China Articles - June 26, 2022
Friends,
This week I wanted to start off with a victory for Europeans in wresting control of a strategically important technological capability from a PRC-owned defense company. The first piece this week is Eleanor Olcott’s reporting in the Financial Times about the saga of Kleo Connect, originally a German-Liechtenstein low-earth orbit (LEO) satellite company similar to Elon Musk’s Starlink, which is playing a critical role in providing communications and internet access to Ukraine.
Over the past few years, the founders of Kleo Connect brought in PRC investors to scale their production of LEO satellites. But quickly, those PRC-backed investors took majority ownership, pushed out the company’s leadership and began to move the company’s intellectual property and valuable satellite licenses to a PRC state-owned defense company, Shanghai Engineering Center for Microsatellites (SECM). Within months, SECM started launching its own low-earth orbit satellites in the same spectrum band as the Kleo Connect licenses.
Starting last year, a group of Europeans began to fight back and in just the past few weeks, they succeeded in regaining control of the company and its satellite licenses. Over a series of legal battles, they managed to push out the state-backed PRC investors and re-establish the company under new management.
This whole affair deserves greater attention as it seems to demonstrate that concerted effort and individuals who are willing to compete hard can succeed against the Chinese Communist Party.
Everyone should read #4 as well… as many suspected, the PRC company ByteDance accesses sensitive data of TikTok users in the United States, which means that the CCP has access to that data as well.
Thanks for reading!
Matt
MUST READ
1. The Corporate Feud Over Satellites That Pitted the West Against China
Eleanor Olcott, Financial Times, June 22, 2022
How a clash of cultures — and geostrategic interests — sank a German-Chinese joint venture competing in the new space race.
On the final day of February, a group of European financiers and entrepreneurs gathered on a late-night online meeting to resolve a boardroom dispute.
The Microsoft Teams meeting only lasted 35 minutes. But it was enough time for the board to wrest control of the rights to launch hundreds of low-earth orbit (LEO) satellites from a majority China-owned company to a subsidiary of a US telecoms group.
It was the latest move in a long-running corporate battle between European and Chinese partners in a joint venture, which has huge ramifications for the future of telecommunications in space.
At its centre are prized satellite permits granted by the UN International Telecommunication Union (ITU), which could give the rightful owner an edge in the burgeoning LEO industry currently dominated by Elon Musk’s SpaceX.
The licences that give access to satellite spectrum are “critically important”, says Nicholas Eftimiades, a space expert and former US Department of Defense and CIA official. “They have strategic implications, economically, geopolitically, militarily and for information dominance from the earth through space.”
2. U.S. Restraint Has Created an Unstable and Dangerous World
H. R. McMaster and Gabriel Scheinmann, Foreign Policy, June 22, 2022
After welcoming the PRC and Russian Federation into the liberal international system and hoping that they would become “responsible stakeholders,” the United States must abandon its delusions re-establish deterrence against Beijing and Moscow.
3. Four Takeaways from a Times Investigation into China’s Expanding Surveillance State
Isabelle Qian, Muyi Xiao, Paul Mozur and Alexander Cardia, New York Times, June 21, 2022
The Chinese government’s goal is clear: designing a system to maximize what the state can find out about a person’s identity, activities and social connections, which could ultimately help the government maintain its authoritarian rule.
4. Leaked Audio From 80 Internal TikTok Meetings Shows That US User Data Has Been Repeatedly Accessed from China
Emily Baker-White, BuzzFeed News, June 17, 2022
According to leaked audio from more than 80 internal TikTok meetings, PRC-based employees of ByteDance have repeatedly accessed nonpublic data about US TikTok users — exactly the type of behavior that inspired former president Donald Trump to direct the separation of TikTok from ByteDance, which the Biden Administration failed to fulfill.
Ivan Kanapathy, Center for Strategic & International Studies, June 17, 2022
As the One China policy accommodation unravels and China’s military attains a credible capability to mount a cross-strait invasion, the United States and its allies should stop hedging and adopt enhanced measures to deter Beijing.
6. Farewell to Hong Kong and Its Big Lie
Timothy McLaughlin, The Atlantic, June 22, 2022
Falsehoods, gaslighting, and endless fabrications in the city are equaled only by the cowardice of the people partaking in the insulting ruse that it is still free.
Authoritarianism
7. The world’s biggest surveillance company you’ve never heard of
Zeyi Yang, MIT Technology Review, June 22, 2022
Hikvision could be sanctioned for aiding the Chinese government’s human rights violations in Xinjiang. Here’s everything you need to know.
You may never have heard of Hikvision, but chances are you’ve already been captured by one of its millions of cameras. The Chinese company’s products can be found anywhere from police surveillance systems to baby monitors in more than 190 countries. Its ability to make decent-quality products at cheap prices (as well as its ties with the Chinese state) has helped make Hikvision the largest manufacturer of video surveillance equipment in the world.
