Social credit for companies is here to stay

Dear Access member,

Sinica Podcast co-host Kaiser Kuo has an essay in the latest edition of the PRC History Review, titled Talking China: Podcasting and pedagogy on Sinica, in which you can read about some of his thinking on The China Project’s oldest audio show. 

Doxxing and online harassment of female Chinese journalists is one subject addressed in the latest issue of the Chinese Storytellers newsletter. This comes after “a Twitter user created a photo collage targeting women journalists,” and “suggested that Chinese women work in liberal Western media because they crave the power and prestige of these organizations, and most of them marry white men.”

Yangyang Cheng’s most recent column on The China Project, published today, is called Freedom in Dissent. As protests rage in Hong Kong, Yangyang thinks about her own experience with expression and dissent. 

Our word of the day is Corporate Social Credit System: 企业社会信用体系 qǐyè shèhuì xìnyòng tǐxì. 

—Jeremy Goldkorn, Editor-in-Chief

1. Social credit for companies is here to stay 

According to a new report published by the European Union Chamber of Commerce in China and German consultancy Sinolytics, foreign businesses will have to heed China’s new social credit system, and their own company’s credit score. 

Björn Conrad of Sinolytics said, per the South China Morning Post, that the data collected by the government through the social credit system could easily be used as a weapon against foreign businesses, and that “no one should be naive about this.”

“Is it a system designed to target specific companies? No. Is it possible to use it as such? Sure. It’s a very powerful regulatory tool. If the government decides to do so, it can also be used in that manner. We don’t have evidence on that yet. But it is obviously not unthinkable.”

From the Wall Street Journal (paywall):

A separate report released Tuesday on the corporate social-credit system by Beijing-based consulting firm Trivium China, whose clients include foreign companies, doesn’t link it to the U.S.-China trade war but said the system “will provide the government with vast amounts of systematized data,” and warned about the possibility of Beijing “co-opting technology to enforce political orthodoxy.”

In a press release, the president of the EU Chamber of Commerce in China, Jörg Wuttke, said: 

“For better or worse, China’s Corporate Social Credit System is here to stay. Businesses in China need to prepare for the consequences, to ensure that they live by the score, not die by the score.”

Context — important to note before you panic:

• Sinica Podcast: Mythbusting China’s social credit system with Manya Koetse and Rogier Creemers

• Jeremy Daum on China’s social credit system / China Digital Times

• The messy truth about social credit / Logic

—Daniel Schoolenberg

2. Pentagon wants Americans to make drones to replace DJI

“As part of a broad effort to cut dependence on Chinese technology, the Defense Department is hoping to boost domestic production of…unmanned aerial systems (UASs) — handheld drones increasingly used for reconnaissance missions,” reports Foreign Policy (porous paywall). 

These are the kind of drones consumers buy, and the vast majority of them are currently made by Shenzhen-based DJI. I have one myself. No other company’s products even come close. 

But this type of drone is not just for editors with a midlife crisis in need of a hobby. These drones also have military applications. Until recently, the Pentagon just bought the small drones it needed in the same way I bought mine: from DJI. But times have changed, and this is seen as a key vulnerability. From Foreign Policy:

“We don’t have much of a small UAS industrial base because DJI dumped so many low-price quadcopters on the market, and we then became dependent on them,” said Ellen Lord, the Pentagon’s chief weapons buyer, in an August 26 press conference. “We want to rebuild that capability.”

DJI is going to lose an important customer, but it looks like there’s a huge opportunity for American firms, if they can match DJI’s quality.

—Jeremy Goldkorn

3. The final shutdown of an independent think tank focused on economics 

The Guardian reports on the final closure of one of China’s few independent think tanks, the pro-market, liberal Unirule. Subject to government interference since at least 2004, pressure on Unirule has intensified since 2017, when government pressure led to staff being locked in their offices and then evicted. 

The Unirule Institute of Economics, one of China’s few remaining outposts of liberal thought, said in a statement on Monday that local authorities had declared the thinktank “unregistered and unauthorized.”

