Chinese tech companies keep getting fined and blocked overseas – sometimes unfairly, and sometimes because they’re behaving exactly like they do at home.
· Beijing just released a plan to fix both problems at once.
Our take: “China’s nefarious plan to get its companies to obey overseas laws” is a Foreign Affairs headline just waiting to be written.
On this episode, Trivium China podcast host Andrew Polk sits down with Kendra Schaefer (Head of Tech Policy Research) to unpack:
Why lumping AI labs, e-commerce platforms, and cybersecurity firms into the single regulatory category of “cyberspace enterprises” is a bigger deal than it sounds
The story behind AliExpress’s EUR 550 million EU fine, and why Chinese companies keep getting tripped up by rules they don’t fully understand
One vague line in the CAC’s latest policy doc that might matter most: Beijing says it will “regulate the overseas competitive behavior” of its own tech firms, with zero detail on how
Why cleaning up Chinese tech companies’ act abroad might get Beijing branded as the bad guy either way
Transcript
Andrew Polk: Hi, everybody, and welcome to the latest Trivium China Podcast, a proud member of the Sinica Podcast Network. I’m your host, Trivium Co-Founder, Andrew Polk, and today I am joined once again by Trivium’s Head of Tech Policy Research, Kendra Schaefer. Kendra, how’re you doing?
Kendra Schaefer: I’m doing great. How are you?
Andrew: I’m wonderful, especially since I have the opportunity to talk to you about China tech policy. I mean, that’s just what gets me going. I’m only half kidding. Actually, I’m 90% serious. So, anyway, we are going to talk today about this regulation that came out on August 21st. We are recording today on August 25th. And this document came out on the 21st from the Cyber Administration of China.
It’s a 2026 to 2030 action plan aimed at helping Chinese digital companies, everything from SMEs to big platform companies and AI firms, grow stronger and compete internationally.
So there’s a lot in here about supporting firms as they head abroad, but also some pointed language about bringing in some bad behavior once they get there.
So we’re going to unpack all of that with Kendra today and talk about what it signals. But of course, before we get into it, we have to start with the customary vibe check.
Kendra, how’s your vibe today?
Kendra: A little bit overwhelmed, actually. I am going to be on four trips in September. I’m not really sure how that happened, but I’m going to be in D.C. like three times, and then I’m going to go to New York once. That just kind of trip’s just piled on trips, so I’m gearing up for a lot of Amtrak in the next four weeks.
Andrew: Wow. Well, that sounds like a lot of fun. That’s great. My vibe is, I don’t know, like ready for the fall. Our kids are back in school, so it feels like we’re getting back in that whole rhythm of D.C. starting to heat up, not temperature-wise, of course, but activity-wise. Once Labor Day comes and goes, that’s when D.C.’s back at it.
So, kind of getting warmed up over here and excited to talk about this with you today as part of getting back into the rhythm. So, welcome. We also have to quickly do the housekeeping up top. Just a quick reminder, we’re not just a podcast here.
Trivium China is a strategic advisory firm that helps businesses and funds navigate the China policy landscape. That, of course, includes domestic policy in China around a bunch of different issues like tech, which we will talk about today, macro policy, minerals, autos, exports, choke points, industrial policy, you name it, we do it.
It also includes China or policy towards China out of Western capitals like D.C., London, Brussels, and others. So, if you need any help on that front, please reach out to us at hq@triviumchina.com. We’d love the chance to talk about how you can support your business or your fund.
Otherwise, check out our website, again, triviumchina.com, where you can see all of our various subscription options for subscription policy monitoring and policy analysis products that we have there. We’ve got a range of options – free, paid. You’ll definitely find what you need on the site in terms of China policy intelligence.
And finally, please do tell your friends and colleagues about Trivium, both about the company and about the podcast. It really helps us grow our listenership, grow the business. Really cannot stress enough how the word-of-mouth recommendations really help us out a lot. They go a long way to building trust with potential new clients and new listeners. So, help us out and tell your friends and colleagues about us. All right, let’s get into it. Kendra, are you ready?
