Samm Sacks is a Cybersecurity Policy and China Digital Economy Fellow at New America. Her research focuses on emerging information and communication technology (ICT) policies globally, particularly in China. She has worked on Chinese technology policy issues for over a decade, both with the U.S. government and in the private sector.
Her reports and commentaries cover issues ranging from the U.S.-China technology relationship, the Chinese government’s technology ambitions, China’s cybersecurity regulatory environment (particularly data issues), and the global expansion of Chinese tech companies. Her research on how China’s data protection system referenced EU’s GDPR is widely cited as pivotal to understanding China’s emerging data regime.
Previously, Sacks launched the industrial cyber business for Siemens in Asia, focusing on energy sector cybersecurity markets in Japan, South Korea, and China. Prior to this, she led China technology sector analysis at the political risk consultancy Eurasia Group. Prior to this, she worked at Booz Allen Hamilton and Defense Group Inc. where she was an analyst-linguist focused on China’s technology development.
She reads and speaks Mandarin and is a frequent contributor to print, TV, and radio, including Bloomberg, the Financial Times, National Public Radio, the New York Times, and the Wall Street Journal. Her articles have appeared in the Atlantic and Foreign Affairs, among other outlets. She has testified before Congress and speaks regularly before audiences from academia and research, policy, and the private sector.
A former Fulbright scholar in Beijing, Sacks holds an M.A. from Yale University in international relations and a B.A. from Brown University in Chinese literature. She lives with her husband and two young sons in New York.
Kelsey Clarke CMC'22 interviewed Samm Sacks in September, 2019.
Why have the number of global Chinese tech companies been increasing in recent years?
I think we have to look at this from both a top-down And a bottom-up lens. Often times, people outside of China are completely focused on what the government is doing to promote the tech sector. They point to the leadership’s efforts to help Chinese companies become leaders in AI, global communications, and Internet applications. We can point to a lot of state-level plans to put more resources into these spaces. The reality is when you look at a lot of the emerging tech in China, a lot of it is actually coming from the private sector. You have a lot of really innovative startups and entrepreneurial activity coming from the private sector in China. If you look around the world at the leading AI companies for example, they are in China and the United States as these two countries are racing ahead of the rest of the world and coming up with innovative applications for these new technologies.
You and others have written that the US understanding of China suffers from the fact that the US sends very few students to study in China, whereas China sends many students to the US. How does this factor into the success of Chinese tech ventures globally? By contrast, how might this pattern diminish the US’s tech companies’ ability to compete in China?
I don't know if that's actually completely accurate. There are a lot of students from the US who study in China. Increasingly, you have researchers and US tech companies that are in China specifically to tap into the power and innovation that is happening there. I do think there is sort of a two-way flow of information going on right now. You have Chinese students, researchers, and scientists coming to the US because the US traditionally has had world-class leading universities and institutions. It is not just Chinese experts coming here, but you have it from all around the world. That is just what is sort of driving them to come here among others. The question is I think in the future are those experts from China going to stay in the US or go back to China. Going forward, is that talent going to stay in the US, go back to China, or other parts of the world? Unfortunately, we are in a moment right now where there is increased scrutiny and suspicion of anyone ethnically of Chinese origin that is in the science or technology field in the US. There is a perception that they are part of a state industrial espionage campaign, and it is leading to an environment of racism and xenophobia where people are being falsely accused of being spies. This is making US research institutions and universities an increasingly hostile environment. This is going to undermine the ability of the US to continue to have a lead and be at the cutting edge in terms of the quality of its institutions and being able to attract the top talent from around the world in ways that definitely will have an impact on where some of this leading work is taking place.
How successful have behemoth companies like Alibaba and WeChat been in reaching global markets and how do they compare to other large Chinese tech companies seeking markets abroad?
Chinese companies, particularly in the tech sector, have struggled to make it outside of China. The leadership of Xi Jinping has stated they want China to be a global power in the tech space. But it's really hard for a lot Chinese companies who are so dominant inside China to succeed outside of a closed system like in China. I think where we will see companies like Alibaba become more successful will probably be in parts of Southeast Asia. We are not probably going to see Tencent’s WeChat or a Chinese tech startup be able to capture much market in the US, for example, other than with people who are connected to China in some way. I think we will see more of those companies and their apps succeeding in emerging economies, countries like India for example. I don't think we're going to see much competition between Chinese tech companies and US tech companies in Europe and the United States, it's going to happen in more of the emerging economies. There are exceptions, however, such as Bytedance, the video selfie app, making a strong play in developed economies. The Chinese consumer drone maker DGI also dominates market share around the world. So the question is are these anomalies or can others break out in this way?
Do you think cultural factors play a role in why Chinese tech companies won’t do as well in Europe and the United States?
It just depends. One of the reasons WeChat has been so successful inside China is because of its bundled services - it is like a super app. It lets you do in one app what in the United States would be like 10 different apps. I don't think that's cultural so much as it is just consumer preference. Facebook has tried to bundle apps like that and people just aren’t as excited about it here. So it's a combination of that, but it's also regulatory. In the United States, there are restrictions around combining certain kinds of search and financial transactions. Those regulations don't exist in China, so part of it is demographic and part of it is regulatory. The thing that Chinese tech companies are going to have to grapple with more and more are concerns over the Chinese government's access to data. We see this come out a lot with Huawei. You know there's a perception and we can talk about whether it's accurate or not that there is a data is free for all in China, and that Chinese companies automatically give all their data to the Chinese government. It's actually not true but that's a perception, and there is a lot of global mistrust around what a Chinese company would do with data that may not be the case with a Western company. Although, I would argue that companies like Facebook have been much more exploitive of people's data in some ways. So it is a sort of a toss up over who has the most data abuses.