Critics said the shuttering of Unirule, founded in 1993 during China’s reform and opening era to promote both economic and political liberalization, was an indication that those ideals were increasingly no longer welcome.

See also: State pressure forces China champion of pro-market policies to close / WSJ 

4. Western culture and the English language were invented in China 

At around the same time as the internationally recognized scholars of Unirule were having the nails hammered into their organization’s coffin, another group of scholars was presenting papers at the first “China International Frontier Education Summit,” held in Beijing in July. 

According to Sina’s Xinjiang news channel (in Chinese), a group of researchers presented a paper containing some rather extraordinary claims. The two key points are:

The English language is derived from Chinese

The evidence presented by one scholar is that “after more than 20 years of research,” he discovered patterns such as these:

Yellow: It is the color of autumn leaves, and the English pronunciation is almost the same as the Chinese for “leaves fall” (叶落 yè luò).

Shop: The English pronunciation is basically the pronunciation of Chinese “shop” (商铺 shāngpù)…

If only one or two English words were like this, it would be coincidence. But there are hundreds of English words like this, so this is an intrinsic law.

Western culture comes from China 

A translated excerpt: 

Before the 15th and 16th centuries, Europe had no history, only myths and legends…It took nearly 500 years to falsify Western history. Joseph Scaliger (1540–1609), a French priestly scholar, established a “biblical chronicle” and a historical framework for all European countries by imitating Chinese history, especially the ancient Chinese dynasties.

The economy, science and technology, education, and philosophy of modern Europe in the 18th and 19th centuries were all copied from China… There was no such thing as the “Renaissance.” It was actually more like a western high school learning from China with Confucius as its patron saint.

5. U.S. confirms new 15 percent tariffs on consumer goods 

Creak! The tension ratchets up another notch. 

The U.S.-China techno-trade war, now on day 419, enters a new phase “as the U.S. government scheduled an official filing” to confirm “tariff increases from 10 to 15 percent on US$300 billion of Chinese imports, many of them consumer goods,” reports the South China Morning Post. “Tariffs already scheduled for implementation on September 1 and December 15 respectively would see their rate increase by 5 percent.”

Other news of the U.S.-China techno-trade war:

“U.S. officials are seeking to block an undersea cable backed by Google, Facebook, and a Chinese partner, in a national-security review that could rewrite the rules of internet connectivity between the U.S. and China,” according to the Wall Street Journal (paywall):

The Justice Department, which leads a multiagency panel that reviews telecommunications matters, has signaled staunch opposition to the project because of concerns over its Chinese investor, Beijing-based Dr. Peng Telecom & Media Group Co., and the direct link to Hong Kong the cable would provide, the people said.

“U.S. tariffs have cost American vendors on Amazon more than their Chinese counterparts as a bitter trade war drags on between the two countries, a new analysis has found,” reports Nikkei Asian Review (porous paywall). A source involved in auto parts trade told Nikkei that while both sides are affected by U.S. tariffs, 

Chinese sellers usually have better control over their supply chain… They have better relationships with their suppliers… They can get more flexible account periods. They might get better prices. 

Social credit as a trade war weapon? The Wall Street Journal says (paywall) that “foreigners worry that, amid the continuing U.S.-China trade dispute, Beijing will use its new corporate ‘social credit’ system as a weapon against international businesses.” See social credit summary above for more on this. 

“China’s currency weakened by 0.15 percent against the dollar on Tuesday,” reports the New York Times (porous paywall). “Allowing the currency to weaken helps China offset the impact of American tariffs on its products.”

“Business trips to the U.S. by mainland Chinese appear on track to decline in 2019 after years of growth,” says the South China Morning Post. 

Fentanyl war of words: “Washington has attacked Beijing for not doing enough to curb the flow of fentanyl… China has repeatedly pushed back, arguing that the epidemic is due to the U.S.’s own lax regulation over the prescription of addictive opioids to patients,” reports Bloomberg (porous paywall). 

