an official narrative about the nation-state,” says Renren Yang, an assistant professor of modern Chinese popular culture at the University of British Columbia, who believes it would benefit China to usher in more Western companies. “Competition with Chinese local telecom companies will spawn the invention of new technologies and new services that people can afford and utilize. Competition brings forth innovation. One day, I'd like to see the Great Firewall come down, just like the Berlin Wall did."
Censorship is not exclusive to China, nor are human-rights abuses and political maneuvering. What is different about China is that it is the single largest manufacturer of goods and components in the world, and also the second biggest consumer market in the world. China has the economic strength and the security to stand-up to the US on economic issues, and no other country has been able to do that for the best part of a century. This is what happens when you have two global superpowers, and we should be thankful if the conflict remains a trade dispute.
However, the bifurcation of the internet, physical security market, and other digital technologies could set the world down two paths that would be hard to come back from. Two paths that divide markets and complicate industries, that limit collaboration and innovation, and that could lead to deeper socio-economic fractures in the world. Regardless of right and wrong, who started it and why, the tit-for-tat politics from both superpowers is holding back global economic growth, technological development, and many consumer-focused benefits of an open global market.