Kendra: Yeah, I’m ready. Let’s go.
Andrew: All right. So as I said, the CAC, the China Cyberspace Administration, released a new policy on digital enterprises. The policy is a bird’s-eye view on how the state is thinking about both big tech platforms, AI companies, and smaller tech companies, and how it wants to support those firms and regulate them.
So, a digital enterprise means a social media platform, an e-commerce company, a cybersecurity firm, an AI lab, a software SME, basically any kind of company that builds and sells digital products and services. So, with that intro, straight over to you, Kendra. Why is this policy interesting, or why should it be to our listeners?
Kendra: It’s interesting for a couple of reasons, actually. So, I think the first one is that we haven’t really seen the state lump AI companies into a sort of targetable category with e-commerce platforms and software companies before.
So, I thought it was vaguely interesting that we now have a sort of category.
They’re calling them cyberspace enterprises that policymakers can essentially target. But more important than that, since the tech crackdown ended, I think AI has sucked a lot of the regulatory air out of the room. There hasn’t really been a lot of discourse in the policy space about what the state wants for its digital companies.
And so, this policy gives us a really good overview, right? What kind of regulations are coming out, but what is the state also supporting? And a lot of the things that we’ll see in this policy, I think, are policy trees or trajectories that are threads that our regular listeners are probably pretty familiar with because they’re continuations of policies that have been ongoing for a while.
But there’s a couple of really interesting new things in here. So, I’m excited to do a little overview.
Andrew: All right. Well, let’s jump into the overview. Give us the overview of what’s in there, what’s interesting?
Kendra: All right. Well, actually, before I talk about the interesting stuff, let me talk about the not-so-interesting stuff. And I say it’s not interesting because-
Andrew: Great place to start; the not interesting stuff.
Kendra: Yeah, always get right in with like a really good, boring headline and get everybody really drowsy before we get into the fun part. But no, I think our regular listeners will remember a lot of this or have been tracking a lot of this for a few years, right? The state still wants Chinese companies, Chinese tech companies to invest more in basic research, particularly in strategic technologies. Those are the obvious ones — AI, quantum, blockchain, etc.
And they also want tech companies to participate in some of these national science and technology projects. So that means getting in the room with researchers, with universities, and really starting to kind of push the frontier forward on some of those emerging technology fields. They don’t want there to be a big separation between enterprises and academia.
They’re trying to sort of close that gap. So again, that’s something we’ve heard of for a long time.
They also want tech companies to digitize traditional industries like manufacturing and agricultural production. And that idea that the cyberspace companies should be contributing to the digitization and upgrading of traditional sort of dinosaur industries is another thread that we’ve seen in, for example, in the recent AI Plus policy and in several other tech policies in recent years. There were also some very familiar refrains on platform regulation.
It’s kind of funny that the state has been trying to crack down on some of these problems in the platform economy for many years now and is still sort of pursuing those regulatory pathways. One of them is improving personal information protection, of course. The other one is strengthening anti-monopoly compliance, so making sure that tech companies are adhering to antitrust law.
Eliminating forced exclusivity. And we’ve talked about that in the past during the tech crackdown. Obviously, there was a sort of push to prevent platform companies from forcing on-platform merchants from only listing on one platform, for example, through various nefarious contracting methodologies.
So, forced exclusivity elimination. Eliminating excessive consumer subsidies and involution-style competition. So, in other words, I mean, I think we’ve talked about that a lot on the podcast, right? Trying to crack down on this idea of, or this competitive mechanism whereby Chinese companies just try to drive each other out of business in some kind of war of attrition by holding each other’s head into the water until your competitor runs out of money, until they don’t want to see that anymore.
