The recent news of TikTok laying off 1,000 employees globally, primarily in operations and marketing, raises alarm bells about the future of Chinese companies operating in the United States. While the official reason as told by the company is cost-cutting amid regulatory changes, the timing of layoff, just weeks after President Biden signed legislation potentially banning TikTok, suggests something else.
Tiktok isn’t the first Chinese company to be called out by USA
This is not the first time Chinese companies have faced challenges in the US market. In 2019, Huawei, a leading telecommunications giant and a smartphone brand, was placed on the U.S. Commerce Department’s “Entity List”. The Entity list effectively bars a company from doing business with American companies without a special license. This move of US Government severely impacted Huawei’s global operations and sent a strong message to other Chinese companies looking to expand in the US.
Why Tiktok’s layoff is more than just a layoff?
The rising tensions between the US and China, coupled with concerns over data security and national security, have created an increasingly hostile environment for Chinese companies in USA. TikTok, with its massive user base and potential influence, has become a prime target for scrutiny and regulatory action. It must be noted that Indian government has also banned Tiktok because of similar issue along with many other Chinese apps.
Are Temu and Shein next in the list after Tiktok?
This uncertainty of the future that China-based companies can have in USA could lead to a ripple effect, with companies like Temu and Shein, both rapidly growing Chinese e-commerce platforms, potentially reevaluating their strategies in the US market. While there have been no official announcements of layoffs at these companies, the situation with TikTok serves as a cautionary tale.
According to the Rhodium Group report of 2019, Data from the Bureau of Economic Analysis (BEA) showed a notable decrease in employment at Chinese companies in the US, dropping from 229,000 in 2017 to 140,000 in 2019.
Check our article on Temu’s negative reviews and whether they are of any effect.
Are all Chinese companies facing challenges in USA?
No, they are not! It’s important to note that not all Chinese companies in the US are facing the same level of scrutiny. Companies like Lenovo, a leading computer manufacturer, and Haier, a major appliance maker, have established a strong presence in the US market and have not been targeted by recent regulatory actions.
However, the TikTok case highlights the growing challenges faced by Chinese companies operating in the US. It remains to be seen how this situation will unfold and what impact it will have on the future of Chinese investment in the US.
