China Articles - September 19, 2021
Friends,
Below is this week’s edition of articles and reports on the malign activities of the Chinese Communist Party.
I recommend everyone read the OpEd in the Wall Street Journal this week by Gary Gensler, the Chairman of the U.S. Securities and Exchange Commission (SEC). Chairman Gensler warns that Chinese companies listed on U.S. stock exchanges may be forced to delist if they continue to violate U.S. law which requires transparency into a company’s financial records and audits.
As if on cue, Katrina Northrop wrote the cover story for The Wire China last week titled “The Boom-Bust Backlash” (article #8). She describes what could be a pattern of fraud by small and medium cap Chinese companies listing in the United States and using the shield of Chinese Government protection to steal from investors. None of this has yet to be proven, but Northrop provides insight into a pattern that should be taken seriously.
Also in this week’s edition is the piece by Stu Woo on how the Chinese Communist Party uses its position on the United Nations on Non-Governmental Organizations to coerce entities, like a High School in Colorado, to adopt Beijing’s position on Taiwanese independence (article #3). Over the summer, CCP officials at the United Nations used their position to stall the applications of six other organizations at the United Nations like “the World Bicycle Industry Organization, a French nature society called the Association of 3 Hedgehogs and For All Moonkind, a volunteer team of space lawyers trying to preserve lunar landing sites.” In many cases, these organizations comply with the demands of the Chinese Communist Party because they cannot avail themselves of the United Nations’ institutions or forums unless they receive formal recognition from this committee.
Thanks for reading!
Matt
MUST READ
1. SEC Chair: Chinese Firms Need to Open Their Books
Gary Gensler
Wall Street Journal, September 13, 2021
China’s companies must allow their audit firms to be audited or their shares won’t trade in U.S. capital markets.
The Securities and Exchange Commission may need to prohibit trading in about 270 China-related companies by early 2024. The reason can be traced to the Enron and WorldCom accounting scandals.
Congress passed the Sarbanes-Oxley Act in 2002, mandating inspections of public companies’ auditors by the Public Company Accounting Oversight Board. More than 50 foreign jurisdictions allow the board to “audit the auditors.” Two do not: China and Hong Kong.
Congress acted last year to fill this gap by unanimously passing the Holding Foreign Companies Accountable Act. The law prohibits trading in an issuer’s stock if a foreign jurisdiction prevents our oversight board from inspecting the company’s audit firm for three consecutive years. The SEC has taken all the required steps to implement this law, and the oversight board is on track to finalize its relevant rulemaking before the end of the year. The three-year clock began ticking in 2021.
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2. VIDEO — Uyghur Tribunal – Live Hearing 13th September 2021
Uyghur Tribunal, September 13, 2021
3. China Makes Sure Everyone Writes Taiwan’s Name Just So—Even a Colorado High School
Stu Woo
Wall Street Journal, September 10, 2021
No group is too small or obscure to escape the attention of Beijing bureaucrats scouring applications to attend United Nations functions.
Trying to give some students a taste of foreign affairs, Colorado’s Regis Jesuit High School applied for credentials to attend the United Nations Commission on the Status of Women.
This spring, the U.N. committee that accredits such groups emailed the school. It said there was a hiccup: Regis Jesuit’s website used incorrect terminology for Taiwan, the democratically governed island. The committee suggested modifying it to “Taiwan, Province of China.”
Beijing has long used its rising clout to challenge governments and multinationals over its claim that Taiwan is part of China. It’s also increasingly pushing around the runts of global diplomacy, like Regis Jesuit, over the issue.
“We are small potatoes,” said Christina Vela, the Spanish teacher in charge of the Aurora, Colo., school’s application.
China sits on the U.N. Committee on Non-Governmental Organizations, which authorizes groups big and small to participate at U.N. functions. At its publicly held meetings, any representative can hold up an application. Chinese bureaucrats scour each group that comes before the committee, scrutinizing every nook and cranny of their websites for references to Taiwan, say researchers who’ve studied the committee. If groups don’t include Beijing’s preferred language, China asks the committee to request changes.
At a committee meeting in May, China requested that Regis Jesuit change how it refers to Taiwan. Soon afterward, the committee emailed the school to point out a year-old article on its website about a student joining the Girl Up Teen Advisory Board, alongside youths from countries including Taiwan, Ms. Vela said.
“No one was ever going to randomly stumble upon that webpage,” Ms. Vela said.
She found the request odd but added “Province of China” to the article as requested. A week ago, the U.N. committee endorsed her application.