But while Hikvision’s close links with the Chinese government have helped it grow, it is these links that may now be its undoing. The firm has helped build China’s massive police surveillance system and tailored it to oppress the Muslim minority groups in Xinjiang. As a result, the US government has imposed several sanctions on it in the last three years. This year, the US Treasury is reportedly considering adding Hikvision to the Specially Designated Nationals and Blocked Persons (SDN) List, usually reserved for countries like North Korea or Iran.
SDN designation would ban anyone anywhere in the world from doing business with Hikvision, a sanction much harsher than the Chinese company Huawei is experiencing now. Countries and companies would risk being added to the same list if they didn’t comply. While the millions of Hikvision cameras currently in use won’t have to be replaced overnight, they won’t be available for sale in the future. “It may basically turn Hikvision into a domestic company very quickly,” says Conor Healy, who researches Hikvision at IPVM, an online trade publication for the video surveillance industry.
8. For some Chinese hosts, Airbnb’s exit marks a return to a smaller world
Viola Zhou, Rest of World, June 21, 2022
"The entire country is becoming more closed to the world."
…
Airbnb’s China exit, and the disappointment of hosts who used the platform, highlights the challenges of operating a foreign platform in the country –– and how those platforms provide a unique link to the outside world. The combination of a strict zero-Covid strategy, the government’s tightening control of the internet, and the rise of local monopolies has combined to create physical and digital barriers between China and the wider world. For younger people in the country who grew up feeling like global citizens, it’s been a difficult shift.
9. WHO chief 'believes Covid DID leak from Wuhan lab' after 'accident'
Glen Owen, Daily Mail, June 18, 2022
10. Countries prefer U.S. to China as leading superpower, poll finds
Dave Lawler, Axios, June 16, 2022
11. Constant Cycle of Restrictions Is China’s Covid Future
Bloomberg, June 21, 2022
12. VIDEO - China’s Surveillance State Is Growing. These Documents Reveal How.
Muyi Xiao, Paul Mozur, Isabelle Qian and Alexander Cardia, New York Times, June 21, 2022
A New York Times analysis of over 100,000 government bidding documents found that China’s ambition to collect digital and biological data from its citizens is more expansive and invasive than previously known.
13. Chinese Omicron Study Renews Debate Over ‘Zero Covid’ Policy
Daisuke Wakabayashi, New York Times, June 21, 2022
14. China’s mental-health crisis is getting worse
Economist, June 22, 2022
It is no surprise that demand for psychotherapy is increasing in China. It is not just that lockdowns and oppression lead to anxiety and depression. During the lockdown in Wuhan, party officials suggested a “gratitude education” campaign, with residents taught to give thanks to Mr Xi and the party for their management of the virus.
15. China and Russia: united in opposition
Vincent Brussee; Roderick Kefferputz, Mercator Institute for China Studies, March 30, 2022
16. China’s ‘Very Dangerous Trajectory’
Michael Schuman, The Atlantic, June 21, 2022
17. Hong Kong bans some media outlets from swearing-in of new chief executive
Helen Davidson, The Guardian, June 17, 2022
Environmental Harms
Johnny Patterson and Sam Goodman, Hong Kong Watch, June 15, 2022
As investment into China grows, despite the increasing risks associated with that market, little attention is being given to gross human rights violations.
The relationship between human rights and investment is a complex policy area, and many businesses and financial institutions require expert guidance and better understanding of these issues. But as firms increasingly recognise the importance of sustainable and ethical investing practices, it is vital that human rights are not neglected and an imperative that the pursuit of profits does not come at the expense
of fundamental principles.
19. Analysis: Quantity over quality - China faces power supply risk despite coal output surge
Muyu Xu, Reuters, June 21, 2022
Foreign Interference and Coercion
20. China and the transatlantic relationship
Pepijn Bergsen, Antony Froggatt, Veerle Nouswens, Raffaello Pantucci, Chatam House, June 16, 2022
21. Helsinki University closes China-funded Confucius Institute
YLE News, June 18, 2022
This week Helsinki University terminated the contract with its on-campus Confucius Institute, a teaching centre speacialied in Chinese language and culture.
Beijing would have liked to continue funding the programme, according to the university's vice rector, Hanna Snellman.
"They asked if we would consider negotiating a continuation. We said we wouldn't," she explained.
The institute's deal with the University of Helsinki lapses next January.
Finland is not alone in its decision to leave the Confucius network. In recent years dozens of western universities have shuttered Confucius Institutes on suspicions that they are an arm of the Chinese government's propaganda machinery.
COMMENT: There seems to be an increasingly less hospitable environment for PRC state entities across Europe.
