Can you make China's under-25%-foreign cutoff?
What you need to know
- The U.S. and China have been locked in a heated, years-long technology battle.
- As the U.S. continues to tighten its grip on Chinese tech companies, China remains focused on building up domestic developments so it will no longer have to rely on foreigners.
- China has crafted the Xinchuang committee, otherwise known as a sort of country-spanning whitelist, to prioritize domestic powerhouses over foreign ones.
The U.S. has been doing its best to keep key technologies out of Chinese hands, as can be evidenced by the recent SK Hynix situation. And even when the U.S. isn't actively roadblocking technology transportation, it's placing sanctions and otherwise inconveniencing Chinese tech companies. So, China has doubled and tripled down on its domestic efforts, to the point where it has a whitelist to determine which companies are primarily China-based and will, by extension, receive preferential treatment.
As reported by Bloomberg, China's Information Technology Application Innovation Working Committee (its website can be found here) now has an "IT Application Innovation" plan underway. The plan and its associated committee go by the name "Xinchuang." It will whitelist and promote domestic tech companies for critical domestic sectors, excluding foreign companies in the process. Profitable spaces such as Chinese banking will be handled by companies on the whitelist.
China has also tightened its stance on technologies and companies in data security. It has forced Microsoft and Amazon Web Services to operate via joint ventures for their mainland business activities. And as for the whitelist, any company that's foreign-owned to the tune of more than 25% is excluded by Xinchuang. That means no whitelisting for Microsoft or Intel in the sectors Xinchuang covers.
Even Chinese startups such as Tencent have to tread carefully due to their reliance on foreign investments. Companies like these have to apply through local subsidiaries for a shot at getting in Xinchuang's good graces. While that trick may not be enough for every company to score a spot on China's list of chosen partners, it does show that there is an exception to the rule, so long as local subsidiaries remain a viable option.
This is all part of the bigger picture surrounding the chipmaking war being waged between the U.S. and China.
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