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4. China’s Hunt for Dissidents Has Gone Global
Hal Brands
Bloomberg, September 12, 2021
Operations Fox Hunt and Skynet target Beijing’s critics wherever they may go.
For years, China has purported to be a new type of great power: one that rises peacefully and respects the rights of other states rather than chasing the foreign domination of empires past. “China will never seek hegemony, expansion or a sphere of influence,” President Xi Jinping said in April.
Yet many of Beijing’s policies have a distinctly imperial feel. A case in point is a wide-ranging effort to give Chinese law enforcement global reach, and thereby hound the regime’s enemies wherever they may go.
The programs in question are known as Operation Fox Hunt and Operation Skynet. As ProPublica has reported, their stated purpose is to track down white-collar criminals who have sought refuge abroad. Yet in many cases, the real targets are dissidents or political foes of Xi.
Networks of Chinese agents have fanned out across countries around the world, usually without the knowledge of local authorities, to surveil and apprehend wanted individuals, according to the U.S. Justice Department and press reports. They often rely on heavy doses of coercion, reportedly using family members who still live in China — and are thus at the mercy of the Chinese Communist Party — as leverage to bring those individuals home.
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5. Slovenia's PM Urges EU to Stand with Lithuania Against Chinese Pressure
Robin Emmott
Reuters, September 15, 2021
6. How Hollywood Sold Out to China
Shirley Li
The Atlantic, September 10, 2021
7. How China Weaponized the Press
Timothy McLaughlin
The Atlantic, September 9, 2021
Authoritarianism
Katrina Northrop
The Wire China, September 12, 2021
The wild stock movements of several small cap Chinese companies — and the U.S. firms that advise them — are raising eyebrows on Wall Street.
Earlier this summer, a small Chinese company based in the seaside city of Xiamen went public on the Nasdaq Stock Market. It immediately turned into a sensation. The stock price for Pop Culture Group soared 1,200 percent in two days — from $6 a share to $78 a share — helping the company raise $37.2 million dollars.
Pop Culture Group’s allure, while not anticipated, is a common one for investors: a Chinese company with a niche concept promising to take its massive domestic market by storm. In the prospectus, for instance, the company marketed itself as having “a deep understanding of the younger generation, [and] a highly-recognized brand name in the hip-hop culture and street dance industries.”
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After it went public, Elliott Zaphkiel, a college student in Idaho who day trades in his spare time, started noticing a lot of chatter about the company on social media. The stock had already reached its incredible high and begun to drop, but online, Zaphkiel says, “A lot of people were pumping it.” Believing the hype, Zaphkiel says he bought $77,000 worth of the stock at $10 a share.
But as the stock continued to tumble, Zaphkiel got out, selling at $8.30, and then looked on as Pop Culture Group’s bubble continued to pop. In recent weeks, it bottomed out at around $3.70 a share, which is about where it sits today. The company, which reached a peak valuation of more than $1.9 billion just days after the IPO, is now valued at close to $90 million.
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If U.S.-based underwriters, lawyers and auditors knowingly support a company in committing fraud or stock manipulation, they could be held legally responsible. But experts say it is exceptionally difficult to prove — partly because so much of the deal relies on the advisors’ judgment and access to internal Chinese corporate documents.
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“When I was at the SEC, once an investigation landed on China’s door, I always thought, that’s it, it’s done,” says Silvers, the former SEC economist. “Even if they know this irregular activity is triggered by some fraudulent behavior, the SEC still has to have something to allege against the firm. They need some evidentiary basis, and with the Chinese companies that’s a big ask.” The SEC did not respond to requests for comment.
Luckin and other Chinese companies are able to get away with relatively brazen fraud schemes largely because of an auditing irregularity. In the wake of the Enron scandal in 2001, in which the Texas-based energy giant committed serial accounting fraud, U.S. lawmakers passed legislation to create a regulator tasked with overseeing all auditing firms. It is called the Public Company Accounting Oversight Board (PCAOB), and in the years after its creation, the PCAOB brokered deals with other countries, so that they could inspect the work of auditors working abroad when foreign companies went public in the United States. China, however, was the only major country that refused to comply, and to this day, China does not allow the PCAOB to conduct investigations within its borders.
“China has always said auditing is sensitive, and it may be a national security issue,” says Peterson, who has written books on the auditing industry. “There are agreements in almost every other country.3 But the Chinese, to be non-euphemistic about it, have been jerking the U.S. around for years now.”