Yan Xiaojun, Mohammed Alsudairi, Journal of Contemporary China, Feb 7, 2021
23. Chipmaker Nexperia denies being under control of China
Katie Prescott, Times of London, June 21, 2022
24. China’s political party school in Africa takes first students from 6 countries
Jevans Nyabiage, South China Morning Post, June 21, 2022
Glenn Owen, Daily Mail, June 18, 2022
26. Boris Johnson’s father Stanley hopes UK parliament removes ban on Chinese ambassador
Finbarr Bermingham, South China Morning Post, June 22, 2022
27. In Brussels, tram ads for 25th Hong Kong handover anniversary pulled after complaints
Finbarr Bermingham, South China Morning Post, June 21, 2022
Human Rights and Religious Persecution
28. China: US Law Against Uyghur Forced Labor Takes Effect
Human Rights Watch, June 20, 2022
29. DHS Releases Uyghur Forced Labor Prevention Act Strategy
U.S. Department of Homeland Security, June, 17, 2022
30. Firms Warn of China Shipment Delays as U.S. Bans Xinjiang Imports
Liza Lin and Yoko Kubota, Wall Street Journal, June 21, 2022
31. US ban on cotton from forced Uyghur labour comes into force
Fleur Britten, The Guardian, June 21, 2022
The fashion industry has been told it must wean itself off cotton from China’s Xinjiang region, as a new law comes into force giving US border authorities greater powers to block or seize goods linked to forced labour in China.
The Uyghur Forced Labor Prevention Act (UFLPA), which comes into force today, assumes that any product partly or wholly made in Xinjiang, north-west China, is linked to the region’s labour camps. “The difficulty is that at the ginning stage [when fibres are separated from their seeds], cotton from disparate locations is mixed together, making it impossible to trace the provenance,” she said. Brands can use the platforms to log all their purchase orders and certifications.
In order to prove conclusively an absence of Xinjiang cotton, brands would need to show a “complete digital chain of custody”, said Shameek Ghosh, chief executive of TrusTrace – “where a brand is fully in control of its supply chain from the farm onwards”. While fashion has historically been notoriously cagey about its supply chains, there is now a strong business case for full transparency.
COMMENT: The impact of the Uyghur Forced Labor Prevention Act, as well as similar laws across Europe and Asia, could have far reaching impacts on the PRC economy and might even hasten a rebalancing of globalization away from the PRC and to countries in South and Southeast Asia, as well as Africa and Latin America. The positive effects of this rebalancing of globalization should not be underestimated.
32. Companies Brace for Impact of New Forced Labor Law
Ana Swanson, New York Times, June 22, 2022
33. U.S. 'rallying' allies over Xinjiang forced labor as import ban begins
Nikkei Asia, June 22, 2022
34. How the US’ Xinjiang labour law leaves millions of tonnes of cotton unsold
Ji Siqi, Luna Sun, He Huifeng and Kandy Wong, South China Morning Post, June 20, 2022
35. Wimbledon told to drop HSBC over its support for Hong Kong oppression
Lucy Burton, The Telegraph, June 18, 2022
36. BBC Africa Eye expose: Chinese man held over racist videos
Peter Jegwa, BBC, June 20, 2022
COMMENT: This is a follow-up to a piece that was highlighted last week, one of the individuals who was responsible for these videos has been arrested by authorities in Africa.
37. Volkswagen faces union and shareholder calls to examine China human rights allegations
Joe Miller, Financial Times, June 17, 2022
38. China’s elites think feminism is a foreign plot
The Economist, June 16, 2022
Industrial Policies and Economic Espionage
39. China must ‘consider’ its neighbours in US’ Asia-Pacific trade framework
Luna Sun, South China Morning Post, June 22, 2022
40. Next China: Wall Street’s Dead End
Bloomberg, June 16, 2022
41. China Is Hardening Itself for Economic War
Zongyuan Zoe Liu, Foreign Policy, June 22, 2022
Chinese policymakers are increasingly convinced that the United States is determined to implement a full-fledged strategy of containment against China. Beijing views the Indo-Pacific Economic Framework for Prosperity as the economic mirror of the Quadrilateral Security Dialogue and AUKUS, two U.S.-led security pacts that Beijing regards as anti-China coalitions. Chinese officials, academics, and media rhetoric increasingly talk of self-reliance and are preparing for a forced decoupling from the United States. Fang Xinghai, a vice chairman of the China Securities Regulatory Commission, proposed accelerating the yuan’s internationalization to prepare for the risk of forced financial decoupling. A Shanghai-based academic argued that “the peace dividend is over”—hence, “it is time that China prepare for a full decoupling.” Even the more moderate voices have acknowledged the profound changes in U.S.-China relations behind the “decoupling theory” and called for China to “prepare for the worst but strive for the best.”
