Pompeo offers insight into US strategy in trans-Pacific political war

The on-going tension between the US and China is having a material impact on the telecoms industry, though the next stage of the battle plan might be to inhibit the Chinese app economy.

The importance of the developing App Economy should not be understated. Some in society might undervalue how much influence apps are having on business and our personal lives, but the digital native generations haven’t missed the boat. The rapid rise of services such as TikTok, Twitch, Netflix, Microsoft Teams and Zoom demonstrate the world is being created for the generations of tomorrow, and apps will be the focal point.

In an interview with Fox News, US Secretary of State Mike Pompeo indicated the US might well be preparing itself for an assault on Chinese apps. In response to whether TikTok and other Chinese social media applications should be banned, Pompeo said:

“You should know we are taking this very seriously, we’re certainly looking at it. We have worked on this very issue for a long time, whether it was the problems of having Huawei technology in your infrastructure, we’ve gone all over the world and making real progress getting that out. We have declared ZTE a danger to American [US] national security. We have done all of these things with respect to Chinese apps on people’s cell phones. I can assure you the United States will get this one right too, Laura. I don’t want to get out in front of the President [Donald Trump] but its something we are looking at.”

There is quite a bit to digest in this statement, but it does indicate that the White House is readying itself for a more aggressive stance against apps and digital services which might be coming out of China and dominating the international markets.

What is worth noting is this is all interpretation and assumption at the moment, but Pompeo seems to be offering insight into the future strategy of the US Government in stemming the rising Chinese tide. Whether you believe the objectives of these strategies are national security or economic based is irrelevant. President Trump is likely to push against China and its domiciled technology companies further, though the mind boggles as to how high this could escalate should he win another four-year term as President in November.

What we have seen over the last few years is the US incrementally chipping away at the telecoms and technology capabilities of Chinese companies who have been particularly successful in the international markets. ZTE and Huawei, two network infrastructure vendors, have been the most publicised campaigns, however the US has also targeted Chinese telecoms operators who have licences to operate on US soil.

Having seemingly inhibited the network infrastructure vendors and the telecoms operators, the US may well turn attention to the Chinese app economy, as this is another area which could be deemed a national security threat, but also one which would offer the Chinese technology industry some very lucrative gains as the app economy gains momentum.

Looking at App Annie’s analysis of Q1 2020, the average time spent on gaming and non-gaming apps rose 20% year-on-year, while consumer spend increased by 5% for apps in both Apple’s App Store and the Google Play Store, taking the total to $23.8 billion.

In May, the most downloaded app worldwide was Chinese-based short-video social media platform TikTok. Zoom was the second-most installed app, though this will also make US officials uneasy as how the app was developed (and where) is still not entirely clear. The US accounted for 9.3% of total downloads of TikTok during the month, though India led the downloads with 20%.

While TikTok is the centre of several privacy investigations around the world, only India has matched the aggression of the US. Having banned downloads of 59 Chinese applications last months, of which TikTok was one, it would be fair to assume there will be retaliatory action. However, the Chinese Government might bigger fish to fry than India if the US ups the ante when it comes to TikTok and other Chinese apps.

In the coming days or weeks, it would not be a surprise to see some sort of US action taken against TikTok, but what remains to be seen is whether this would be extended to other Chinese applications with murky links to the Government. Having seemingly dealt a crippling blow to Huawei’s supply chain in compromising relationships with semiconductor firms, US attention might be directed towards another segment of the digital economy now.

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