Chinese laws and regulations actively prohibit both Chinese and U.S. auditors of China-based companies from giving U.S. regulators access to their papers. The rules are so strict that even U.S. accounting firms that have large offices in China are behind it.
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9. Xi Jinping’s Crackdown on Everything is Remaking Chinese Society
Lily Kuo
Washington Post, September 9, 2021
10. Blackstone Drops $3 Billion Property Deal with Chinese Power Couple
Elaine Yu and Jing Yang
Wall Street Journal, September 13, 2021
11. Hong Kong’s Financial Ties to Mainland China Deepen as Wealth Link Launches
Frances Yoon
Wall Street Journal, September 10, 2021
12. China bans men it sees as not masculine enough from TV
Joe McDonald
Associated Press, September 2, 2021
13. Evergrande’s Cash Problem Is Now Beijing’s Political Problem
Jacky Wong
Wall Street Journal, September 14, 2021
14. Is this proof of lab leak lies?
Ian Birrell
UnHerd, September 9, 2021
15. Podcasting platform Ximalaya to file Hong Kong IPO after shelving US listing
Chad Bray
South China Morning Post, September 10, 2021
16. Foreign Brands Criticised in China for Misleading Shoppers
Reuters, September 9, 2021
17. Tencent dominates digital donations in China. That’s the problem.
Ben Brody
Protocol, September 15, 2021
18. ‘Reversing Gears’: China Increasingly Rejects English, and the World
Li Yuan
New York Times, September 9, 2021
19. Tencent and NetEase shares fall as China urges end to profit focus in gaming
Primrose Riordan
Financial Times, September 9, 2021
20. What Is China Evergrande and Why Is It in Trouble?
David Scanlan and Cathy Chan
Bloomberg, September 13, 2021
21. #MeToo: China Court Dismisses Landmark Sex Harassment Case
BBC, September 15, 2021
22. Alibaba Slides on Report China Plans to Break Up Payment App
BBC, September 13, 2021
23. China bans private tutors from giving online classes
Reuters, September 8, 2021
24. China is purging celebrities and tech billionaires. But the problem is bigger than ‘sissy men’
Alice Su
Los Angeles Times, September 14, 2021
Environmental Harms
25. UK-led Cop26 talks at risk of failure over China’s refusal to cut emissions
Emma Gatten
The Telegraph, September 8, 2021
26. China Is Disrupting the Ocean’s Blue Carbon Sink
Andrew S. Erickson and Gabriel B. Collins
Foreign Policy, September 15, 2021
27. China's Hard Climate Stance with U.S. Imperils Glasgow Talks
David Stanway and Muyu Xu
Reuters, September 15, 2021
Foreign Interference and Coercion
28. Hi-Yah! Beijing sells kung-fu to Africa
Didi Tang, Beijing
Sunday Times, September 12, 2021
29. Beijing’s new envoy says American businesses welcome in Chinese market
Amber Wang
South China Morning Post, September 14, 2021
30. China Is OK With Interfering in Guinea’s Internal Affairs
Charles Dunst
Foreign Policy, September 15, 2021
31. China slams US move for South Korea to join ‘outdated’ Five Eyes
Park Chan-kyong
South China Morning Post, September 15, 2021
32. China ‘spying on lectures run by British universities’
Mark McLaughlin and Ben Ellery
Sunday Times, September 13, 2021
33. Chinese Ambassador Banned from British Parliament as Diplomatic Relations Sour
Adam Taylor and Annabelle Timsit
Washington Post, September 14, 2021
34. China is becoming more assertive in international legal disputes
The Economist, September 11, 2021
35. Rubio to CIA: Reject Woke Agenda and TikTok, Focus on Keeping Americans Safe
Senator Marco Rubio
Office of United States Senator Marco Rubio, September 9, 2021
36. South Koreans sour on China ahead of Wang Yi visit
Steven Borowiec
Nikkei Asia, September 13, 2021
37. US backs Lithuania as China puts on the pressure over Taiwan office
South China Morning Post, September 14, 2021
38. Washington risks Beijing ire over proposal to rename Taiwan’s US office
Demetri Sevastopulo
Financial Times, September 10, 2021
39. Top Dem Blocked Push to Punish Chinese Disinformation Efforts
Jimmy Quinn
The National Review, September 13, 2021
40. China boosts stake in UK with London shares spree
Richard Evans
The Telegraph, September 11, 2021
Selina Cheng
Hong Kong Free Press, September 14, 2021