While part of the likely response will be the further strengthening of China’s military, the party-state will also tighten two economic strings in its bow. It will double down on pursuing a preexisting self-reliance strategy and sanction-proof the Chinese economy while bolstering its offensive geoeconomic capabilities by reinforcing China’s strategic position in global supply chains and expanding its influence in international commercial sea lanes.
The Chinese Communist Party (CCP) made “independence and self-reliance” the centerpiece of its 2021 historic resolution. The West’s recent harsh sanctions on Russia have reminded Chinese leaders of the need to strengthen economic autonomy. On Feb. 25, the day after Russia’s invasion of Ukraine, a People’s Daily editorial argued that “independence and self-reliance ensure that the cause of the party and the people will continue to move from victory to victory.” The government recently vowed to improve self-reliance by building a “national unified market.” Policymakers are looking to prepare the Chinese economy to withstand the heavy economic blow caused by a forced decoupling.
42. Nearly One in Four European Firms Consider Shifting Out of China
Bloomberg, June 20, 2022
23% figure is highest proportion in a decade: European chamber
ASEAN, Europe among most considered alternatives, survey shows
43. China IPO fundraising doubles US total to top global ranks
Hudson Lockett and Cheng Leng, Financial Times, June 20, 2022
44. China orders US companies to set up Communist Party units to oversee firms in new global enforcement
Ryan Morgan, American Military News, June 16, 2022
Jeremy Goldkorn, SupChina, June 17, 2022
Cyber & Information Technology
46. China hawks demand TikTok answer
The Spectator, June 21, 2022
47. PODCAST – Bold Ideas to Make Digital Democracy Work
Rachel Tausendfreund and Audrey Tang, German Marshall Fund, June 16, 2022
48. Now China wants to censor online comments
Zeyi Yang, MIT Technology Review, June 18, 2022
A draft update of rules would dramatically increase the power of China’s censorship machine, but platforms will pay the price.
China is fine-tuning its censorship machine, this time proposing changes in how to regulate the billions of online comments posted in the country every day.
On June 17, the internet regulator Cyberspace Administration of China (CAC) published a draft update on the responsibilities of platforms and content creators in managing online comments. One line stands out: all online comments would have to be pre-reviewed before being published. Users and observers are worried that the move could be used to further tighten freedom of expression in China.
49. NetEase shares fall after nationalist backlash in China over Winnie the Pooh post
Primrose Riordan, Financial Times, June 20, 2022
Military and Security Threats
50. Elon Musk’s Starlink aid to Ukraine triggers scrutiny in China over US military links
Edward White and Eleanor Olcott, Financial Times, June 20, 2022
51. Defending Taiwan
Kore Schake, Allison Schwartz, American Enterprise Institute, June 21, 2022
52. Taiwan scrambles jets to warn away Chinese planes in its air zone as tensions simmer
The Guardian, June 22, 2022
53. China claims successful anti-ballistic missile interceptor test
Jessie Yeung, CNN, June 20, 2022
54. China launches 'Fujian,' its most advanced aircraft carrier
CK Tan, Nikkei Asia, June 17, 2022
55. How America tries to grapple with China while confronting Russia
Economist, June 16, 2022
56. US Rejects China’s Claims Over Taiwan Strait as Concerns Grow
Peter Martin; Jennifer Jacobs, Bloomberg, June 18, 2022
57. European universities under fire over work with Chinese military
David Matthews, Science Business, June 16, 2022
One Belt, One Road Strategy
58. VIDEO – What a New Bridge Says About How China is Helping Russia
Wall Street Journal, June 21, 2022
Opinion Pieces
59. Biden’s Patent Gift to Beijing
The Editorial Board, Wall Street Journal, June 17, 2022
60. China and Economic Security in the Shadow of Ukraine
Michael R. Pompeo, The National Interest, June 14, 2022
61. The Balance of Soft Power
Maria Repnikova, Foreign Affairs, June 22, 2022
The PRC has had considerable success with its brand of ‘soft power’ in the Global South. Beijing’s pragmatism has resulted in significant achievements.
62. The Consequences of Conquest
Brendan Rittenhouse Green and Caitlin Talmadge, Foreign Affairs, June 21, 2022
63. Op-ed: Why China’s Xi Jinping’s damage control is all about heading off a crisis
Frederick Kempe, CNBC, June 19, 2022
64. The Diplomatic Deadlock
Eyck Freymann, The Wire China, June 19, 2022
65. China’s Lessons from Russia’s War
Kevin Rudd, Project Syndicate, June 17, 2022
66. Ukraine’s Losses are China’s Gains
Vasily Kashin, East Asia Forum, June 16, 2022