By David Kirton
SHENZHEN, China (Reuters) – For the ambitious Chinese tech entrepreneur, expanding into the United States keeps getting more complicated.
Prior to 2019, there were few major barriers to a Chinese company doing business in the United States from China. But amid escalating trade tensions between the United States and China, particularly after Washington imposed sanctions on telecommunications giant Huawei, some Chinese companies have begun establishing overseas headquarters – measures that could help them attract less attention from the US government.
Now, some mainland Chinese tech business owners say they need to go further and obtain permanent residency or citizenship abroad to avoid restrictions and biases against Chinese companies in the United States.
Shenzhen-based Ryan, who declined to give his last name for fear of reprisals in China, says his three-year-old software startup has reached the point where it would be natural to expand into the United States – the largest economy of the world. His company already has one million users in East Asia and a solid base in North America.
But he is dismayed by the trade wrangling between the United States and China and the restrictions imposed or proposed by American lawmakers on a growing number of Chinese companies.
“It’s very unfair,” he said, lamenting that competitors from other countries haven’t faced similar issues when trying to expand into the United States.
“We feel a lot like the filling sandwiched in the middle of a cookie.”
His solution? He is trying to obtain permanent residency in another Asian country.
Reuters spoke to seven mostly foreign-trained mainland Chinese tech entrepreneurs who would like to expand their businesses in the United States. All are trying to obtain permanent residency or citizenship elsewhere, with most exploring a range of options including Hong Kong, Canada, Japan, the United States and Singapore.
Of the seven contractors, three agreed to be identified only by their English first names while the others requested complete anonymity, all citing concerns about repercussions in China. They also asked that their businesses not be described in detail.
COOLER SHOULDERS
While US-China tensions may have been given a new boost under the Trump administration which heavily levied tariffs and imposed sanctions on Huawei, friction has continued unabated under President Joe Biden as the two countries are vying for global technological preeminence.
Major flashpoints include US chip export restrictions and data security concerns that have seen ByteDance-owned TikTok banned on US government devices and overall by the state of Montana. . For its part, China recently blocked key industries from using Micron Technology’s products and sought to curb foreign consulting and due diligence firms.
Geopolitical tensions have resulted in a much less friendly atmosphere for mainland Chinese companies wishing to operate or obtain financing in the United States, according to entrepreneurs and consultants.
“The political narrative in Washington D.C. and many state capitals is based on the misconception that all Chinese businesses are intertwined and follow the directives of the Chinese government and the Chinese Communist Party,” said James McGregor, chairman for Greater China from the American communications consultancy. APCO in the world.
The US Commerce Department did not respond to a request for comment on attitudes towards Chinese companies in the United States.
China’s Foreign Ministry said in a statement that some Western countries want to “politicize technology, erecting barriers to regular technological and business cooperation, which benefits neither side and harms global technological progress and social security.” economic growth”.
BECOME LESS CHINESE
But even though expanding into the United States has become much more difficult, it’s still the end goal of most entrepreneurs Reuters spoke to. Focusing on the domestic market is hardly an attractive option despite its size, they added.
A two-year regulatory crackdown on China’s once-freewheeling tech sector from late 2020 — which overlapped with draconian zero COVID restrictions during the pandemic — has led to their disillusionment with China under Xi Jinping.
“Everything changed during the pandemic,” said entrepreneur Wilson, who began looking for ways to move his software startup overseas after Xi won an unprecedented third term in office last year.
He said that while it was not impossible to do business from China, the distrust between Washington and Beijing had become such that “it’s easier for my employees, for my shareholders, if I leave “.
China’s State Council Information Office (SCIO) and Foreign Ministry did not respond to requests for comment on some entrepreneurs’ efforts to emigrate or their expressions of disillusionment with from China.
Companies looking to relocate overseas and even “de-China” in terms of corporate identity have become a trend, said Shenzhen-based Chris Pereira, who runs business consultancy North American Ecosystem Institute.
Among the companies that have visibly downplayed their Chinese identity is fast-fashion online retailer Shein, which has made a Singaporean firm its de facto holding company. In early May, e-commerce company PDD Holdings moved its headquarters from Shanghai to Dublin.
Shein declined to comment and PDD did not respond to a request for comment.
So far this year, Pereira’s company has received about 100 inquiries from mainland companies seeking help to expand overseas. Pereira said he advises many people on how to effectively locate themselves abroad and be part of a community instead of just masking their Chinese identity.
Entrepreneurs said they were unconvinced by Beijing’s expressions of support for private business owners and worried about the loss of civil liberties. Being ambitious in China also often means cultivating ties with the Chinese Communist Party – a step they are reluctant to take, some also said.
Tommy, another entrepreneur, left China for overseas discouraged after government censorship demands for his product became too frequent and intrusive, leading him to shut down the business.
The SCIO did not respond to a request for comment on how censorship affects businesses in China.
Tommy is setting up a new start-up and would like to eventually move to the US – although he was questioned at length by US customs officials as to why he had a US bank account on a recent trip to the US. business there.
U.S. Customs and Border Protection did not respond to a request for comment.
(Reporting by David Kirton; Additional reporting by Eduardo Baptista in Beijing and Casey Hall in Shanghai; Editing by Brenda Goh and Edwina Gibbs)