With India’s recent ban on 59 Chinese apps, including the widely popular TikTok, the spotlight is on the global competition among US and Chinese tech companies for user acquisition. This competition for “the next billion users” has severe geopolitical implications for the influence of global superpowers in developing markets, according to Matt Sheehan’s recent analysis for MacroPolo, the Paulson Institute’s in-house think tank. We spoke with Matt to get his take on the US-China app competition in the wake of recent news.
How does the popularity of consumer tech apps factor into the soft power and influence of certain countries, including the US and China? Are these dynamics typically overt or more subtle?
Today much of our information and entertainment gets filtered through a handful of major tech platforms. Every day the companies behind those platforms make important decisions about how to design, build, and regulate those platforms: what type of content to promote or remove, what privacy protections to implement, etc. Those decisions end up embedding a lot of key social and cultural values that we often associate with soft power, like norms around privacy, speech, and censorship. This isn’t quite as overt as the soft power that came from Hollywood movies during the Cold War, but it may end up locking in practices and values that prove even more impactful.
If it is strategically important for a country’s native apps to gain widespread adoption in developing markets overseas, what can governments do to foster that adoption and thereby grow their soft power?
This is a tough one because governments don’t have a lot of politically palatable ways of helping their countries’ apps gain traction overseas. Venture capital investment is often one way that US companies gain insight and exposure in international markets, so I can imagine some incentives built around that. I’m also interested in proposals around creating a “Digital Peace Corps” that could help make these connections at the grassroots level.
Which features, if any, typically differentiate US apps from Chinese apps? How does data privacy factor into the equation? Are there specific characteristics that lead to apps achieving success in developing markets?
One of the most salient differences is just how much gets packed into one app. While China has tended toward a “super-app” model, in which a considerable number of functions are built into a single app, the US tends to favor a “constellation” of discrete apps that divide up those tasks. On data privacy, some Chinese apps are more aggressive in accessing data, but the real divide here is on how aggressive US and Chinese governments are in demanding access to that data. Generally, apps in developing markets need to be able to adapt to slower download speeds, and they often require creative solutions for financial transactions that don’t involve credit cards or bank accounts.
What do you see as the implications of India’s recent decision to ban several Chinese apps? Could they have been influenced by China’s ban of non-Chinese apps? Do you expect to see similar actions by other countries?
There’s still a ton we don’t know about India’s app ban: how long it will last, how strict it will be, and whether the companies can bounce back if they’re unbanned. But it certainly creates an opening for either domestic or American companies to try and fill the void. It also could serve as inspiration for other countries facing similar situations. Before the recent ban, we’d already seen some temporary bans on TikTok in India and Indonesia over content issues, and that’s a trend that will likely continue. At the same time, we shouldn’t be surprised if countries use similar measures against leading US apps that rub their government the wrong way.
In your research, you found that India was the only major developing country where Chinese apps overtook US apps in the period from 2015 to 2019. What does this imply about the Indian market? Could it have contributed to India’s recent decision?
Chinese investors, entrepreneurs, and companies poured a lot into the Indian market over the past five years: investing in startups, building smartphones, and promoting their apps. I think they saw Indian tech as being in a similar place to China circa 2008, and they’d gleaned a lot of experience in building at scale for a developing country in that phase. That helped boost India’s ecosystem substantially, but the success of Chinese apps also likely engendered some resentment.
You write that “while the US foreign policy community has focused extensively on 5G infrastructure and artificial intelligence, it has not paid sufficient attention to the question of adoption of Chinese and American consumer tech apps in emerging markets.” How does the foreign policy of consumer apps differ from that of 5G and AI?
5G is a very hardware-driven industry, and it’s one in which many of the critical decisions are made early on when you choose hardware vendors to build out the infrastructure. AI has some parallels and intersections in terms of the huge variety of applications it can drive (i.e., TikTok is a very AI-powered app), but much of the conversation on AI has focused on the somewhat abstract question of “Who’s ahead in developing the technology?” In contrast, the adoption of consumer tech apps is a continually evolving field that is much more about company-to-company competition across a huge range of countries and cultures.
How do you think US tech firms should compete with Chinese tech in emerging markets?
Today, building and maintaining market share in these countries requires a lot more leg-work than before. The days when Google or Facebook could simply take their US-built product, blast it out into countries around the world, and expect to win those markets, are over. US tech companies should look to better integrate into these local tech ecosystems by investing in local startups, building relationships with local governments, and leveraging the knowledge and connections of their own employees who come from these countries. It’s a much more competitive world today for US tech companies, but that also likely means much better and more useful products being built for people in diverse countries around the world.