“When all else fails, nationalism prevails,” a quote from me. At least that’s the impression I get these few years from the politics brewing in the U.S. and China.
I am no stranger to this phenomenon. After all, I live in Malaysia. The name of the game is who can drum up the right-wing nationalists in each party (or race).
I have seen it played out again and again.
Is the economy not doing well? Blame markets in Malaysia for not buying local products, and importing too much from overseas.
Not enough jobs? Blame foreigners for taking jobs from the locals.
The ringgit being weak? We need to fix or peg the ringgit against outside buying.
And here, in the debacle that is TikTok. The same kind of sentiments have played out.
Going into the 2020s, nationalism (or xenophobia) has risen in prominence and reared its ugly head in the discourse among everyone. And this has affected markets around the world.
I am worried about this trend. Already, there has been bad blood between the U.S. and China since the turn of the decade.
Many countries are now forced to ‘choose sides’ in the geopolitical landscape. We have seen the impact on companies in the Chinese electrical and electronic industry during the ban.
TikTok is Getting into Trouble in the U.S. due to ByteDance
Let’s put it this way.
The U.S. thinks information on TikTok’s U.S. users is being transferred to the Chinese government. And that’s a big no-no to the U.S. government.
This could indeed happen. TikTok U.S. has not denied this but highlighted that it is working towards basing all of its servers and user information in the U.S.
But of course, that is not enough.
The U.S. government don’t think this is true. And it has repeatedly bashed TikTok for being tied to the Chinese government.
Hilariously, in one of the famous ‘grilling’ of TikTok’s CEO, a U.S. senator didn’t have any idea where Singapore was and thought it was in China because the CEO looked Chinese (he was Singaporean).
In the name of national security, the U.S. has drummed nationalist support for the banning of TikTok in the U.S. And to be honest, I see this as just a move to bolster its own U.S. tech companies that have been completely beaten in the short-form video industry.
But China does the Same Things Too
Google, Facebook and U.S. social media companies are banned in China. It has been this way for a long time. And that has been a matter of contention for many U.S. companies trying to set up base in China.
After all, China boasts the largest population in the world and is a golden trove for online companies. The Chinese have been very quick to adopt any type of technology (mainly by stealing and copying them from overseas).
The U.S. companies that can’t set up base in China are not happy about this of course. China is also one of the most efficient companies in drumming up nationalist sentiments against ‘Western capitalists’ and ‘Foreigners’. It has been doing this since the 1940s.
Relations between the U.S. and China have Gotten Worse
Diplomatic relationships between the U.S. and China are at their worst now. There are several issues that have been fought.
- Russia-Ukraine: The U.S. is on Ukraine’s side while China is on Russia’s.
- Taiwan: China thinks Taiwan is part of it, and reunification is just a matter of time. The U.S. has always been a staunch supporter of Taiwan since the Korean War in the 1950s. Back then, the U.S. supported South Korea to stem the communist regime of North Korea. China, of course, sided with North Korea.
- Industry espionage: The U.S. has sanctioned several notable Chinese companies for suspicions of industry espionage. The most notable example is Huawei. Meanwhile, China has also clamped down on several U.S. consulting companies in China to send a message.
- Trade War: The Trump administration picked a long trade fight with China in 2018, imposing tariffs on many Chinese products. China did the same thing too. That legacy has persisted until today.
At the core of it, China is rising in prominence in the world. It is now the second-largest economy in the world and is poised to replace the U.S. soon.
The U.S., used to its dominant position in the global economy and politics, sees a new challenger from the Middle Kingdom and intends to beat it.
After all, it was just about 100 years ago when China was called the ‘Sick Man of the East’. Now, it’s on par with most Western countries.
Nationalism Might be the Biggest Risks to Global Markets
I think this is true for many investors 5 to 10 years from now.
No longer can we separate politics from markets. We have seen the impact of the Israel-Palestine war on sentiments surrounding companies and markets.
Here in Malaysia, there is a big boycott of anything Israeli-linked.
Nationalism can more be aptly described as institutionalized racism and xenophobia. If it’s endorsed by the government and politicians, it is nationalism. If it’s not, it’s racism and terrorism.
And the nationalism wave could decimate markets in the long term.
Much of this will lie in the trade links between companies. For one, the TikTok ban will for sure, lead to a fall in any companies’ share price related to ByteDance.
ByteDance is already considering a sale of some stake in TikTok to U.S. investors to appease some quarters of the U.S. politician spectrum.
However, most importantly, this could lead to more protectionist measures imposed by governments around the world. If the U.S., the purported defender of free trade and market, could do such a thing, surely everyone else can.
This sets a precedence for many countries around the world to ban foreign companies. And this is bad news for markets.
Conclusion
The TikTok ban could be just the start of another round of banning of companies from both countries. And the casualties are expected to be other developing countries.
For one, Malaysia exports most of its products to China and the U.S. So does most of the countries in Southeast Asia.
Would we have to choose a side in the near-future? And would we have to ban certain companies from operating?
