The WSJ reports that China is on an extensive push to drive out Western tech companies from the country and replace them with domestic alternatives. China reportedly started its domestic expansion in 2022 with a highly secretive “Document 79,” an initiative focused on deleting Western tech companies from the country. Since then, China’s new plan has been in full effect — domestic alternatives have replaced most Western software providers.
When initiated two years ago, Document 79 was a super sensitive document that only high-ranking officials were purportedly shown. Security was so paramount that copies of the document were not allowed to be made. The initiative set out by Document 79 is to replace foreign software in China’s IT systems by 2027, with state-owned firms required to provide quarterly updates on their progress in replacing foreign software with domestic alternatives.
Two years later, the fruits of Document 79 are now apparent. Microsoft, HP Enterprise, and Cisco’s market share in China has fallen drastically in the past several years. In 2018, HP Enterprise had a 14.1% market share in China, but in 2023, that has fallen to just 4%. Cisco’s market share has halved in the past five years down to just 8%. Microsoft’s Chinese sales today account for just 1.5% of the company’s overall sales.
I don’t understand how this is news to anyone. China is playing a long con game ever since the modern world order had settled. They instrumentalize capitalism against the west, keeping their corporations tightly aligned with the government and its objectives.
The first step was to appropriate the western technological advantage by providing cheap labor, but always in a partnership construct which allows them access to the actual know-how. This works/worked out perfectly for them, knowing the uncontrolled, solely motivated by greed, western corporations would be unable to resist the short term gains.
The next step was to create western economic dependence on the now largely outsourced manufacturing, giving them increasing leverage to buy into strategic assets all around the world, particularly in former third world regions.
Obviously the next step is to throw out the westerners now that they served their purpose and their economies depend on China. This allows them to build upon the acquired technological know-how and the secured assets, giving them eventual technological dominance over the rest of the world.
With the United States slowly collapsing in on itself the only hope left for the west is for Europe to get their shit together and truly integrate into an actual global player.
You’re attributing a lot of things to perfect execution without acknowledging the missteps and shortcomings of their approach.
The biggest in my mind is the domestic economic speedrun they’re ending too quickly. China has gone from cheap low tech manufacturing for the world markets to high tech affordable partner to the world markets (which is the sweet spot), to now contracting to serve only a domestic market.
They blew through the sweet spot in about 15 years where other countries sit there for 50 to 100 years. During those 50 to 100 years, you raise the standard of living for your populace, bring literacy and education levels to modern levels, stabilize your population replacement rate, and most importantly let your populace generate generational wealth. What this means is they robbed multiple generations of the benefits in a speedrun to late stage capitalism. They skipped social reforms, worker protections, environmental protections, and banking regulations. They didn’t have a long run of the good years in the sweet spot to absorb the turmoil that comes from learning these lessons an enacting reforms that the populace accept.
We’re seeing the results of this already with China’s 996 working hour system…
“The 996 working hour system (Chinese: 996工作制) is a work schedule practiced illegally by some companies in China. It derives its name from its requirement that employees work from 9:00 am to 9:00 pm, 6 days per week; i.e. 72 hours per week, 12 hours per day.” source
…the “lying flat” demotivated youth because they don’t see a path to getting ahead…
source
“Tang ping means choosing to “lie down flat and get over the beatings” via a low-desire, more indifferent attitude towards life.”
…and China’s dangerous population decline
source
“China’s population drops for second year, with record low birth rate”
Students of history, specifically China’s history have seen this before. Historically China was regional power that thought they had everything they needed from the outside world and saw the outside as a negative not worth interacting with. They built the Great Wall to keep out the rest of the world emerging years later to find they were passed by as the world evolved without them.
If your narrative is correct, I’m shocked to that China seems to be making the same mistake again. The repeated success of large nations has been engagement with the outside world with trade. If you’re right, China doesn’t agree with that to their detriment.
hello~
westerner tech guy in China here. they haven’t thrown me out yet, but then they haven’t grown up an equivalent of we do yet either. they haven’t tried to steal it or learn our secrets either.
nope for the last 3 or 4 years they’ve asked to license it to a local firm or better yet sell it outright to them. each time the price goes up and I suspect at some point it will become so irresistible that the founders will do it.
interestingly the sanctions closed us off from a lot of big institutes and companies who faced with losing the capability entirely just went ahead and acquired a bunch of Japanese stuff and jerry rigged it together. so that sucked.
because that’s it, if we don’t sell it to them someone else will and that’ll be the end of the party for everyone.
pretty sure this has played out in history before.
The article imply they aren’t looking for another seller but to domestically develop these products they need themselves. Although it’s still probably easier for them to use products from other non-western nations.
I agree with everything you said, but I think the word “appropriate” in your second paragraph is using a better term for what they do. They straight up steal our technology. From appropriating the industrial IP used in their country when they manufacture stuff for our companies to actually stealing IP through hacking our companies, they have no qualms about where they get the tech they use. I’m not trying to imply that Chinese companies and people aren’t smart enough to develop the tech we have, but it makes good business sense to spend zero money on R&D if there are no laws stopping you from copying tech from someone who has spent that money on R&D.
Mostly agree, the manufacturing agreements played Western companies like a fiddle in the long game. But I don’t think Western companies will collapse (or Chinese companies gain dominance as you word it). We’ll end up with two competing spheres, China and the west, protecting their own internal economies.
Im worried that China isn’t content with that. Their stated goal is to become the next global hegemon, and we can see that they desire to establish their domestic rules abroad as well.
Around the world they establish secret police stations to monitor their citizens living abroad, and to ensure their narrative is dominant in western media (most recent examples: China bitching about unfavorable reporting in Canada, and the completely insane agreement Hungary made to give Chinese police actual law enforcement powers in the country.
Also, two competing spheres in the past developed into the Cold War. I’m not really keen on another super polarized world flirting with nuclear war.
Well they’re going to be economically sooner or later. GDP is essentially population times efficiency. Once they get their efficiency up, there’s no way the US can compete. The population of China is just that high. Same with India if they ever get their act together.
But as for exporting their values, that’s a hard sell. The old idea was that prosperity will lead to democracy, but the US Europe are wising up to that is not going to happen. I don’t see it going very far. Selling it to Africa will be interesting.
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