China was the only major economy to grow during 2020, when the rest of the world—including the United States— suffered economically from the COVID-19 pandemic. China’s perception of the U.S.’s position is summed up by a frequent refrain of Chinese leaders: “the East is rising, and the West is in decline.” Further making their views toward the U.S. clear, China's most senior foreign policy official recently told senior U.S. officials that the U.S. isn't qualified to "speak from a position of strength" when criticizing China. This comes at a time when China has laid out plans to become a global leader, including in technology.
China already exports its manufactured goods—at a rate far above the U.S.—and is also a source of loans and infrastructure investment for nations worldwide. Technology is one of the few industries where the U.S. leads but fiercely competes with China.
Yet at home, we are seeing populist proposals including calls to break up leading American tech companies like Amazon, Google, Facebook and Apple by liberal groups like the Institute for Local Self-Reliance (ILSR), Athena, and the Economic Security Project. ILSR recently convened a new coalition of trade associations dubbed Small Business Rising whose first policy goal is “to break up Amazon along business lines.” The groups want the U.S. to abandon the idea of maximizing efficiency and the consumer welfare standard, which has spurred innovation and benefitted consumers.
These populist proposals stand to be a gift to China and detrimental to U.S. leadership and competitiveness. China is competing aggressively, amplifying productivity and innovation, and driving large investment projects. The country grew over 18 percent in the first quarter of this year, a record pace and even faster than it did before the pandemic.
Weakening major American companies would only benefit Chinese companies like Alibaba, Baidu, and Tencent. China’s leader Xi Jinping has been clear in his desire to obtain greater control of the private sector by installing more Communist Party officials inside private firms, among other actions to help achieve state goals. Tencent, who also owns the mobile app WeChat, has been known to enforce the surveillance and censorship that the Chinese Communist Party wants, and also assists the government in identifying and prosecuting users who step out of line with their posts and messages, even through private messaging. Are these the companies we want dominating the world?
The growing dominance of Chinese tech companies goes beyond economic concerns, they are also a real national security concern. The Chinese Communist Party and its intelligence agencies exercise significant control over the country’s tech companies and can essentially force Alibaba and its peers to hand over thousands of terabytes of data. Chinese spies can sift through this data to put together key intelligence tidbits that inform China’s economic espionage efforts. China stands to get stronger by breaking up leading American companies.
This also wouldn’t be the first time that America’s adversaries have leveraged liberal groups to undermine American businesses. In the mid-2010’s, Russia funded several groups working against fracking in the United States, channeling funds to nonprofits like the Energy Foundation, Southern Alliance for Clean Energy, and Sea Change. Russia hoped to reduce U.S. fracking operations to lessen American energy exports to European nations, which would otherwise rely on Russian energy. Russian contributions to these liberal groups aimed to bolster our adversary’s position in the global energy market. What’s past is prologue here: the Energy Foundation has contributed money to ILSR, the very group leading Small Business Rising’s charge to break up U.S. tech leaders.
The bottom line is that breaking up American companies would strengthen Chinese tech leaders like Alibaba, Tencent, and Baidu—feeding vital data and information right into the Chinese Communist Party’s coffers. Policymakers must be wary of calls to break up American companies. These calls come from crony capitalism, misguided activism, or what could be worse, foreign influence.
Andrew F. Quinlan is the co-founder and president of the Center for Freedom and Prosperity (@cfandp)