42. Brazil Moves Away from Chinese Covid-19 Vaccine
Luciana Magalhaes and Samantha Pearson
Wall Street Journal, September 11, 2021
43. PM accused of deliberate ‘strategic void’ on China to prioritise trade
Patrick Wintour
The Guardian, September 10, 2021
44. How Many Confucius Institutes Are in the United States?
National Association of Scholars, September 8, 2021
45. China’s Practice in Recognizing Governments: The Case of Taliban
Aarshi Tirkey
Observer Research Foundation, September 15, 2021
Human Rights and Religious Persecution
Cat Wang and Nadia Lam
South China Morning Post, September 14, 2021
47. How China hijacked the war on terror
Melissa K. Chan
Politico, September 9, 2021
48. American Lawyer Imprisoned in Hong Kong Speak out about His Treatment
Shibani Mahtani
Washington Post, September 12, 2021
49. UN Rights Chief to Report on China’s Abuses in Xinjiang
Human Rights Watch, September 15, 2021
50. Rape, Forced Prostitution of Uyghur and Kazakh Women
Ruth Ingram
Bitter Winter, September 15, 2021
51. Hong Kong: Activists jailed for joining banned Tiananmen vigil
BBC, September 15, 2021
Industrial Policies and Economic Espionage
52. Transatlantic trade deal rises from the grave to fight China
Barbara Moens and Mark Scott
September 9, 2021
53. Huawei ‘infiltrates’ Cambridge University research centre
Ben Ellery, Sam Dunning, and Oliver Wright
Sunday Times, September 12, 2021
54. China to consolidate overcrowded electric vehicle industry - minister
Reuters, September 13, 2021
55. China is Fast Outpacing U.S. STEM PhD Growth
Remco Zwetsloot, Jack Corrigan, Emily Weinstein, et al.
Center for Security and Emerging Technology, September 2, 2021
56. White House officials consider probe into China’s industrial subsidies
James Politi
Financial Times, September 10, 2021
57. Chinese EV Maker Once Worth More Than Ford Wipes Out $80 Billion
Bloomberg, September 14, 2021
58. US-China STEM Talent Decoupling
Remco Zwetsloot
The Johns Hopkins University Applied Physics Laboratory, 2020
Cyber & Information Technology
59. How TikTok Serves Up Sex and Drug Videos to Minors
Rob Barry, Georgia Wells, John West, Joanna Stern and Jason French
Wall Street Journal, September 8, 2021
60. Does China have a new foreign weapon in information war with the West?
South China Morning Post, September 12, 2021
61. Ericsson to shut major research centre as China business falters
Che Pan
South China Morning Post, September 9, 2021
62. China has become a laboratory for the regulation of digital technology
The Economist, September 11, 2021
63. China ‘tracks users of foreign sites’ through anti-fraud app
Didi Tang
Sunday Times, September 14, 2021
64. TikTok faces GDPR probe over children’s data and China transfers
Hannah Murphy
Financial Times, September 15, 2021
65. Alt-right finds new partners in hate on China’s internet
Vincent Ni
The Guardian, September 11, 2021
66. Data Privacy Chinese-Style
Angela Huyue Zhang
The Wire China, September 12, 2021
Military and Security Threats
67. Japan PM contender Kishida aims to boost security with China in mind
Reuters, September 13, 2021
68. Biden announces joint deal with U.K. and Australia to counter China
Alexander Ward and Paul McCleary
Politico, September 15, 2021
69. Australia and the Growing Reach of China’s Military
Thomas Shugart
Lowy Institute, August 9, 2021
One Belt, One Road Strategy
70. China offers $31m in emergency aid to Afghanistan
BBC, September 9, 2021
Opinion Pieces
71. Germans Are Demanding a New China Policy. Will the Next Chancellor Deliver?
David Wilezol
The National Review, September 13, 2021
72. What the U.S. Withdrawal from Afghanistan Means for Taiwan
Oriana Skylar Mastro
New York Times, September 13, 2021
73. Alipay break-up is power grab by China’s government
The Editorial board
Financial Times, September 14, 2021
74. The Xi personality cult is a danger to China
Gideon Rachman
Financial Times, September 13, 2021
75. Jeff Immelt on What Business Leaders Get Wrong about Globalization
David Barboza and Jeffrey Immelt
The Wire China, September 12, 2021
76. Europe and America Still Don’t Agree on China
Eyck Freymann
The Wire China, September 12, 2021