Liz Truss represents a severe change for the UK’s tech trade stance towards China, as she has demanded that UK firms curb tech exports to so-called “authoritarian regimes.” As such, China will likely be de-emphasized as a destination for UK tech exports in the next year or so.
The ramifications of this geopolitical move could be serious. UK tech firms will lose access to a lucrative market, face price hikes, and experience Chinese sanctions.
Boris and Truss: a change of stance
Liz Truss is not afraid of confronting China. She played a leading role in orchestrating the Australia, UK, and US (AUKUS) security deal, in which highly specialized nuclear technology is shared with Australia to counter Chinese aggression in the South China Sea. Truss has also vowed to crack down on TikTok, a social media platform owned by Chinese tech company ByteDance. In August 2022, the UK parliament closed its TikTok account following concerns that the apps could siphon data to the Chinese government. This is a significant privacy concern, considering the sensitivity of user and government data.
Truss’ predecessor Boris Johnson had an antithetical view. Johnson’s administration was responsible for the Digital and Tech China campaign, which encourages and advises UK firms to export tech to China. The campaign recognizes the specific difficulties that UK companies face in exporting tech to China, such as patents, trademarks, and copyright. Truss will likely not encourage this, as demonstrated by her rhetoric during the Conservative leadership debates. Action could be taken against the tech sector in particular.
The geopolitics of trade with China
UK exports to China increased by 7% between Q1 in 2021 and Q1 in 2022, according to the UK Department for International Trade. However, this is potentially going to change under the Truss government; going forward, China will not be as attractive of investment for UK digital or technological products.
Geopolitics is an increasingly important theme in the global tech market. Tech companies in developed nations are being asked to avoid China. NVIDIA, for example, has become a target of the US Government’s restrictive action on ‘advanced technology’ facilities being built in China. Similarly, the University of Manchester was prevented from exporting its robot vision technology to China-based Beijing Infinite Vision Technology. As the UK has historically followed the US in geopolitical issues, UK tech firms must prepare for the possibility of reduced market access in the near future.
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Some industry experts perceive restricted exports to China as a counterbalance to encourage and subsidize domestic production. However, it can trigger a rise in manufacturing costs, making the end products expensive. This, in turn, will limit the products’ appeal in the global market, especially against cheaper Chinese variants.
China’s growing importance on the world stage also makes it capable of reciprocating attacks against the UK if export bans are imposed. This could be in the form of tariffs, which will damage the bottom line of UK firms. Businesses should also prepare for counterattacks in terms of sanctions or trading bans in the future. In such a scenario, UK firms will struggle for market share and be unable to outpace Chinese tech capabilities and aggressive market penetration.
An uncertain future
Truss will most likely make a U-turn on the Johnson approach towards China. This is evident from her early rhetoric and historical actions as foreign secretary. It remains to be seen if she will maintain this hard line. Meanwhile, UK tech firms should remain wary and privy to market conditions that could change at any moment.