On 5 January 2021, U.S. President Trump signed an executive order effectively banning the use of eight major Chinese apps in the United States, as part of his administration’s ongoing crackdown on technology companies with potential links to the Chinese government. Citing past instances of China hacking U.S. institutions to collect data, the order bars transactions with “persons that develop or control” the apps of Alipay, WeChat Pay, QQ Wallet, Tencent QQ, CamScanner, SHAREit, VMate and WPS Office.
The order gives the U.S. Commerce Department 45 days to implement the restrictions, though reports indicate Commerce plans to act before President-elect Biden’s inauguration on 20 January. While the order seeks to lock in the Trump Administration’s hardline stance toward Beijing, it will presumably fall to President-elect Biden to define the scope of its enforcement.
Significant Impacts on Business Operations
Chinese digital payment apps are widely used by consumers, businesses and governments across Asia. Despite being done in the name of economic and national security, locking American companies and Chinese immigrants in the United States out of these apps hugely limits their access to China and other markets throughout the region. Previous Access Alerts have highlighted, from the U.S. business community’s perspective, the potential broad ramifications of these app restrictions for executive travel, consumer sales and foreign talent recruitment. To that end, the practical impact of this order on the export-focused US business community is more severe than the previous order targeting TikTok.
Impact on Business Growth
Apps such as Alipay and WeChat Pay, which in 2019 logged over 1.7 billion active users and USD 6.5 trillion in payments in China alone, are indispensable to everyday commercial activity in the region. QQWallet, commonly used among younger Chinese people, allows businesses to diversify their target consumer base. Restricting U.S. companies’ access to these apps thus puts them at a clear disadvantage to their foreign competitors in these markets.
Impact on Business Functionality
This latest order goes beyond the previous Trump Administration app restrictions in August 2020 which targeted Chinese social media and messaging platforms WeChat and TikTok. In China and other Asian markets, the apps listed in yesterday’s order can be used for all manner of financial transactions and other routine business functions––including completing money transfers, purchasing insurance, applying for a loan, customer service, and more. WPS Office, a standard office suite offered for all leading PC and mobile operating systems in all major Asian and global languages, is commonly used among businesses in the region. CamScanner, a wildly popular business tool that converts photos to PDFs, is installed on over 370 million devices in 200 countries. SHAREit allows users to transfer video, music, files and apps from one device to another. U.S. companies may struggle to up-sell American alternatives to Chinese apps used frequently in the workplace in Asia.
Impact on American/Chinese Expats
The latest order could also disrupt U.S. companies’ operations by severing frequent lines of communication with business counterparts in the region. Tencent QQ, a web portal and instant messaging software service, is essentially China’s WeChat for the Internet and one of the world’s most visited websites. Its global counterpart, QQ International, gives non-Mandarin speakers access to the entire QQ ecosystem including Tencent’s massive social network, QZone. QQ is, therefore, an indispensable vector not only for U.S. businesses to engage with vendors in China, but also for Chinese immigrants in the United States to communicate with their colleagues, friends and families back home. As such, the latest ban could further discourage Chinese and other Asian talent from studying and working in the United States.
Why ban these apps now?
Many Trump administration officials are eager to cement the hardline U.S. position with China on a number of fronts before Biden takes office. Yesterday’s order mirrors the Trump administration’s August 2020 Chinese app restrictions, which have faced pushback from U.S. courts due to First Amendment claims. However, the administration insists this latest order against mostly digital payments and file-sharing apps will not be affected by pending legal challenges.
How tech companies could respond
Tech companies should continue gathering as much intelligence as they can about the executive order’s implementation, particularly as the Biden Administration takes over. Though it is the Commerce Department’s intention to act before 20 January, the administration changeover means the subsequent enforcement of these restrictions will hardly be straightforward.
Secondly, they should engage outgoing and incoming administration officials and Congressional representatives with concerns and suggestions. Beyond emphasizing the critical role that Alipay and other apps affected by the latest order play in your company’s success, it would be helpful to present suggestions for alternative policy methods to protect U.S. national security and American citizens’ privacy rights.
Finally, companies should monitor the Chinese government’s response to the ban, especially as the Biden Administration prepares to take the reins. Companies should be prepared for further tit-for-tat actions; a Chinese foreign ministry spokesperson called the order “another example of American bullying and hegemonic behavior”, adding that Beijing will “take necessary measures” to protect Chinese companies. Though it remains to be seen how Biden will differentiate his China policy from Trump’s, most signs point to the incoming administration maintaining Washington’s current confrontational approach to Beijing.
Author: Elliot Silverberg, Access Partnership