China Inc walks tightest of ropes over Ukraine

A contestant walks on tightrope as a helicopter flies past during a tightrope competition in Zhuzhou, Hunan province, China, May 29, 2015. Seven contestants from China, Switzerland and Russia took part in the competition which will last till Sunday, local media reported. Picture taken May 29, 2015. REUTERS/Stringer

HONG KONG, March 17 (Reuters Breakingviews) - Chinese companies are at the pointy end of Beijing’s foreign policy. Those with overseas businesses are awkwardly falling behind their government’s position on Russia’s invasion of Ukraine. This war could accelerate the downgrade of Chinese Inc’s global ambitions.

Washington is worried that President Xi Jinping’s refusal to condemn President Vladimir Putin's aggression means China will also undercut Western-led sanctions. read more China could buy more Russian energy, for one thing. It exported nearly $50 billion of goods to Russia in 2019, and now it has an opening to sell even more goods and services there as foreign consumer and technology brands sever ties.

Some are already well-established, and therefore vulnerable. Technology giant Alibaba’s (9988.HK) joint venture in Russia holds about 10% of the country's e-commerce market and hopes to grow that to 20% by 2025. Xiaomi (1810.HK) had around a quarter of the local smartphone market before the war, per market intelligence firm IDC. Knowing that China supplies the majority of Russia’s semiconductors, U.S. Commerce Secretary Gina Raimondo in early March warned the White House could “essentially shut” Chinese chipmaker Semiconductor Manufacturing International Corp (0981.HK) if it steps over the line.

Companies face the risk of backlash no matter what. Ride-hailing giant Didi Global (DIDI.N) reversed a decision to exit after Chinese social media users accused it of succumbing to U.S. pressure. read more On the other hand those dependent on Western markets – like laptop maker Lenovo (0992.HK) - risk being attacked from both sides. Two foreign executives left the UK board of telecom-equipment maker Huawei over its silence on Ukraine.

Conundrums abound. Short video app TikTok, owned by China’s ByteDance, has cooperated with Russia’s new censorship laws instead of leaving. That will play poorly in the United States, a far more important market, where politicians are already worried about the app’s influence among young Americans; indeed the White House saw fit to brief TikTok influencers about Ukraine.

The speed at which Russia is being deglobalised read more is making investors nervous that something similar might eventually happen in the People’s Republic if tensions between Washington and Beijing escalate. Not to mention if China attempts to forcibly reunify with Taiwan. As internationalised Chinese companies walk the tightrope over Ukraine, their global footprints look less like assets and more like liabilities.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

CONTEXT NEWS

- U.S. national security adviser Jake Sullivan raised concerns about China's alignment with Russia in a seven-hour meeting with Chinese diplomat Yang Jiechi in Rome, Reuters reported on March 14 citing two U.S. officials.

- Washington told allies in NATO and several Asian countries that China had signalled its willingness to provide military and economic aid to Russia to support its war, the report added.

- The United States could "essentially shut" down Semiconductor Manufacturing International Corp or any Chinese companies defying U.S. sanctions on Russia by cutting them off from American equipment and software they need to make their products, U.S. Commerce Secretary Gina Raimondo told the New York Times in an interview published on March 8.

- TikTok said on March 6 it would suspend live-streaming and new content uploads for Russian users in light of Russia’s new “fake news” law, which threatened jail for those publishing what authorities consider to be false information about the country’s invasion of Ukraine.

Editing by Pete Sweeney and Katrina Hamlin

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Beijing, crunching economic data, interviewing high-level officials, and travelling to far-flung provinces to visit factory floors and talk to local shopkeepers. Before that, she spent nearly three years in Santiago, Chile, where she built a trade news website reporting on the produce industry – and developed Spanish as a third language alongside Mandarin Chinese and English.