The agreements struck between Presidents Biden and Xi at the APEC summit last week do not amount to a rapprochement between the two rival countries, but they do represent a step toward deescalating some tensions. Hopefully, they will also lead to a more clear-headed U.S. view of which Chinese companies pose threats to America, and which do not -- some of which produce technology America needs.
The U.S. has long had concerns about companies controlled by the Chinese government spying on the U.S. through intelligence gathering and economic espionage efforts targeted at U.S. businesses, academic institutions, researchers and lawmakers. In July 2020, FBI Director Christopher Wray warned: “The greatest long-term threat to our nation’s information and intellectual property, and to our economic vitality, is the counterintelligence and economic espionage threat from China.”
A 2022 report from the U.S.-China Economic and Security Review Commission listed the many ways some Chinese companies, often with Chinese government support, capture and transfer to China U.S. technical information and know-how.
Several months ago, the U.S. Commerce Department’s Bureau of Industry and Security blacklisted six Chinese industrial-technology companies that were suspected of being involved in Beijing’s surveillance-balloon program. Many recent reports have raised red flags about TikTok potentially spying on its users and its parent company ByteDance’s links to the Chinese government. As a result, governments worldwide have banned TikTok from official cellphones and computers. In the U.S., the Biden Administration has threatened to ban TikTok in the United States unless its Chinese owners sell their stakes in the company.
But not all Chinese companies are state-owned enterprises or closely linked with or controlled by Chinese authorities. Examples include companies such as Xiaomi, the world’s third-largest maker of mobile phones; and Tencent, the internet giant. Xiaomi has a U.S. headquarters in San Jose; Tencent, which is headquartered in Palo Alto, Calif., established LightSpeed, a video game development studio, in Los Angeles and has other offices in Seattle and New York.
China’s independent entrepreneurs are a significant force and many of them operate privately owned companies that have no connection to Chinese government or military. According to the Global Entrepreneurship Monitor, approximately 25 percent of China’s adults are entrepreneurs. Over the past 20 years, the spirit of the independent entrepreneur has taken root in Chinese business culture. China has become the world’s second largest economy in large part because of private entrepreneurship.
Hesai Technology is one such example of China’s independent, entrepreneurial ethos. Hesai was established in 2014 by three Chinese students who studied at U.S. universities before starting their tech careers and founding their company in Silicon Valley. Private investors from the U.S., Europe, and China saw Hesai’s potential, and the company quickly grew to more than 1,000 employees, with offices in China, Germany and the U.S. Importantly, none of Hesai’s investors were Chinese state-owned enterprises or quasi-military operations, and the company has not taken any sovereign money. In February 2023, with the support of U.S. investment banks Goldman Sachs and Morgan Stanley, Hesai completed its initial public offering and currently is listed on the Nasdaq.
Hesai has emerged as a top designer and manufacturer of lidars (light detection and ranging), a remote sensing system for vehicles that uses pulsed laser light to measure distances. Without the use of cameras, Hesai’s lidars create a detailed 3D map of the environment. Hesai is a critical player in the burgeoning autonomous vehicle market, including the U.S. market, with its lidar acting as the eyes that allow the vehicle’s operator-owned processing unit to safely navigate its surrounding area. To those who may have concerns about Chinese-made lidars looking at American roads, it’s important to note that Hesai lidars can neither store the images they create nor wirelessly transmit them, a fact that was affirmed by two of the world’s leading engineering testing bodies.
The National Highway Traffic Safety Administration estimates that 40,000 Americans die in auto accidents annually and millions are injured. Lidar, like those produced by Hesai, will make America’s streets and highways safer by detecting potential hazards hundreds of yards ahead, day or night, in all weather, road and traffic conditions. Hesai lidars are currently the predominant lidars used in robotaxis and safety systems around the world, including in the U.S.
While the threats from Beijing are real, U.S. trade policy makers should have a sophisticated, nuanced view of the U.S.-China business relationship and recognize that despite these threats, there are still certain private Chinese companies and their products can benefit, and even protect, American consumers. Despite the encouraging outcome of the summit between Presidents Biden and Xi, the U.S. economic relationship with the People’s Republic of China will remain a matter of intense debate. While that debate rages, Americans remain best served by policymakers evaluating each Chinese company according to its own merits.
Gregory Tosi is a former congressional aide and Washington, D.C.-based attorney who specializes in international trade in developing countries.
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