US tech firms should keep trying to crack China, trade body says

Key Points
  • Gary Shapiro, CEO of the Consumer Technology Association, said there are "challenges" for U.S. tech firms trying to get into China, but ultimately it's "worth it".
  • Some companies like Netflix have said that entering the Chinese market is off the table in the near term.
  • Shapiro said the political relationship between the U.S. and China is better than people had expected.
'Smart everything' at CES Asia

U.S. technology companies like Facebook and Google should still keep trying to get into China despite censorship and other challenges because the rewards could be big, the head of a trade body told CNBC on Wednesday.

Many American technology firms have struggled in China. Facebook and Google are both banned under the censorship regime in the world's second-largest economy.

Gary Shapiro, president and CEO of the Consumer Technology Association, which represents 2,200 firms, made the comments as the annual Consumer Electronics Show Asia kicked off. CES is held in Las Vegas every year and showcases the latest gadgets and technology. But the organization also holds an event in Asia, which is now in its third year.

"There are challenges … there is still major censorship that goes on here. But if you can get into the market, if you could get the partner, if you can understand the rather vague and ambiguous market, you have a huge market of 1.4 billion people and a lot of them are middle and upper class," Shapiro told CNBC.

Some U.S. technology firms have publicly said China is not a market they are focusing all their efforts on in the short-term. Reed Hastings, CEO of Netflix, told CNBC in May that China was "off the table for the next couple of years." Yet despite the challenges, there are definitely rewards.

"It is tough to get in this market, but it's worth it," Shapiro said.

The CTA head discussed the relationship between the U.S. and Chinese governments and said there is a "much better relationship" than anyone thought there would be after the anti-Chinese rhetoric during last year's election campaign. Then-candidate Donald Trump had threatened to brand China as a currency manipulator, but his administration has since backed away from that label.

Facebook and Google logos
Peter Foley/Bloomberg | Getty Images

While China has often made it difficult for foreign companies to operate in the country, Shapiro said that when Beijing negotiates with the likes of Trump, it may have to give concessions.

"Well I think what the Chinese government is going to face, especially against administrations like the Trump administration is a concept that there is a little bit of parity, which is necessary, looking at trade deals and relationships that are fair on both sides," Shapiro told CNBC.

But ultimately, Shapiro said companies would continue to try and break into China despite any politics.

"I think the seduction of China is the big market and politics will just have to play out as it plays out, but it is so large, so fast and so growing and so important that every major tech company wants to be here," Shapiro said.

CES Asia is taking place from Wednesday to Friday and will see major technology firms such as Chinese smartphone maker Huawei exhibiting their latest products. Auto firms are also expected to have a big presence with artificial intelligence, robots and virtual reality all taking center stage.