First TikTok then gaming as a crucible of US-China rivalry

The writer is a fellow at Schmidt Futures focused on the geopolitical impact of the rising Chinese tech ecosystem

The US effort to force the sale of Chinese-owned short-video app TikTok has accelerated debate around the Balkanisation of the internet. In the midst of geopolitical competition with China, the US government is poised to reshape the architecture of the digital world in perhaps the most significant way since the dawn of the internet itself as an American research project. 

TikTok is an early battleground for these debates, but it will not be the last. The next skirmish lies in the video game industry: only last week, Donald Trump’s administration indicated it was worried about the security of personal data held by games.

Online gaming is strategically critical for China not least because it forms the financial backbone of one of its largest tech companies, Tencent. With a market capitalisation of $650bn, Tencent is widely known as the creator of WeChat, the messaging app banned alongside TikTok.

Tencent derives more than one-third of its revenues from gaming and, via a string of acquisitions, its US business is now significant.

Its subsidiaries own blockbuster games such as League of Legends and Clash of Clans, and the company holds major stakes in Fortnite maker Epic Games, and World of Warcraft maker Blizzard. It derives a major source of revenue from in-app transactions, such as the sale of new outfits for Fortnite’s digital avatars.

These companies have hundreds of millions of users worldwide. This raises legitimate concerns about Chinese-owned companies holding digital real estate on so many US devices. They constitute a potential surface for attack.

However, the idea that anything benefiting China’s tech industry runs counter to US interests is a dangerous and false dichotomy. The US derives considerable geopolitical power from being the largest consumer market in the world. In fact, the sheer size of its gaming market gives the US government leverage over this leading Chinese tech company. It will also force greater investment in bilateralism by China’s tech elite. 

It is tempting in the current political climate for US regulators to seek out bans that kneecap Chinese tech champions. But that is a short-sighted pursuit of US interests. Natural “reciprocal zones” exist in tech ecosystems, where it is impossible for one party to harm another without incurring harm too. The canonical example is iPhone manufacturing. China’s Communist party could cripple Apple by shuttering its factories, but this drastic step would destroy so many local jobs that it is probably untenable.

In the absence of bilateral trust, these types of ties can bind together the world’s two superpowers. They also form the basis of a relationship of “co-opetition”, where the US and China compete in areas like 5G but collaborate on shared challenges such as climate change and pandemic disease.

In the tech world, the ideal reciprocal zones should be defined as having high economic value combined with low strategic political threat. Gaming likely fits the bill. Policy tools, such as divestment requirements, and technical mechanisms, such as limiting data access from within operating systems, should always be explored before resorting to outright bans.

The issue du jour is TikTok; it will be gaming tomorrow, and a recurring argument in the days beyond. Given that, the guiding principle in resolving these debates should be the pursuit of solutions that allow both sides to preserve ties built on reciprocal zones.

In a world where trust is hard to come by, we need ties that are strengthened when each actor pursues its own incentives. Such links will shape the way humanity stares down the greatest challenges of the 21st century. They are ties worth fighting for.


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