Blacklists to bans: Why countries think Chinese firms are a security risk

Nations are increasingly imposing restrictions on Chinese companies like DJI, Hesai, and TikTok due to perceived threats related to privacy, security, and trade competition

SZ DJI Technology Co, a drone manufacturer based in Shenzhen, has filed a lawsuit against the US Department of Defense. This legal action stems from DJI’s designation as a Chinese military company, a classification that restricts American firms from engaging in business with it. Similarly, Hesai Technology, a prominent Chinese producer of laser sensors for electric vehicles, plans to challenge its reinstatement on the Pentagon’s blacklist of companies allegedly linked to the military.

 

The wave of legal actions and governmental restrictions reflects a broader trend of increasing vigilance against perceived security risks associated with Chinese tech firms. While not a new phenomenon, countries are now taking more definitive measures to mitigate what they view as potential threats to national security. But what has driven this escalation, and what implications does it have for global trade and technology?

 

 

Why is the US blacklisting Chinese firms?

In 2021, the US Congress enacted legislation mandating the Pentagon to create a list of “Chinese Military Companies.” This initiative arose from concerns regarding the potential for Chinese firms to exploit dual-use technologies. Dual-use tech refers to those developed for civilian purposes that can be repurposed for military applications. Ongoing tensions between the US and China have prompted the Department of Defense to maintain an updated inventory of Chinese companies deemed to have military ties, as part of the National Defense Authorization Act. 

 

As of now, at least 73 Chinese firms have been blacklisted.

 

The US Federal Bureau of Investigation (FBI) website states, "The counterintelligence and economic espionage efforts emanating from the government of China and the Chinese Communist Party are a grave threat to the economic well-being and democratic values of the United States." The statement adds, "The threat comes from the programmes and policies pursued by an authoritarian government."

 

Bans and restrictions on Chinese social media apps

Most notably, ByteDance-backed social media app TikTok has faced numerous bans and restrictions across several countries due to concerns over privacy, security, and, in some cases, morality. In India, the app was permanently banned in 2021 after initially being suspended following a military clash with China, which raised security concerns. At the time of the ban, India represented TikTok’s largest user base.

 

Uzbekistan also restricted the app in 2021 for failing to comply with personal data protection laws. The US Congress has also closely examined TikTok, questioning its safety and data practices and threatening a complete ban on the app.

 

Several nations have introduced partial or feature-specific bans on TikTok. For example, Indonesia banned the app’s “Shop” feature for violating e-commerce laws, and Kyrgyzstan imposed restrictions over child protection concerns. Russia, meanwhile, blocks international content on TikTok, allowing only Russian and state-approved material on the platform.

 

Countries like Australia, the United Kingdom, and Canada have banned TikTok from official government devices due to cybersecurity risks. The European Union institutions, as well as other nations such as Belgium, Denmark, and New Zealand, have followed suit, restricting access to the app for public officials or on government-issued phones. 

 

Scrutiny over Chinese 5G technology

Chinese companies specialising in 5G technology, such as Huawei and ZTE, have faced significant barriers in markets like the US, Australia, and Canada. Authorities have expressed concerns about backdoors in 5G equipment that could potentially enable data transfer to Beijing. This has resulted in outright bans and removal orders in various countries.

 

Despite these concerns, it’s important to note that no concrete evidence has been shared that these firms are engaged in any form of espionage.

 

EU trade disputes with China

Aside from security and morality issues, trade dynamics are also at play.

 

The European Union recently announced plans to impose duties of up to 35 per cent on Chinese electric vehicles (EVs). These measures aim to protect European manufacturers from being undermined by cheaper imports benefiting from substantial Chinese state subsidies. In retaliation, China has threatened to impose its own tariffs on European products, including renowned brandies such as Remy Martin, Martell, and Hennessy.

 

The EU has also begun an anti-dumping investigation into Chinese plywood imports. Meanwhile, China has initiated investigations into EU dairy exports, signalling a tit-for-tat approach that may complicate international trade relations.

 

EU member states like Germany have voiced concerns over potential economic fallout and even opposed the EV tariff increase.

 

In August, China requested World Trade Organization (WTO) dispute consultations with the European Union regarding the EU’s anti-subsidy investigation on imported battery EVs.

 

India-China complicated relationship

India’s relationship with Chinese companies has become increasingly complex following a border clash in 2020, which further strained ties between the two nations. In the wake of the clash, the Indian government implemented stringent measures to scrutinise and regulate Chinese investments, effectively halting major projects and turning away billions of dollars from companies like BYD and Great Wall Motors.

 

On June 29, 2020, India banned TikTok along with 58 other Chinese applications, citing privacy and security risks following the military clash. At that time, TikTok had amassed a substantial user base in India, making the ban a significant move. Despite the company’s attempts to address the Indian government’s concerns, the ban was made permanent in January 2021.

 

India also sought to attract investment from alternative sources, such as Apple. The government expedited approvals for joint ventures involving the US tech giant’s Chinese suppliers and Indian firms. Apple is reportedly looking to shift more than 18 per cent of its iPhone production to India by 2025.

 

Recently, however, there have been indications that India may reconsider its rigid stance towards Chinese investments. External Affairs Minister S Jaishankar remarked that India is “not closed to business” from China, but he emphasised the necessity of defining which sectors would be open for investment and under what conditions.