Pompeo’s announcement generated alarm in China. Hu Xijin, the editor of the Communist Party’s Global Times newspaper, suggested a division of the internet that stifles commerce and ties between people would prompt the risk of a “hot war” to rise.
But for many U.S. officials, the bans are simple reciprocity. China walled off its own online sphere years ago, creating an alternate universe where Tencent and Alibaba Group Holding Ltd. stood in for Facebook Inc. and Amazon.com Inc.
Yet while President Xi Jinping was an early proponent of cyber-sovereignty, China’s view has changed as its tech champions have become fierce global competitors. By banning certain apps, the U.S. is also looking to deprive China of valuable data that is essential for honing the algorithms that will fuel the modern economy powered by artificial intelligence.
The U.S. also potentially has a lot to lose in terms of soft power. Beyond angering the roughly 5 million Chinese Americans, and hundreds of thousands of Chinese students in America, there’s also the risk that other countries start to ban U.S. technology.
‘Awful for America’
“Pretty much any large country can kick out Facebook and make their own social network if they want to legislate that,” said Matthew Brennan, managing director of marketing consultancy China Channel. “That would be awful for America. But that’s the road we’re going towards with this kind of legislation.”
While the short-term economic impact won’t be large, the decoupling of the tech industries will ultimately lead to slower global growth in the long run, according to Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings. And they could ultimately be more significant than the trade deal between the two countries, which is one of the few areas of cooperation that remain.
“These sorts of measures on technology are as serious if not more serious than tariffs because these are the growth industries of the futures,” Roache said. “Once you erect barriers how do you take them down? That’s the question.”