Well, that’s what I got from the first part of this FT article:

Technology companies are “feeling less welcome and finding it increasingly difficult to do business in China”, says John Neuffer, vice-president for global policy at the Information Technology Industry Council, a lobby group.

An evolving regulatory regime, targeting information technology-related products, is the chief cause of this sentiment.

Great journalism. Suck in every potential reader you can by writing an alarmist headline and a lede that scares the crap out of everyone in that industry. Good job. The reality is that the article only covers a part of the IT industry, certain products that contain security hardware or software.

On the other hand, lots of products are involved here, and the protectionism laid out by the article is quite real and a problem for many foreign investors. None of it is too surprising, either. China many years ago invited in foreign tech companies, first with JVs, which through direct contact and knowledge spillover helped to educate countless Chinese companies.

Meanwhile, lots of infant industry protection propelled some of these domestic firms to their current roles in this economy. The idea is to wean them off of government help, though, but of course that is not really happening. Unfortunately, Beijing (particularly the MIIT) is still helping them in countless ways, including some of the domestic security certifications discussed in the FT article.

In the long run, domestic takeover of the IT industry, or a portion of it, is the result of bad policy. Competition will suffer and foreign innovations will never get to China.

Remember, though, that the Chinese government is not a monolith. MIIT has for a long time been much more protectionist than certain other parts of the government. Pushback occurs on a regular basis, so what appears to be an inexorable march towards domestic takeover is really a series of back-and-forth moves reflective of political infighting.

In other words, none of this is preordained and may change in the near future. Companies that make long-term decisions based on current setbacks may want to settle down and, to the extent possible, be patient.