And then they also want to reduce unreasonable or obfuscated platform fees, reduce telecommunications fraud, improve AI governance. So, all of those things are sort of, again, regulatory trajectories that haven’t changed. So, even though we’ve already generally got a clear picture of where the state is going there, it’s always good to get an overview, right?
It’s like a little bit of putting a pin in the map. Yes, we’re still thinking about these things. Yes, we intend to think about them for the next half-decade. So, those are going to be, you know, those things aren’t ending. We don’t see that regulatory push as being complete. So that’s a good thing to know.
But the most interesting part, I think, of this policy is that it explicitly outlines the state’s intentions to help platform companies and AI firms and this sort of group of cyberspace enterprises compete in international markets. And that’s something we haven’t really seen the state explicitly outlined before.
It’s definitely said that it intends to support Chinese companies going out. It has said that it wants Chinese companies to compete internationally, but exactly what the state would do to support that and how the state would support that has not previously been discussed, I think, in this level of detail.
Andrew: Yeah, well, that’s all super helpful. I think you’re right to lay out the domestic stuff first, right? Because they want to continue to push forward their various regulatory priorities over these companies within the China market. And, as you say, you know, a lot of times these high-level documents, they’re not mind-blowing. They’re not a bunch of new stuff, but sort of a reassertion of, hey, this is the top five, top 10 list of things we’re going after.
So, kind of always good to get a reminder that these issues are what are top of mind for regulators domestically. But as you said, that the probably more interesting stuff is what regulators are going to do, policymakers are going to do to sort of grease the wheels for companies to go abroad. So, why don’t you talk to us a little bit about what was in the document in terms of what the state intends to do to support those efforts?
Kendra: There are so many tantalizing hints in here. I think the first one and the most interesting one is that they basically explicitly say that the state will use international fora, like the WTO, like the Belt and Road Initiative, like BRICS, like APEC, like the Shanghai Cooperation Organization, to smooth the pathway for Chinese firms to compete abroad.
And the way that they would do that is by cooperating with foreign countries and regions in areas like digital infrastructure or artificial intelligence or e-government or e-commerce or mobile payments, right? So, these areas where cooperation could basically lay the foundation for Chinese technical solutions to come in and kind of backfill the results of that cooperation.
And that’s something that we have tracked for a long time, suspected for a long time, read between the lines about for a long time. But this policy makes that very explicit that that is part of the state strategy. So, that’s one thing that I thought was kind of interesting.
Secondly, it also lays down a series of measures that regulators are going to take to help Chinese cyberspace enterprises navigate an increasingly hostile international market and an international legal environment.
And some of the things the policy says they’ll do are interesting. One, they’re going to provide what they’re calling an early warning mechanism to ensure that firms can predict and respond to unreasonable trade restrictions imposed by foreign countries. And we know what they probably mean by unreasonable trade restrictions imposed by foreign countries. That would be things like going after, right? TikTok and forcing a divestment or imposing stricter rules on Chinese companies in foreign markets when they’re competing, etc. So, unreasonable trade restrictions imposed by foreign countries.
Two, they’re going to establish overseas compliance guidance centers to help firms understand how to stay legal in foreign markets. And I’ll talk about some examples of why I think that might be important in a minute. And then three, they’re going to set up a case, like a case database of legal disputes that involve internet and information technology enterprises overseas, basically as a method to help corporate lawyers at Chinese companies understand how similar cases usually go and I think to help Chinese technology companies understand what the foreign legal environment looks like when they’re entering into it and where the risks actually are and to sort of prepare in advance for all of that.
Andrew: Yeah, that’s really interesting, that last part of kind of helping Chinese companies protect themselves abroad. I know we wrote about this today separately in our Neopol Daily that the NDRC, the National Development and Reform Commission, also on August 21st, released a draft revision to outbound investment measures.
