US technology companies have one of their main markets in China

Beijing. Meta (Facebook) and Alphabet (Google), the sort of Western duopoly that controls the most popular digital platforms in the world, in China are relegated as tools for common users but not as a business. Aside from the virtual wall that is erected on applications, search engines and browsers, American technology companies continue to be beneficiaries of pragmatism in the world economy.

The global influence on content that American corporate digital platforms have does not reach China, the second largest economy in the world and in conflict to take first place from the United States during the first half of the 21st century. However, Meta, Amazon and Alphabet invoice a good part of their income in the Asian power, due to Chinese companies that need to advertise abroad.

The trade dispute between the United States and China has intensified in recent years, but part of it has been going on for more than a decade with access to digital platforms and the data collection that they entail. In the Asian country cyber sovereignty prevents access to all applications that come from Google (such as Gmail, Drive and YouTube) as well as from Meta (Facebook, WhatsApp and Instagram); X; Yahoo, Netflix, Spotify, Amazon; among others.

Accessing these platforms in China is not impossible, but it is exhausting. Some locals, but especially foreigners, use virtual private networks (VPN) – a service that allows you to hide the real location of the device – to try to connect to Western applications and domains, in a process that is not always possible. guaranteed even if you have paid for it.

Digital industries

Beyond an official discourse that reduces blockades to a matter of national security and digital sovereignty from both sides (the United States and China), the business of digital platforms is also reformulated as part of the new digital industriesin which data collection and processing have made their way as an enclave for other markets.

China has 1.4 billion inhabitants, including the middle class largest in the world, 54 percent of its economic structure is in the tertiary sector and the industrial engine of manufacturing that characterized the growth of this economy in the first years of the Reform and Openingpromoted by President Deng Xiaoping in 1978.

A good part of the commercial links within the Asian country go through the digitalization of commerce, the financial system and marketing on social media platforms that together imply a system with 1.1 billion internet users out of the almost 5.52 billion that there is worldwide.

With a global share of one in five internet users, China is a huge market for any digital platform company. Hence the local ones, Baidu (the simile of the Google browser), Weibo (X), Youku (YouTube), iQiyi (Netflix); Xiaohongshu (Instagram) and WeChat (which exceeds the functions of WhatsApp), have their main or only operation in this country, subject to the content rules that are imposed.

Google, the technology giant with the highest market value worldwide and the main internet search engine, is relegated here. It has been more than a decade since it left China in a kamikaze movement and now its services are limited to selling sponsored advertising outside the country, despite an attempt to return that failed due to criticism at the company’s headquarters. That small twist makes the entire Internet, or at least as is usual in the West, completely different.

Although the platforms of Meta (Facebook), Alphabet (Google), Amazon and many other American technology companies that lead the global financial markets do not participate in the direct collection of data from Chinese users, they do have operations and a good part of Their profits leave this country.

profit mine

In 2023 Meta reported that its advertising revenue reached 131.9 billion dollars, of which 10 percent came from advertisers based in China (13.19 billion) and these also contributed 5 percentage points to the total growth of its income worldwide. The level of growth in 2023 will likely be difficult to replicate. But we will continue to watch this and see how it developsexplained Susan Li, the company’s financial director in a call with investors.

As late as mid-2024, before a slowdown in the third quarter of the year, Li reported that a long-term growth trend was still being seen for advertisers based in China. There was clearly an impact from Covid, but I think it has been a strong contributor to growth for us over the last few years and we expect it to continue to be that way. And again, the majority of our China-based advertising revenue continues to come from a longer tail of advertisershe explained in a call.

Also, among the main American technology companies, Apple reported to the United States Securities and Exchange Commission (SEC) that Virtually all of the company’s manufacturing is performed in whole or in part through outsourcing partners located primarily in mainland China, India, Japan, South Korea, Taiwan and Vietnam; and despite an 8 percent annual decline in sales during the most recent fiscal year, 17 percent of its net income came from China.

Political conflicts have marked Google’s path in this country, hence Alphabet is one of the most opaque in reporting the weight of China in its operations. The company reported that until the end of 2023, 47 percent of its revenue came from the United States; from Europe, the Middle East and Africa 30 percent; from Asia Pacific (a region that includes China) another 17 percent and from the rest of America – which would include countries such as Canada, Brazil or Mexico – the remaining 8 percent.

For its part, Amazon reported to the SEC that to comply with local ownership, regulatory licensing and cybersecurity requirementsin China provides services through contractual relationships with third parties that hold licenses of that country. It does not detail in numbers the economic weight of the Asian power in its operations, but it does emphasize its importance:

Because China-based sellers account for a significant portion of our third-party seller services and advertising revenue, and China-based suppliers provide a significant portion of our components and finished products, regulatory and trade restrictions, data protection and cybersecurity, laws, economic factors, geopolitical developments, security issues or other factors that adversely affect vendors and suppliers based in China could adversely affect our operating results..