The Russia sanctions are an important lesson for China
Greetings! Did you spend the weekend reading about the “Two Sessions” proposals, or were you, like me, endlessly doomscroolling about the Russian invasion of Ukraine? Today, we are going to discuss more about how China will be affected by the war, plus: Beijing goes after metaverse crimes, Elon Musk meets the Chinese ambassador, and Alibaba dominates cloud services in China.
The sanctions on Russia have spooked Beijing
The speed with which the U.S. and EU enacted sanctions on Russia took many Chinese observers by surprise. In the public discourse, finance and export sanctions are often grouped with the voluntary withdrawals by tech companies such as Apple and Microsoft as an example of how dependence on American and European products can be fatal to China.
- Also, the United States could put together the sanctions so quickly partly because it recycled its playbook against Huawei, economics researcher Martin Chorzempa pointed out.
Chinese firms are carefully monitoring the situation and, in some cases, silently complying with the sanctions. Chinese tech companies, some of which have expanded their global footprints to Russia or Ukraine, have mostly remained silent.
- U.S. Commerce Secretary Gina Raimondo specifically warned SMIC and other Chinese chipmakers they could face targeted sanctions if they keep selling to Russia.
- Two of China’s largest state-owned banks have restricted financing for Russian commodities purchases, Bloomberg reported.
- Alibaba, which has a joint venture in Russia with three sanctioned companies, has not said a word. DiDi was forced by public pressure to reverse its Russia exit decision.
- Chinese companies won’t make independent decisions. They are likely to consult government officials in the first place to root out any political risks, a March 3 note by Eurasia Group pointed out.
China sees itself one day becoming the target of Western sanctions as the U.S.-China decoupling discourse continues under Biden. Lists summarizing all Western sanctions and company pull-outs are making the rounds on Chinese social media, where people warn this could be China soon.
- Spooked by the possibility, “China is likely to intensify its self-sufficiency drive and further limit its technological interconnections with the outside world,” Chris Miller, an international history professor at Tufts University, told Protocol.
- On the flip side, China can also be learning from the sanctions and “seeing whether and how China might assimilate some of them into its own coercive arsenal,” Carnegie Endowment VP Evan Feigenbaum told Jonathan Tepperman.
But a sanctions alliance against China would be much harder to form. China is far more important to the global economy than Russia, and that would make both the U.S. and multinational companies think twice.
- Only 1.4% of Apple’s global revenue comes from Russia, but 19% comes from China, according to MarketWatch. Would Apple ever be willing to let 19% of its revenues vanish in one day?
- China also has its legal tools to fight back: The Anti–Foreign Sanctions Law, in effect since June 2021, allows the Chinese government to punish foreign entities and individuals that impose sanctions on China.
And thanks to years of deliberately building up self-sufficiency, China would be in a better place than Russia to cope with a void of Western tech products. Since the Great Firewall forced out Google in 2010, domestic tech giants have emerged to replace all the important Western tech platforms, software and hardware.
- China has been working on self-sufficiency since the NSA surveillance scandal pushed the Chinese government and companies to retire their American-made hardware and software.
- There are still areas where Western companies largely dominate, like computer and mobile operating systems or high-end semiconductor manufacturing, but you can bet that China will be motivated to invest even more in these areas after the sanctions on Russia.
On Protocol China
Alibaba is in a tough spot right now. Russia’s most-visited online marketplace is a joint venture between Alibaba and some of Russia’s largest companies. The Chinese ecommerce giant has invested heavily in the Eastern European market for its globalization ambition, and now the company has to carefully navigate between Russia, Ukraine and China. Zeyi Yang has more.
A MESSAGE FROM 4-H
Gen Z is poised to help everyone - from a rural small business to a tech giant - rethink how their business operations can help alleviate the digital divide. It’s time to give Gen Z a seat at the table for the generation that sees how tech can be a benefit but often is the barrier for advancement.
Big Brother Beijing
Beijing will go after metaverse crimes. An official from the Supreme People’s Procuratorate in China told 21st Century Business Herald that illegal fundraising in the name of the metaverse and NFTs had begun to emerge in recent months. The official said China’s top procuratorate will combat the new concepts and new types of fintech crimes through legislative proposals and judicial interpretations.
Anti-war speech was censored at the Paralympics opening. When International Paralympic Committee President Andrew Parsons made a very moderate anti-war speech at the Friday opening of the 2022 Paralympics, his words were not translated in China’s official broadcast, and even his volume was lowered at certain points. IPC said it had asked China to explain the decision, but no response has been made public so far.
China goes global
Elon Musk woos the Chinese ambassador. Last week, the Tesla CEO offered a Model S ride to China’s ambassador to the United States, Qin Gang. Qin described the ride as a “smooth” one despite the vehicle’s power. Musk pledged Tesla’s continuing cooperation with China in developing more climate-conscious tech, such as EVs. “The Chinese people are hard-working and intelligent, good at getting things done,” Musk said. “Tesla’s cooperation with China has been smooth and successful.”
Chinese smartphone brands are unsure of their future in Russia. Before the war started, Chinese brands were frequently on the list of top-selling smartphones in Russia, but the ongoing war, the Western sanctions and the Russian economic collapse have made the situation more murky now. While Apple leaving the Russian market creates a theoretical window of opportunity for Chinese brands, most of them have stopped shipping new phones to Russia and are now just looking to clear their stock, Chinese tech publication Chuhai Post reported.
Straight from China's web
New cloud services rankings. A new cloud service tracker released by International Data Corporation reported that the overall market size of China’s public cloud services reached $7.2 billion in Q3 2021. Domestic companies are taking the lead, with Alibaba Cloud snagging the throne with a 38% market share. Tencent Cloud ranks No. 2 with an 11% market share, followed by Huawei. Amazon AWS only occupies a 7% market share in the Chinese market.
Showing support for Russian chocolate. To show that they are on Russia’s side in the war, some Chinese people have swarmed to a Russian-run online store on Chinese ecommerce platform JD.com, Reuters reported. The “Russian State Pavilion” store, which says it’s backed by the Russian Embassy to China, received over 1.8 million followers in just a week, and every single product, ranging from candies and vodka to cleaning supplies, is now out of stock.
One more thing
Do virtual idols dream of British parliamentary debates? Virtual idols are hot commodities in China. Fans are no less crazy about their idols than fans of real celebrities are. One fan in China recently paid John Bercow, former speaker of the House of Commons of the United Kingdom, 100 pounds (about $130) to record a birthday wish for Chinese virtual idol Jiaran. The 92-second video clip, in which Bercow sang the birthday song, has been watched nearly 3.9 million times on Bilibili, Jiaran’s main platform.
A MESSAGE FROM 4-H
People often think of the digital divide as being just about broadband access, but it is also about understanding the needs and tech literacy levels across roughly six generations. Gen Z could help companies develop products and apps that better serve the needs of our communities, our country and our world.