And basically, the revision requires companies at sort of every level of the overseas investment process to report back to regulators about sort of the dynamics they’re facing on the ground, partly because they don’t want to or they want to keep companies from transferring technology or assets kind of on the back of the whole Meta-Manus thing and transfer of tech outside of China, but also for national security reasons.
And I think even more so, it says investors must flag when overseas holdings face foreign discriminatory or unreasonable measures to which the NDRC can respond by restricting the foreign party’s investment in China or Chinese entities’ dealings with it. And so, I feel like everything you just talked about is very much in line with what the NDRC is saying here, that basically we’re trying to keep Chinese companies from being messed with while they’re overseas or unfairly treated.
And I feel like it’s a little bit of an underappreciated part of the lawfare build-out. We talk about the export controls and the anti-foreign sanctions law and China building up extraterritoriality, but it’s not just about sort of punitive, retaliatory-type measures against foreign companies. It’s also asserting and helping defending Chinese companies’ rights overseas.
Do you kind of agree with that assessment that that’s part of what’s going on here?
Kendra: Oh, for sure. I would say that it’s half of what’s going on or maybe 70 percent of what’s going on. I think the other half of it, I think there’s actually two kind of things they’re tackling. The first is, as you say, the perception that Chinese companies are getting treated unfairly overseas or getting unfairly targeted. And the state wants to kind of help them protect themselves and also have the information necessary to intervene as necessary.
But secondly, there’s so many cases where Chinese companies have entered foreign markets and violated the rules of those markets simply because they’re behaving the way they behave in China. And I think there’s just a sort of lack of understanding about… I mean, if you think about it the same way that you get a foreign MNC that comes into the China market and they don’t know anything about the local government when they first enter that market, they don’t understand the business norms.
They don’t really get the legal environment. Sure, they’ve hired a lot of very smart people, but the decisions that are being made at the headquarters level are not necessarily plugged into the realities on the ground. I mean, we sit in the middle of those kind of issues all the time.
So, there’s a similar thing now with Chinese companies that are going the other way. And so you see things like, actually, the one that I’m probably most intimately familiar with is all of these Chinese e-commerce platforms that have entered the EU in recent years.
And you probably, you know, you know all about this, but just a couple of months ago, the EU Commission sort of fined AliExpress 550 million euros for failing to sort of prevent the sale of illegal goods on their platforms. There was also a big fine levied against TAMU, I think 200 million euros, right? I think that was violations of the Digital Services Act or Product Safety Act or something like that.
And we actually did a big research project on that at one point. And one of our key findings was, I mean, I think the assumption by EU policymakers was that those platforms were going into that market like with total disregard for local law. And they didn’t really care about local law at all. But the reality of the situation was, I think they were a little bit unfamiliar with the operating environment.
It was partly that. And they were simply behaving. I mean, I’m wildly oversimplifying a very complicated issue. But part of it is that they were just behaving exactly the way you would behave in China; when a regulator knocks on your door in China and says, “Hey, you need to fix XYZ,” you pay a bunch of lip service and they’re going to go away, and then they’ll come back and tell you to knock it off, and then they’ll go away and then they’ll come back and tell you to knock it off. And surely, you’ll be able to sort it out at some point.
But the entire sort of legal and compliance environment is really different. And all these sort of e-commerce companies got caught up in that to some extent. Now, there were lots of other things going on. They were selling unsafe goods into those countries, and they failed to stem the tide of those services. I think those fines were probably quite justified.
And in fact, I would say that the state, Beijing, knows that those fines were justified. They know those fines were justified because the EU talked to them about some of those; they were very provable, obvious issues. And the EU talked to Beijing multiple times about what was going on and Beijing couldn’t fix it. And the platform struggled to fix it. And so, you’ve got two situations, right? One is, as you say, companies go abroad and because they’re Chinese companies, they’re under additional scrutiny.
