US-China tech decoupling: Zoom woes reveal narrowing space for firms to reconcile both systems

Masha Borak
·7-min read

Recently revealed US charges against a China-based Zoom employee for censoring virtual meetings commemorating Beijing’s crackdown on the pro-democracy movement in 1989 show how the space for global technology firms to operate in both China and the US is narrowing amid an economic, technological and ideological rivalry between the two countries, according to analysts.

Jin Xinjiang, a China-based former employee with Zoom who is also known as Julien Jin, is accused of censoring online meetings hosted on the popular video conferencing app at the request of the Chinese government, according to a US Department of Justice (DOJ) complaint and arrest warrant unsealed last Friday. The meetings disrupted were in commemoration of the 31st anniversary of the Tiananmen crackdown in June 1989, a taboo topic in China.

Jin, 39, is also accused of providing information on users located outside China, including names, email addresses and IP addresses.

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If convicted of conspiring since January 2019 to use Zoom’s systems to censor speech, Jin faces up to 10 years in prison. He is currently not in US custody.

US charges China-based Zoom executive with disrupting Tiananmen crackdown memorial

The allegations against the former Zoom employee – which included setting up fake accounts using profile pictures with terrorism-related or pornographic imagery to get sensitive meetings banned from the platform – may take some time to untangle, but Alexander Capri, a visiting senior fellow at the National University of Singapore’s Business School, said the incident reflects the strengthening grip of the Chinese Communist Party over companies operating in the country.

“It is going to be a major show-stopper for a lot of multinational companies trying to do business in China,” said Capri.

China’s strict internet censorship system has long been a challenge for global companies operating in the world’s biggest online population, many of whom have established in-house committees to ensure they are in alignment with Beijing’s goals.

Software giant Microsoft censors sensitive topics on its Bing search engine in China to follow local laws while Apple has removed hundreds of apps from its app store in China at the government’s request. Google’s search engine, meanwhile, has been blocked in China since early 2010 after it stopped complying with government requirements to censor searches.

However, a worsening China-US relationship may have further narrowed the scope for tech firms who are increasingly facing a choice of complying with stringent Chinese government rules or quitting the market altogether, analysts said.

“If you run a multinational company – whether you’re an American company or a Chinese company – now, unlike any other time, you will have to balance local regulations and local requirements around data privacy censorship surveillance in particular with a global company value system or a global company policy,” said Capri. “That means contradictions.”

US companies operating in China are facing increasing scrutiny back home amid mounting China-US trade tensions. Google, for instance, ended the development of a censored search engine for Chinese users in 2019 after employees petitioned against it and the company’s chief executive, Sundar Pichai, was grilled by the US Congress over the project, referred to internally at the tech giant as Project Dragonfly.

The story of China’s Great Firewall, the world’s most sophisticated censorship system

At the same time, Chinese tech firms such as TikTok-owner ByteDance – which is facing a forced sale in the US that is currently in limbo – are increasingly struggling to convince the US that it can be run independently from Beijing.

“For the newer, younger companies that have to deal with local laws and regulations everywhere they go it’s going to be increasingly difficult, particularly involving China, because of the issues around data privacy, censorship and so on,” said Capri.

For Zoom, whose founder Eric Yuan is a naturalised US citizen from China, this could mean answering uncomfortable questions about how it handles its relationship with the Chinese government.

We support the US government’s commitment to protect American interests from foreign influence

Zoom

In a statement about the DOJ complaint last Friday, Zoom said that it had fired Jin for violating company policies including by attempting to circumvent internal access controls. It has also placed other employees on administrative leave while investigations are ongoing, it added.

The former Zoom employee was serving as the company’s government contact in China at the time when he allegedly disrupted the virtual meetings, some of which were hosted by users outside China, according to the statement.

“We support the US government’s commitment to protect American interests from foreign influence,” it said in the statement on its official blog.

Zoom said every American company faces challenges when doing business in China but that it reviews all government requests to prioritise user privacy, security and safety. It has, however, taken some actions to adhere to Chinese law including shutting down “certain types of political, religious, and sexually explicit meetings”, according to the statement.

Why are people in China using Zoom?

The company declined to answer emailed queries by the Post, referring instead to its statement last Friday.

“This is just the beginning of challenges that companies like Zoom are going to face because they’re right in the middle of the ongoing tech wars,” said Cameron Johnson, an adjunct faculty instructor at New York University and partner at Tidal Wave Solution. “A lot of people are watching this case, to see how they manoeuvre.”

One way for Zoom to manage fears about data privacy is to take the same path as its Silicon Valley predecessors and isolate its Chinese business from operations elsewhere, said Johnson. This would involve operating two ring-fenced environments – one “in China for China” and one for the rest of the world – adhering to different privacy, censorship and freedom of expression standards, according to Capri.

LinkedIn, one of the few US social media companies to have broken into the lucrative Chinese market, operates in the market under a joint venture with local partners China Broadband Capital and Sequoia China.

Zoom appears to be taking similar steps to insulate itself from some of the risks of operating in China. After its services in the country were abruptly blocked by local authorities in September last year, the company established a local entity and started requiring real-name authentication for accounts in the country. It also assigned an in-house contact for law enforcement requests and transferred China-based user data to a local data centre before its services resumed in the country in November last year.

Zoom halts direct sales in China, will rely on local partners

In May this year, it limited new user registrations in the country to enterprise customers only, according to media reports. The company halted direct sales of all products in China in August, and now only sells services through local partners there.

However, ring-fencing operations in China from those elsewhere may still result in blowbacks from both sides and it may not make sense to have a separate business for a particular market, Capri said.

Alternatively, Zoom may eventually choose to abandon the Chinese market just as Google did in 2010. However, this could hurt the many Chinese corporate users who have been relying on Zoom for their video conferencing needs as many other global communication apps, such as Google Hangouts, are already blocked in the country.

Stanford University Cyber Policy Centre research scholar Graham Webster said that Zoom had understandably been facing challenges while scaling up this year as its popularity surged amid the pandemic, but this did not excuse its recent missteps.

Webster said that while the company had a responsibility to respond to government requests when operating in China, he hoped that it and other tech companies would be able to do so in a “responsible and ethical way”.

“The world needs communications platforms to connect Chinese people with Americans and others, especially during the pandemic,” he said.

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