Big Tech Still Has a Big Addiction to China

Photo-Illustration: Intelligencer; Photo: HECTOR RETAMAL/AFP via Getty Images

In late January, the Senate Judiciary Committee dragged a bunch of tech executives to Washington for a hearing that was, in theory, about online child safety. Senators questioned and occasionally berated the heads of Meta, Discord, X, and Snap; at one point, under pressure from Republican senator Josh Hawley, Mark Zuckerberg turned to face attending families, some of whom had lost children to suicide, to apologize.

A few senators, however, wanted to talk about something else: China, and more specifically, TikTok’s relationship with the Chinese government. At one point, Senator Tom Cotton asked TikTok’s CEO, Shou Zi Chew, if he had “ever been a member of the Chinese Communist Party,” to which he responded, “Senator, I’m Singaporean, no.” Hawley described TikTok as “basically an espionage arm for the Chinese Communist Party.” It was a tense spectacle and a preview: TikTok’s roots in China and reach in America — particularly among young people — have the potential to be important issues in (and perhaps influences on) the 2024 elections.

On the issue of China, executives at competing companies haven’t exactly rushed to TikTok’s defense; for a couple years starting in 2019, after a failed acquisition attempt, Zuckerberg called attention to TikTok’s foreign ownership. At the time, this was an easy choice: TikTok was a new and clear competitor to Instagram; Meta, then Facebook, was facing intense public and regulatory scrutiny; Zuckerberg, whose company wasn’t seriously politically or financially obliged to China, where its apps are banned, was eager to change the subject. Since then, however, things have changed. In a call following Meta’s blowout Q4 2023 earnings report, its CFO revealed a source of much of its recent growth:

The online commerce and gaming verticals benefited from strong demand by advertisers in China reaching people in other markets. In 2023, revenue from China-based advertisers represented 10 percent of our overall revenue and contributed 5 percentage points to total worldwide revenue growth.

Meta, which also quietly reentered the Chinese market through a deal between its VR business and Tencent, isn’t the only company making interesting disclosures about its dependence on international trade. In a filing with the SEC, Amazon acknowledged, for the first time in such explicit terms, the scope of its dependence on not just products manufactured in China but on Chinese sellers and their marketing budgets:

[B]ecause China-based sellers account for significant portions of our third-party seller services and advertising revenues, and China-based suppliers provide significant portions of our components and finished goods, regulatory and trade restrictions, data protection and cybersecurity laws, economic factors, geopolitical events, security issues, or other factors negatively impacting China-based sellers and suppliers could adversely affect our operating results.

Meta, Amazon, and many other major American tech companies aren’t able to offer services in China, so their connections with its economy can be easy to minimize. Apple, which both manufacturers and sells goods in China — a market that has in the past accounted for about a fifth of total sales — has reported a precipitous drop in demand there, which analysts predict will be hard to turn around.

In recent years, in response to domestic backlash, political risks abroad, and COVID-era supply-chain scares, American tech giants have emphasized the ways they’re distancing themselves from China: Apple and Google have shifted some hardware manufacturing to India and Vietnam, while Meta briefly and awkwardly attempted to position itself as a protector of “American values” in tech. The Biden administration has pushed tighter restrictions on American tech investment in and exports to China, and bigger fights over chip technology and AI are looming.

At the same time, Chinese-American tech interdependence has by many measures increased. Ad-supported firms like Meta and Google have benefited from massive spending from firms like Shein and Temu; online retailers including but not limited to Amazon have become, effectively, conduits for a new form of direct, loophole-enabled cross-border commerce. Even X, which is banned in China, now has serious exposure through its new owner: Elon Musk’s much larger Tesla sells and manufactures a lot of cars there, and without Chinese lithium and cobalt suppliers, its battery supply chain falls apart. (In case you were wondering, Elon Musk, as of late 2023, has started expressing some nuanced views of China’s relationship with Taiwan.)

Senators like going after TikTok in part because they see it as an easy win. Outside of a few demographics — the ones that tend to use it — the app is widely seen as either silly or dangerous. More broadly, Americans are fairly supportive of tighter restrictions on trade with China. Trump made a spectacle of trade war, but the Biden administration has continued to treat economic “decoupling” as a priority, and its policies are having a measurable negative effect on some forms of trade.

So it’s probably notable that the rest of the tech industry is moving in the other direction. It’s easy to imagine a scenario in which TikTok, after years of scrutiny and through a years-long, contentious plan to cordon off its American operations from ByteDance, ends up truly out of touch with its parent company, rendered inoperative in the nefarious (and largely theoretically) influence schemes of which it stands accused by Tom Cotton, Josh Hawley, and plenty of others. It’s likewise easy to see how America’s largest tech companies could find themselves utterly dependent on relationships with a country their government increasingly regards as an economic adversary or worse, depending on who is president this time next year. Nothing a few more hearings can’t resolve.

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