Chinese tech entrepreneurs are eager to “take out China” as tensions with the US escalate

Shenzhen, China, May 31 (Reuters) – For an aspiring Chinese tech entrepreneur, expanding into the United States is getting tougher.

Before 2019, there were a few major barriers to having a Chinese company do business in the US from China. But amid escalating trade tensions between the United States and China, particularly after Washington slapped sanctions on telecoms giant Huawei (HWT.UL), some Chinese companies have begun setting up headquarters abroad — moves that could help them attract less attention from the government. American.

Now, some tech business owners in mainland China say they need to go further and obtain permanent residency or citizenship abroad to avoid restrictions and prejudices 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 is normal for it to expand into the United States — the world’s largest economy. His company already has 1 million users in East Asia and a strong base in North America.

But he is troubled by trade disputes between the United States and China and by restrictions on a growing number of Chinese companies that he has imposed, or is being proposed by US lawmakers.

“It’s very unfair,” he said, lamenting that competitors from other countries haven’t had similar problems when trying to expand into the United States.

“It feels very much like the filling is in the middle of the biscuit.”

solve it? He is trying to get permanent residence in another Asian country.

Reuters spoke to seven tech entrepreneurs from mainland China, most of them educated abroad, who want to expand their businesses in the United States. Everyone is trying to get permanent residency or citizenship elsewhere, and most are exploring a range of options including Hong Kong, Canada, Japan, the US, and Singapore.

Of the seven entrepreneurs, three agreed to only give their first names in English while the others asked not to be fully identified, all citing concerns about ramifications within China. They also asked not to describe their business in detail.

Cooled shoulders

While tensions between the US and China may have been given a new impetus under a Trump administration that has slapped widespread tariffs and imposed sanctions on Huawei, the feud has continued unabated under President Joe Biden as the two countries vie for global technological supremacy.

Key hotspots include US export restrictions on chips and data security concerns that have seen ByteDance-owned TikTok banned on US government devices entirely by the state of Montana. For its part, China recently banned key industries from using Micron Technology (MU.O) products and sought to rein in foreign advisory firms and due diligence firms.

Entrepreneurs and consultants say geopolitical tensions mean a much less friendly atmosphere for mainland Chinese companies looking to do business or obtain financing in the United States.

“The political narrative in Washington, D.C. and in many state capitals is based on the misconception that all Chinese companies are interconnected and take direction from the Chinese government and the Chinese Communist Party,” says James McGregor, chairman of Greater China at US telecom consultancy James McGregor. APCO Global.

The US Department of Commerce did not respond to a request for comment on attitudes toward Chinese companies in the United States.

China’s foreign ministry said in a statement that some Western countries want to “politicize technology, set up obstacles to regular technological and trade cooperation, which does not benefit either side, and negatively affects global technological progress and economic growth.”

become less Chinese

But even if expanding into the US becomes more difficult, it remains the ultimate goal for most of the entrepreneurs Reuters spoke to. They added that focusing on the local market is not an attractive option despite its size.

A two-year regulatory crackdown on China’s once-liberalizing tech sector from late 2020 — which was interwoven with strict non-COVID restrictions during the pandemic — has left them disillusioned with Xi Jinping’s China.

“Everything changed during the pandemic,” said entrepreneur Wilson, who began looking for ways to take his software startup offshore after Xi won an unprecedented third term last year.

Although it was not impossible to do business from China, he said, the mistrust between Washington and Beijing had become such that it “became easier for my employees, my shareholders, if I got out.”

China’s State Council of Information (SCIO) and the Ministry of Foreign Affairs did not respond to requests for comment about some entrepreneurs’ efforts to move abroad or their expressions of disappointment with China.

Shenzhen-based Chris Pereira, who runs the business advisory firm North American Ecosystem Institute, said companies looking to reposition themselves offshore and even “de-Chinese” in terms of corporate identity are becoming a trend.

Companies that have visibly shed their Chinese identity include fast-fashion online retailers it is in That made a company in Singapore a de facto holding company. In early May, e-commerce company PDD Holdings moved its headquarters from Shanghai to Dublin.

Shin declined to comment and PDD did not respond to a request for comment.

So far this year, Pereira has received around 100 inquiries from mainland companies seeking help in expanding overseas. Pereira said he advises many on how to settle abroad effectively and join a community rather than just hiding their Chinese identity.

The entrepreneurs said they were unconvinced by Beijing’s expression of support for private entrepreneurs and were concerned about the loss of civil liberties. Being ambitious in China often also entails cultivating ties to the Chinese Communist Party—a step they are reluctant to take, some of them also said.

Tommy, another businessman, has moved abroad from China, frustrated after requests for government oversight regarding his product become so frequent and intrusive, that he shuts down the company.

The SCIO did not respond to a request for comment on how censorship affects companies in China.

Tommy is now creating a new startup and would eventually like to move to the US – this despite being questioned at length by US customs officials as to why he had a US bank account when he was on a recent business trip there.

US 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

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