Compliance Management, Government Regulations

Regulatory policies threaten China’s info communications tech sector

A recent report by the U.S. Chamber of Commerce estimated that China will experience a loss of GDP from between 1.77 - 3.44%, or almost $3 trillion annually by 2025, based on 2015 GDP, as a result of China's information communications technology policies.

The report, titled Preventing Deglobalization, warns that “techno-nationalist” regulatory policies could slow or reverse the growth of the information communications technology sector globally.

In an accompanying economic analysis, the Rhodium Group, a partner in the report, noted that, by comparison, the negative effects from China's non-participation in the Trans-Pacific Partnership (TPP) is approximately 2.2% over four years. The loss of GDP based on expected 2016 GDP is about $200 billion, the analysis stated. “As policy shocks go, this is huge,” New York City-based firm Rhodium Group wrote.

EastWest Institute Vice President Bruce McConnell told that other countries have made attempts to enact nationalist regulatory policies to varying degrees. Attempts by India to enact similar policies were found to have “many unintended policies, including a negative effect on GDP,” he said.

China has recently allowed foreign technology firms to participate in creating cybersecurity standards, a move that observers see as a positive development that may signal a willingness to engage in an inclusive global approach to establishing cybersecurity standards. Chinese technology entrepreneurs have made efforts to open up the Chinese market to Western companies in order to prevent damaging Chinese competitiveness in a global market in the long term, Adam Segal, director of the digital and cyberspace policy program at the Council on Foreign Relations (CFR) and the Ira A. Lipman chair in emerging technologies and national security, told last week.

G20 summit commitments to oppose protectionism “gives added weight to the conclusion that security-motivated protectionism can be economically costly,” McConnell wrote in an email to At the G20 summit on Monday, President Obama attempted to convince that U.S. trading partners in Asia that Washington would approve the TPP agreement, despite presidential candidates Hillary Clinton and Donald Trump's opposition to the trade deal.

Foreign participation in China's technology sector “is not just about today's goods and services, but very much about the new innovations which will create growth and opportunity tomorrow,” Rhodium Group wrote in its accompanying analysis to the Chamber of Commerce report. “The best known Chinese new economy players have generally borrowed business models that had already proved themselves abroad.”

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