A new cold war is emerging between the U.S. and China, but it isn’t related to weapons. The two sides are trying to gather, aggregate, analyze and make the utmost use of data to overtake their opponent.
In a recently published article in The Guardian, economist, political commentator and former U.S. Department of Labor Secretary Robert Reich identified a new cold war between the two leading economies of the world — the U.S. and China.
Last week, China’s giant ride-hailing company Didi saw its share prices plummet by more than 20%. Didi had previously managed to raise $4.4 billion in the largest initial public offering for a Chinese company in New York since the launch of Alibaba in 2014.
Didi’s share price dropped allegedly because the Cyberspace Administration of China suspects that Didi collected and illegally used users’ personal information.
While the investigation proceeded, Didi was required to stop registering new users and remove its app from Chinese app stores.
Worries about Data and Information Leakage to Opponents
What was the reason for Beijing’s drastic actions with respect toDidi?
It’s very likely that the massive initial public offering in New York aroused Beijing’s concern that the U.S. could access large amounts of personal information regarding the residency, occupation and itineraries of Chinese people, data that could threaten Beijing’s national security.
On July 7, China’s antitrust regulator penalized several online companies, including Didi, charging it with violating the country’s antitrust laws.
A new cold war seems to be emerging between Beijing and Washington. This battle isn’t related to weapons, but is a battle for information in which both sides find ways to gather, aggregate, analyze and make the utmost use of data to overtake their opponent.
The winner of such an information cold war would have more access to the other side’s information and could optimize that data source.
Just recently, China also announced enhanced regulations for technology companies listed abroad, and close monitoring of the information these companies can send and receive across borders.
The official reason given for these actions was to ensure the safety of Chinese customers in the face of cybercrimes and the leakage of personal information.
Nevertheless, the real reason is perhaps to ensure national security.
On the flip side, Washington politicians are similarly anxious about the information flow that could leak to Beijing.
Sen. Marco Rubio told the Financial Times that it was “reckless and irresponsible” for the New York Stock Exchange to list Didi.
Another worrisome concern raised by Sen. Rubio is the matter of protecting American investments in a Chinese-governed company.
“Even if the stock rebounds, American investors still have no insight into the company’s financial strength because the Chinese Communist party blocks U.S. regulators from reviewing the books,” Sen. Rubio said.
Accordingly, the senator is worried that American retirees’ investments in Chinese companies will be endangered.
Disregarding Nationalism in the Digital Sector
However, Chinese companies lead the MSCI Emerging Markets Index and guide the flow of funds from the U.S.
Despite escalating political tensions, the standing of Chinese companies has greatly increased in the past few years. Global bond indexes even added Chinese government bonds to their investment portfolios.
It’s estimated that America’s investment in Chinese companies and government shares could reach a total of more than $1 billion by the end of 2021.
American legislators’ true concern is the ability of Didi and other large Chinese technology companies to gain a foothold in the American financial sector, which would mean China could collect data on Washington. Beijing has similar concerns.
Beijing’s and Washington’s anxiety surrounding data security is easily understood in the context of the increasingly heated competition between the U.S. and China.
However, in reality, these two economies are engaging in a profound exchange. Entrepreneurs and financial companies in both China and the U.S. clearly understand that these two nations are together creating the largest market in the world.
They will continue to do everything in their power to profit in this massive marketplace, disregarding nationalism in the politically divided digital sector of the two nations.
This means that the most interesting upcoming conflict isn’t the one between China and the U.S. It’s a conflict between the big guys in the business sector of both Beijing and Washington, as they seek colossal profits in a setting where China and the U.S. both strive to protect their national security as well as their political positions.