They’re more concerned about data collection maybe than there would be of another company from the same size from a different country. They get sort of targeted for exclusionary trade treatment. They feel that that’s unfair, and Beijing wants to step in. But the other half of it is those companies go into those foreign markets, Beijing knows they’re violating the rules, and they just get sort of caught up. They give Beijing a bad name, essentially. They get sort of caught up in, right?
Andrew: Yeah, that’s kind of a tough one to untether — when are Chinese companies being unfairly discriminated against and when are Chinese companies being fairly penalized for acting like Chinese companies — It’s kind of a hair-splitting exercise. But talk to us about that second piece of it in terms of what this document talks about specifically to help companies both protect themselves, but also kind of educate themselves or at least shape up their act in overseas markets.
Kendra: Well, it doesn’t get into extreme detail specifically about what they’re going to do, but how the Chinese government is going to intervene, let’s say, in the second case where you’ve got a situation where a Chinese company is operating abroad, it’s operating illegally or it’s not complying or it’s behaving badly in the market or whatever it is doing. Right? But there’s a little tantalizing clue in this policy. It says “Beijing will regulate the overseas competitive behavior of cyberspace enterprises,” and then didn’t go into detail at all.
And that is very interesting to me because they have largely not done that. There are a couple of mechanisms by which they might regulate the overseas behavior. Well, maybe they might regulate the overseas behavior of Chinese companies abroad, but there really hasn’t been a push or any mechanism by which a Chinese regulator would pull a Chinese tech company into a room and say, “Hey, we just got a complaint from the EU. What are you doing?” Right.
So, if that means and again, I’m going on four words here, but if that means there’s going to be a more formal or aggressive mechanism by which Beijing pushes both of those angles, on the one hand, it becomes much more aggressive about supporting its companies abroad and not taking such a passive non-interventionist approach to, well, you could argue, depending on the case, they’ve been very interventionist, that they weren’t just sort of responding on an ad hoc retaliatory basis to U.S. moves, but rather trying to step in to support companies in a way that they haven’t done before, right?
And then also being very aggressive with companies and very disciplinarian with companies, insisting that if the state is going to lend its support to you, you have to earn that support by trying to be compliant with overseas laws so that you don’t put us in a bad position when we’re in here supporting your outward expansion.
Andrew: Here’s one for you. That’s all very interesting. What do you think the reaction is going to be from EU member countries and the U.S., you know, Western countries generally, to something like this? Because it strikes me, part of this is Beijing trying to say, clean up your act in these other markets, which should be good, right? But part of it’s also saying we’re going to support you. And my guess is that this just gets interpreted by foreign governments as, oh, you know, Beijing’s trying to direct its companies to, I don’t know, overtake our markets. How is this going to be interpreted? Am I being too skeptical there?
Kendra: No, no. I was going to say I have a pretty cynical view of that. I mean, I think the interpretation of this will be Beijing is helping its companies abuse foreign legal environments better, that it’s going to really equip its companies with the knowledge necessary to weasel their way out of various lawsuits and penalties abroad.
And that, of course, depends on what some of those outcomes are. I mean, if regulators see a positive change in the way that some of those companies behave in the market, then maybe they’ll be a little bit more apt to appreciate some of this. But I am skeptical about that as well. I mean, in historical cases, when Chinese companies have changed behavior or the entire Chinese marketplace has changed behavior for the better over time, that rarely does get recognized.
So, even if this does work, I mean, you could take the case of counterfeiting, for example, right? It’s like 20 years ago, counterfeiting was absolutely… I mean, you couldn’t buy a non-counterfeit product. I mean, there was no real product. There was no real Gucci store at all. It was only fakes, right? The entire country and every single store had counterfeit products of every single thing.
And now China is still the primary source of counterfeits globally, but the problem has been significantly reduced over 20 years in very little credit. I mean, nobody’s patting China on the back for that. So, I think that even, you know…
Andrew: I was just going to say, people are going to give me a hard time for saying this, but I can see The Foreign Affairs article now — China’s nefarious plan to get its companies to obey overseas laws.
