2020 has been a tough year for China tech companies selling to overseas markets. In India, local authorities banned 177 Chinese apps in June and September following border clashes between the two countries. In the US, the Trump administration launched an effort to ban short video app Tiktok and instant-messaging app Wechat, which are among the most successful Chinese apps in international markets. 

Even in Europe, Chinese telecommunications equipment maker Huawei is facing increasing restrictions on supplying gear for next-generation 5G networks.

It forces us to wonder if the world is still open to China tech. It’s a question that’s fundamental to what we do here at TechNode—so we made it the headline question at our Emerge 2020 conference last Thursday.

Bottom line: Going overseas has always been tough, and in this political climate, it’s even tougher. But politics isn’t everything. Speakers said it’s still possible for some Chinese tech firms to succeed in the right overseas markets. Others face long-standing market barriers that predate current tensions.

Compliance and building trust: Many firms trying to enter developed markets have a more basic problem than bans, speakers said: consumers there just don’t trust them.

“The challenge for entrepreneurs going across the border is actually trying to understand what you can do and what you cannot do,” said William Bao Bean, general partner at investment firm SOSV.

Bean said a lack of regard for privacy has earned many Chinese tech companies a bad reputation in markets like Europe and the US. “You have to adapt to the local market. You have to follow the local law. And half the time, people don’t even know that they’re breaking the law when they go across the border.”

Chinese companies have been successful in exporting hardware to overseas markets, said Kiran Patel, senior director at China-Britain Business Council, during the discussion. Patel said he is “more positive” about the future of Chinese hardware than software in the British market because hardware companies usually don’t need to deal with a huge amount of personal data.

Trust is more important when exporting software that holds personal data, Patel said.

“That is the challenge that companies like Tiktok and Wechat have to meet when moving into a new market,” Patel said. “The first challenge that must be overcome is building trust.”

China, security champion? Privacy and security have always been weaknesses for China tech. But at a workshop at the conference, we heard that this truism could be changing as China moves to enforce new laws on privacy and cybersecurity. Carly Ramsey, director at risk consultancy Control Risks, told the audience that China has written one of the world’s most extensive set of requirements to protect data, and is now moving to enforce it. These don’t resolve international concerns about surveillance—but they could help clean up China’s “idiots with a database” problems.

Disrupting barriers: Embracing disruptive technology can be a path for getting around traditional tech barriers, speakers said. The most optimistic attendees about internationalism, by far, were the blockchain-watchers. 

Asked about political barriers, Matthew Graham, founder of Sino Global Capital, a venture capital firm focusing on blockchain companies, said that the US cannot stop China in the world of blockchain the way it has hobbled Huawei on semiconductors. 

“Most of blockchain is open source. It’s not really possible to throw a bottleneck in that way,” said Graham.

As the nascent technology matures, said Michael Sung, co-director of the Fanhai Fintech Research Center at Fudan University, China is emerging as a leader in standards-setting. State-affiliated projects like the Blockchain Services Network (BSN) are creating ecosystems that attract international players.

But Sung, and Harriet Cao of Bianjie, a blockchain startup, rejected a US vs. China framing for blockchain. Instead, they said, it’s a trans-boundary technology that can mitigate mistrust.

“Blockchain is a little bit of a different beast. It’s not about choosing to use Huawei equipment or not,” said Sung. “Blockchain is about multi-party coordination, having stakeholders being able to coordinate in a trusted and secure way, where trust doesn’t exist between the parties beforehand.”

They’re just not that into your EVs: China is home to some of the world’s most exciting electric vehicle (EV) makers, such as Nio, BYD, and Xpeng. But they’ve yet to get traction with Europe’s millions of prosperous, environmentally-conscious consumers. Marketing is a major reason, said Tu Le, founder and managing director of business intelligence firm Sino Auto Insights.

“Some Chinese companies have started to sell EVs into the EU. That could be a question because they haven’t really solidified positioning in their home market,” said Le. “Europe, like Southeast Asia, is very diverse, and therefore a marketing strategy in Germany might not work in France and Italy. That level of complexity for entering an international market is a lot to chew on for Chinese EV makers.”

“The complexity ramps up significantly for them. And that could be a drain on their capital,” he said, adding that Chinese EV makers should focus on individual markets as opposed to looking at Europe as one big market.

Go southeast: The right answer for many companies with global ambitions is to look for markets that are more like China than Germany or the US. We’ve long seen that most Chinese companies do best in markets that have more in common with China a few years ago—large rural populations, first-generation mobile users, or leapfrog growth.

Chinese tech companies should focus on Southeast Asia in expansion plans, said Bean of SOSV. In addition to friendlier regulations than Europe or India, he said, it’s a good market fit.

“Southeast Asia has a lot of the same challenges, problems, or opportunities that China had 10 years ago. It’s a mobile-first market. So people’s first or only experience with the internet is on a smartphone, which is very similar to China,” he said.

All we are saying is give tech a chance: Chinese companies have their share of problems. But at times they also make good-faith efforts to mitigate concerns. Huawei offered to sign “no-spy deals” with countries and set up a cybersecurity transparency center in Brussels and now is facing spreading bans from Western countries’ core 5G networks. Tiktok vowed to localize user data in the US and appointed a blue-ribbon panel of privacy experts—and was rewarded with an app ban. 

Of course, the election in the United States is going to have a big impact on China tech. If US-China relations keep getting worse, tech will be affected. Maybe we’re biased, but at TechNode we don’t think this is a great thing for anyone. 

With contributions from David Cohen.

Wei Sheng

Wei Sheng is a Beijing-based reporter covering hardware, smartphone, and telecommunications, along with regulations and policies related to the China tech scene. He writes a monthly newsletter tracking...