Jacob Gunter & Rebecca Arcesati
In the Belt and Road Initiative’s (BRI) second decade, the focus is on smaller infrastructure projects involving new technologies, especially digital, that bring a good return on investment and promote Chinese firms overseas. The ‘Digital Silk Road’ (DSR), or the technology-focused leg of the BRI which exists alongside ports, rail, energy and roads, will therefore become more prominent, especially across the Global South. Not only are these key growth markets, but it will be important for China’s digital giants to expand overseas as they finish building out networks in China.
To better understand Chinese tech firms within the DSR, it is important to look at the factors pushing them overseas. Some, like Huawei and Bytedance, have been much written about. Here, we look at less well-known players in sectors such as undersea cables, AI, gaming and social media and ridesharing.
We found pressures for international expansion differed dramatically between consumer internet firms and China’s major players in the hardware and ‘real economy’ fields. Consumer-focused firms face a profit crunch in domestic markets that has sent them seeking growth markets elsewhere, whereas the hardware giants enjoy Beijing’s backing in the form of subsidies and project finance. At the same time, Beijing does welcome Big Tech investing abroad if that helps China dominate strategic technologies like artificial intelligence (AI), or at least generates revenue and profit that can be used to fund the right kind of R&D back home.
The importance of more “neutral” markets for China’s digital champions is growing as the tech rivalry with the United States has brought greater scrutiny of them in North America, parts of Europe and the Western Pacific. Besides, the domestic and emerging markets were often already more important. According to one analysis, for Huawei’s radio access network (RAN) business “any decline in European low-margin markets was offset in absolute terms by China and the emerging economies”.
Chinese telecommunication firms will therefore keep their focus on developing and emerging markets, whose governments are keen on digitally enabled solutions to development challenges ranging from public health to energy storage. In considering the pace of change, it is also worth acknowledging that geopolitical tensions and US controls on the export of semiconductor technology to China have not meaningfully slowed down the DSR—in fact, Huawei has managed to keep its carrier business afloat.
The DSR’s evolution will also depend on Beijing’s fiscal ability to support it amid deep structural constraints on the economy and financial system. The China International Contractors Association has found big ticket projects becoming rarer as the average value of BRI projects dropped 24.8 percent between the 2013-2017 period and 2018-2022, though the number of projects grew by 89.6 percent.
Nevertheless, Beijing continues to see digital development as an important growth driver. At the 3rd Belt and Road Forum in October 2023, it launched two initiatives to encourage international cooperation on the digital economy, namely the Beijing Initiative on the Belt and Road International Digital Economy Cooperation and the International Trade and Economic Cooperation Framework for Digital Economy and Green Development.
Digital infrastructure projects are also cheaper. Although the multi-billion export credit lines of the past are now rarer, anecdotal evidence suggests state financial support is still coming in. It supplements commercial investments and partnerships, which are more organic.
Beijing encourages favored champions to go abroad
China’s government essentially views the DSR as the outward-facing support to domestic efforts to digitalize the “real economy”. It continues to create favorable conditions for Chinese technology companies, both state-owned and private, to facilitate their internationalization. While the former receive direct state support, the latter are encouraged to pursue commercial opportunities abroad where it fits Beijing’s strategic goal of emerging technology leadership.
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