6. #MeToo protest against Hong Kong police

The New York Times has published a striking visual review of the Hong Kong protests with photos by Lam Yik Fei and text by Austin Ramzy — City on edge: Photographs from Hong Kong’s summer of protest (porous paywall).

Here’s the latest from the special administrative region:  

“Tens of thousands of people converged on downtown Hong Kong’s Central district on Wednesday in protest over alleged sexual violence towards anti-extradition protesters, mostly women, the politicized sacking of airline employees sympathetic to the anti-extradition movement,” reports Radio Free Asia:

The #ProtestToo gathering aimed to highlight a specific form of police violence after a number of women reported being sexually humiliated during strip searches while in police custody…

Protesters also gathered to protest the sacking of staff at Hong Kong’s airlines Cathay Pacific and Cathay Dragon for their support for the anti-extradition movement, after pressure from the ruling Chinese Communist Party in Beijing…

“Stop the white terror!” the marchers chanted. “Reverse the dismissal! Give us back our freedom of speech!”

See also reports from Reuters and the Guardian. 

“Mainland Chinese are sneaking into Hong Kong’s protests — to support the cause,” says the Wall Street Journal (paywall), willing to “take risks to support freedoms unavailable to them at home.” ChinaFile has a related essay by Kiki Tianqi Zhao: China’s government wants you to think all mainlanders view Hong Kong the same way. They don’t.  

—Jeremy Goldkorn

BUSINESS AND TECHNOLOGY:

• WeChat not cool for Chinese teens
  Teens are shunning WeChat, showing shifting tastes in Chinese social media / Abacus
  “Only 15 percent of teenagers make public posts on the Tencent-owned platform.”

• Costco’s stellar debut in Shanghai
  Costco caps the number of China shoppers one day after ‘crazy’ debut / Bloomberg (porous paywall)
  “Costco Wholesale Corp.’s first outlet in China has capped the number of customers at 2,000, a day after it opened and was overrun with customers willing to fight over discounted products and wait hours to pay for their purchases.”
  Don’t discount Costco’s chances in China / Bloomberg (porous paywall)
  “Many foreign retailers have struggled. The U.S. warehouse giant is better placed to thrive than most.”

• Wine branding and IP
  Penfolds 25: Everyone likes to evoke this brand in China! / Grape Wall of China
  Products from Australian wine brand Penfolds are “found far and wide” in China. 

You know what else is found far and wide? Labels that remind people of Penfolds. They might evoke that cursive old time-y font. Or its deep ruby red colour. The use of Bin, or even Ben, numbers. Or the name: Benfolds, Penfriends, Benfu, Panfield. Maybe even a blend of these.

• Chongqing chips
  State-backed chipmaker to build ‘strategically important’ plant in southwest China / Caixin (paywall)
  “State-owned chipmaker Tsinghua Unigroup Ltd. signed a deal Tuesday with the Chongqing municipal government to build a facility that will design and manufacture memory chips in the southwestern Chinese city.”

• Stimulus and debt
  Chinese gov’t debt ratio rises on expanding pro-growth spending / People’s Daily
  “The end-June debt ratio for the government rose to 38.5 percent, up 0.8 percentage points from the end of March and 1.5 percentage points from the end of 2018, according to a report released Tuesday by the National Institution for Finance & Development (NIFD), a government think tank.”

• How to research Chinese companies
  China company research: The 101 / China Law Blog
  A brief guide to doing due diligence on Chinese companies. 

SCIENCE, HEALTH, AND THE ENVIRONMENT: 

• North Chinese leopards reappear in Hebei
  Native Chinese leopard species reappear after 14 years / China News 
  China News says it was “the first time in 14 years for wild north China leopard to make its appearance to human.” However, last year, China News also reported that researchers had “confirmed the existence of wild populations of North Chinese leopards, an endangered subspecies, in the Ziwuling forest area of Shaanxi Province and the Taihang Mountains forest in Shanxi Province.”
  There appears to be some disagreement about the taxonomy of the North China leopard: See the Wikipedia entry for Amur leopard (Panthera pardus orientalis): “The North Chinese leopard was formerly recognized as a distinct subspecies P. p. japonensis, but was subsumed under the Amur leopard in 2017.”

