China syndromeHuawei and TikTok Are at the Forefront of a New Drift to Regionalism – Many Others Will Follow
Huawei and TikTok were two of the most successful examples of globalization. Both of these Chinese companies are now at the mercy of a widening geopolitical divide. The U.S. has led an increasingly successful campaign to eliminate Huawei from the global market over alleged security fears, and is threatening to ban TikTok too. These developments are signs of attempts by the U.S. to decouple from China’s economy and concentrate on alliances within its own political and economic sphere. It chimes with the wider drift away from globalization towards a more regional approach to trade.
Huawei and TikTok were two of the most successful examples of globalization. Huawei started as a small private firm in 1987 and has risen in just over 30 years to become a world champion in telecommunications. TikTok has succeeded over a much shorter time period. Having only launched in 2016, the video-sharing service is now the fourth most popular app in the world and has achieved 1.9 billion downloads worldwide.
Both of these Chinese companies are now at the mercy of a widening geopolitical divide. The U.S. has led an increasingly successful campaign to eliminate Huawei from the global market over alleged security fears, and is threatening to ban TikTok too. There has also been speculation that other Chinese tech companies such as Lenovo, ZTE and Xiaomi could be at risk. Meanwhile, HSBC has risked getting caught in the crossfire by expressing support for China’s security crackdown on Hong Kong.
These developments are signs of attempts by the U.S. to decouple from China’s economy and concentrate on alliances within its own political and economic sphere. It chimes with the wider drift away from globalization towards a more regional approach to trade, reflected in the difficulties of the World Trade Organization (WTO) and the rise of regional trading blocs.
Regional Retrenchment
In response to the U.S. moves to restrict its activities, Huawei is now trying to forge closer supply alliances with companies in China and elsewhere in Asia, such as Samsung. TikTok could be making a similar move but in the opposite direction, amid reports that several U.S. investment capitalists might buy the brand from owner ByteDance and separate it from its Chinese version, which is called Douyin. In both cases, these companies appear to be retrenching from a global to a regional focus.
These developments are being driven by the growing antagonism between China and the U.S.– but many other multinationals are facing a similar dilemma, because the global trade system is at risk of breaking down. Multinationals established their dominance by forging global supply chains that maximized the comparative advantages of each country involved.
They have been encouraged since the 1940s by global trade policies that have struck down national trade barriers and deepened global economic integration. In recent years, this has been done through WTO agreements.