How has President Xi’s “Made in China 2025” program mattered for Chinese tech companies seeking to go global?
I think China's “Made in 2025” plan gets so much attention lately and to be honest with you, I don't see it as that important in terms of what it's done and the reason why we have these increasingly powerful commercially successful Internet platforms in China. The “Made in China 2025” plan is just a very just high-level statement of how the Chinese government would like to shift the economy away from a heavy manufacturing export-led growth model to one in which is driven by consumer-led growth particularly in the digital economy and high-tech space and it sort of promises more resources and puts a floor so that companies in China that are in those sector have kind of a safety net. But I don't think it has very much to do with the vibrancy of the Chinese tech sector. It is certainly in the headlines in the United States and has been driving a lot of US policy towards China because of this fear factor, the fear of Chinese industrial policy. It may be the reason why the Trump Administration is confronting the Chinese government right now and sort of saying there are conditions that make competing in China for US firms… it creates an unequal playing field for US companies coming into China. And there certainly market access issues that US companies have been struggling for years in China. I'm just not sure if it has a lot to do with “Made in China 2025” or if it is a lot of other factors.
You were talking about how the Chinese government does make it harder for foreign firms to compete in China, do you think the reduction of foreign competition in China makes Chinese companies less capable in facing competition in global markets?
There's an important question that needs to be asked, which is would a company like Baidu for example would have been able to be as dominant in China if Google had been able to play in the market. The same could be said for lots of other Chinese internet companies. If there were a viable foreign competitor, would these companies have grown as powerful and capture the market share that they do? That's certainly one of the reasons why I think these companies are going to have a harder time going abroad is they haven't had to compete in the same way and they’ve been given major advantages in the domestic market. That said, the competition among Chinese tech companies is fierce. We talk a lot about IP theft involving US firms in China, but something that I think is missing from the conversation is the rampant IP theft between or among Chinese companies. That’s something that Kai-fu Lee in his book AI Superpower has argued is one of the reasons that has made sort of the innovation ecosystem in China so vibrant. In order to make it, it is so cutthroat. Someone is always trying to steal your latest development that you really have to stay on your game. It is so much better from the rest of the field precisely because Issues of IP theft. So I think it goes both ways: yes, these companies have benefitted from a closed system where they're not competing as much with foreign companies, but at the same time that closed system is one that is fiercely competitive and has its own challenges.
How has the US-China trade war impacted the ability of Chinese tech companies to thrive in the US? More specifically, What role does CFIUS play in the inability of the Chinese tech companies to enter the American market?
From the perspective of Chinese investment into the United States, the US-China Trade War has made that drop off a cliff. A lot of this comes down to not the trade war per se, but the reform of CFIUS, the committee on foreign investment in the United States. This is an interagency group that evaluates the national security risks of inbound investment into the United States. About a year or so ago, it went through a major overhaul that gave CFIUS more teeth, more power and expanding the scope of what it looks at. It was targeted specifically at perceived national security risks of types of investments in the US. This has really brought a lot of Chinese investment to a standstill.There are a number of other things that have happened that I think are influencing it. You have the overhaul of the export control regime which will limit the ability of US companies to engage in and sell certain types of technology and equipment to Chinese partners as part of a Chinese deal. You also have scrutiny of Chinese employees actually in US firms because under the new export control regime there is a category called Deemed Export which basically says that if you have a foreign national, presumably with the implication that it's a Chinese national, in a research lab in the US that is a Deemed Export and could be restricted. So they are sort of connected to the trade war, there are a whole host of US government policies that are making it much more difficult for Chinese investors and Chinese companies to play in the US and we're certainly seeing a drop off. There's also just the deterrent effect like even if there's not a specific policy or restriction, there is a sort of general sense that Chinese companies are being met with much more scrutiny, leading to broader examination of how these two systems going to decouple from a technology and from an economics standpoint.
How valid do you think these security concerns are that the US government has raised?
They are always going to be nefarious actors. The problem is I think that the US policy approach is not being as targeted as it should be. And we are in a place now over which every Chinese company is just kind of seen as an arm of the politburo and part of a coordinated effort to bring civilian technology to the military. And that's just not accurate. Different Chinese companies have different kinds of relationships with the Chinese government. I think there's just a need for a more targeted approach, and this is something that in the past year I've testified three times to Congress. To talk about how we can express legitimate National Security issues, because they certainly exist but can we do it in a way that is a more pinpointed approach to identify what are the real threats. Something that I testified about is an idea introduced by the former Secretary of Defense Robert Gates when he talked about having a small yard and high fence.What that means is be selective about what you want to protect and be very aggressive in protecting it. There are a number of tools to do that, whether it's export controls, whether its using some sort of law enforcement or for the National Security agencies to evaluate where espionage is going on. Not all companies that are linked to China are going to be involved in some sort of nefarious activity. Not all ethnically Chinese researchers and scientists are working at the heft of Beijing. It is sort of using a scalpel rather than a blunt instrument as a way to address where there are real national security issues.
Matti Blume [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)]