Gordon Chang, the author of ‘The Great U.S.-China Tech War’, joins Yahoo Finance Live to discuss the technology rivalry between the U.S. and China, the reopening of the economy in China, the driving factors behind the push to ban TikTok in the U.S., and former president Donald Trump’s indictment.
Video Transcript
- Chinese telecommunications giant, Huawei, reported its biggest annual profit decline ever this morning. Blaming pandemic controls and us technology sanctions for the almost 70% drop. The company's finances have been significantly hampered by the US's broad chip restrictions against Chinese companies passed last year. Those chips are critical for smartphones, AI, and advanced tech. But US leaders are fearful China could use them for military purposes.
Now in 2020, Huawei was the number one smartphone business in the world. But subsequent US chip restrictions as well as a COVID-19 policy in China very restrictive, kneecapped their business since the shut China has prioritized domestic production of chips. But experts say they have a long road ahead of them. Joining us now with his thoughts on the technology rivalry between the two countries-- the US and China-- we've got Gordon Chang, who is the author of "The Great US-China Tech War."
Gordon, always a pleasure to speak with you and get some of your insights here. All right. Help us really kind of set the scene for where post COVID-19 policies in China, and the reopening of the economy there where the IMF had projected the Chinese economy as well as India would be the top two growth areas in the world this year. Set the scene for where we're actually pacing now that we're actually a quarter into the year at this point.
GORDON CHANG: Yeah. March might be a good month for China. We're starting to see the purchasing managers indices, especially the one for services. But this comes after a disastrous January and February combined period where we saw exports drop 6.8%. But even more worryingly, brand imports, which show really domestic demand, fell 10.2%. And that's on after months of export and import drops. So the Chinese economy will recover this year because last year was so bad. But the recovery is probably not going to be as good as it once was.
And one of the thing about Huawei. Yeah, they can blame the United States chip restrictions. But also I think they should be blaming the state of the Chinese economy itself.
- And that is a fair point. I do want to ask you about the TiKTok ban. Obviously, just part of a broader discussion about the US and China tech rivalries. And also concerns about data there. Now we did see that this fast track to ban the app was blocked really sort of under the framework of free speech being violated here. I wanted to get your take on that. And really how TikTok plays into the China US discussion.
GORDON CHANG: Well, the restrict act, which is working its way through Congress and which has the support of the Biden Administration, does raise serious first amendment issues. But with regard to TikTok, there has been a series of missed untruths told to American regulators, to the US Congress, and to everyone about data security. As well as China using the app for propaganda purposes. And so I think that essentially what we have is the ability of the Administration to use, for instance, the International Emergency Economic Powers Act of 1977 to ban it. That would not raise the first amendment concerns. Or especially forcing a sale to a US party, which would have no us first amendment issues at all. So there are things that the administration could do, but is not doing because it's waiting for the Restrict Act to give it authority.
- From your perspective then, what is the best solution for how to engage with Bytedance subsidiary, TikTok, from any international regulatory perspective if you did have a fear of that there is indeed some type of use from China for either propaganda or for either data tracking?
GORDON CHANG: Yeah. I think the best thing to do would be to force the sale to US parties who control the algorithm. When the Trump Administration tried to do this during its last months, when they tried to force a sale to Oracle, the deal actually cratered not over price, but over control of the algorithm. The one that curates content. Because Beijing was using TikTok to amplify its propaganda. And so that's what's critical to the Chinese.
And what we have seen in the comments from the Ministry of Commerce and from others in Beijing is essentially that this algorithm is going to be the core of the. Issue
- And I do want to ask you because obviously the comparisons between TikTok and how it shares data potentially with the Chinese government, and then when you also have Meta, you have Google, also collecting this data sharing it with third parties, a lot of us don't know where our data is going. Is a ban the best move versus a blanket national security data law that covers all of them?
GORDON CHANG: Well, first of all, Meta and Google, they're private parties. And people can contract with them, and they can agree to have their data sold or whatever. What's happening with China is different. TikTok has been saying that its data is secure. But as we know from the Buzzfeed reporting of last June, that nobody at tiktok the US had access to the data. The only parties that had access to data were in Beijing. So this is a much different issue of government control versus two private parties contracting with each other. The big platforms and users.
- You mentioned former President Trump. And there's, of course, a lot of political prognostication that's taking place today on the news around his indictment. But with that, there's a larger question as well of, if this does indeed somehow give him more kind of political power in one way or another or at least sway, does that mean that the us-china relationship would become even more fragmented in the future?
GORDON CHANG: I actually don't think that it's-- it doesn't really matter who's going to get elected in 2024. There is going to be-- this whole relationship and the tension is driven by what China is doing. So there might be some marginal difference if you had a Trump, or a Desantis, or a Newsom, or a Biden, or a Harris. The point is China is driving this. And so I don't think that that being much different. There will not be much difference whoever is in the oval office.
There are certain of those candidates who would have a tougher position on China. But that might actually be good for relations in the long run because the Chinese respect strength. And they don't respect the opposite of that.
- We'll certainly be tracking that. Thank you so much, Gordon Chang. The author of "The Great US-China Tech War." Thank you for your time this morning.