Kendra: But I could understand somebody having concerns about, well, if China, if they fall under the radar in foreign markets, that means that they will then be free to compete in those markets in a way that is, you know, endangering to local enterprise. So yeah, I think there’s a damned if you do, damned if you don’t situation here.
Andrew: Fair enough, fair enough, fair enough. Although I do think There is a little bit of a tide turning in terms of I’m seeing more and more articles out there by well-respected, particularly academics, but also policy-adjacent people about sort of what we’re losing by cutting off Chinese investment, what we’re losing by cutting off our markets to different Chinese companies like the whole EV story.
So, I think it’s interesting that that conversation is starting to be out there or starting to be had more. And I believe at least that would be a positive conversation to at least for us to consider if, you know, just a reflex of cutting off China from our markets is the right path. But any thoughts on that?
Kendra: Yeah, totally. And I mean, setting aside what policymakers will think of it, or what D.C. will say, or what Brussels will say, there is absolutely great benefit to having Chinese companies or having a pathway to push Chinese companies to abide by things like safety standards. It doesn’t matter what policymakers think about that. If there are less unsafe toys in international markets, that is overall just an objective good.
Andrew: Yeah. Totally. Totally.
Kendra: So I’m all about it. So hopefully we’ll see over time some results in that respect.
Andrew: Yeah. Well, thanks for walking us through all that so far. You just mentioned one other thing that might be worth flagging, which is there was one other thing in here around IPO channels. And that was another kind of element of regulators looking to support these companies. Why don’t you walk us through that and we’ll wrap it up.
Kendra: Yeah, I just had a quick little note I wanted to point out. I mean, one thing this policy says as well is that it’s going to expand exit channels beyond IPOs. Actually, I’m going to read the quote here. “We will expand exit channels beyond IPOs, encourage the development of private equity secondary market, market funds or S funds and M&A funds and further facilitate a virtuous cycle of investment, exit, reinvestment.”
And so, that’s obviously a continuation of this effort that policymakers have had to unblock the IPO pipeline. You’ll remember that about a year ago, IPOs had essentially ground to a halt, and they were gridlocked for about eight months. Approvals were gridlocked for about eight months. Then there was a push to get the IPO pipeline restarted again. That pipeline restarted again a couple of months ago. Now we’re seeing a bunch of major listings.
We saw some chip makers have listed; Unitary listed earlier just a few days ago. And now they’re looking for channels for exit beyond IPOs. So, this reads to me as the next step of that trajectory, right? That they’re not just going to support IPOs as an exit mechanism, but also these other pathways as well.
Andrew: Yeah. And that’s important, obviously, to get investment in these smaller companies, innovative companies. I mean, the capital market ecosystem is one of the great strengths of the U.S. innovation ecosystem. And China’s sort of innovated absent that ecosystem. Dinny and I have talked a lot about how they’re trying to establish more trust in capital markets, have capital markets be more plugged into national industrial policy goals so that individual investors and institutional investors can basically reap the gains of what policymakers expect to be more and more innovative companies going forward.
So, it’ll be interesting to see how that part of it plays out. The financing piece, you always have to get it right. We’re talking about that with the U.S. side in terms of trying to build out our critical minerals industry in the wake of the Chinese export controls. Cory and I talk about that a lot. It’s like, well, yeah, you can say you want all these companies to build out capabilities to process rare earths. But if the money’s not there, you don’t know what the funding mechanisms are. It’s just never going to get it off the ground. So, this is an important one to keep in mind as well.
Kendra: Totally, totally.
Andrew: Well, great. Well, thanks for walking us through that. This has been a nice, tight, short one, but always great to have you on, Kendra. Thanks for giving us some time today.
Kendra: Yeah, great to talk to you as always.
Andrew: Thanks, everybody, for listening. We’ll see you next time. Bye, everybody.