POLITICS AND CURRENT AFFAIRS:

• 30 billion yuan budget for urbanization 
  China allocates 30 billion yuan to help rural people settle in cities / Xinhua

China’s Ministry of Finance has allocated 30 billion yuan (about 4.2 billion U.S. dollars) to help rural people settle in cities in the latest urbanization push. The funds will be used to support work on granting permanent urban residency to people who move from rural to urban areas…

Official data showed of the nearly 1.4 billion living on the Chinese mainland, 59.58 percent were urban residents by the end of 2018.

• First Catholic bishop blessed by Vatican and Beijing ordained
  Chinese Catholic bishop ordained with Pope’s approval / BBC

A bishop has been ordained with the blessing of both the Pope and the Chinese state for the first time under a new deal.

Yáo Shùn 姚顺 received the papal mandate for his ordination as bishop in China’s Inner Mongolia region…

The Vatican confirmed the new bishop’s ordination  referring to him as Antonio Yao Shun – as “the first to take place in the framework of the Provisional Agreement between the Holy See and the People’s Republic of China.”

• Context on The China Project: Historic breakthrough in ties between the Vatican and Beijing leads to an ‘unholy war of words,’ Sinica Podcast with Ian Johnson on the Vatican and China. 

• World Bank money spent on barbed wire in Xinjiang
  The World Bank was warned about funding repression in Xinjiang / Foreign Policy

A World Bank loan program to a supposed educational project in Xinjiang, China, that has now come under congressional scrutiny previously faced internal concerns, Foreign Policy has learned. Documents also show that at least $30,000 was used by the schools not for educational purposes but to purchase high-end security gear, including barbed wire, tear gas, and body armor.

• See also:
  Repression across borders: The CCP’s illegal harassment and coercion of Uyghur Americans / Uyghur Human Rights Project
  A new report details “how the Chinese government is applying a systematic, ambitious, multi-year, well-resourced, relentless and cruel policy to inflict pain and suffering on Uyghurs abroad in an attempt to control their speech and actions.”
  China’s missing million: the search for disappeared Uyghurs / New Statesman 

• Interference in China and Australia
  Australia moves to protect universities from foreign interference / AFP
  “With concern growing about China’s clout on campuses Down Under, education minister Dan Tehan announced more intensive consultation between schools and government officials — including spy agencies.”
  China warns Australia not to interfere in case of detained writer Yang Hengjun / ABC Australia

China has warned Australia not to intervene in the case of detained Australian citizen Yáng Héngjūn 杨恒均, who has been accused of spying.

• See yesterday’s newsletter for more on Yang.

• Soft power in Namibia
  Visiting astronauts inspire Namibian youngsters / China Daily
  “Metumu Nomvula Tjimune, a grade 12 student at Westside High School, said she was very pleased to see the astronauts from China.”

SOCIETY AND CULTURE:

• The hipsters have come for our soy sauce
  You’ve probably never had real soy sauce / Medium
  “You can imagine, then, how the conversation with Shunan dogged me like a playground taunt. You don’t know what real soy sauce tastes like.” 

• Sexual harassment and depression on TV
  A Little Reunion dives headlong into China’s thorniest themes / Sixth Tone
  A Little Reunion (小欢喜 xiǎo huānxǐ) “has been well-received by viewers… Over the course of 49 episodes, it covers parenting, education, depression and mental health, stay-at-home dads, aging, health product scams that prey upon the elderly, and even sexual harassment in the workplace.”

• Sexist language
  Choice chengyu: sexist sayings / World of Chinese
  A collection of four-character sayings such as 夫唱妇随 fū chàng fù suí (The husband sings and the wife follows).

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As protests rage in Hong Kong, Yangyang Cheng thinks about her own experience with expression and dissent. “From time to time, there will be a comment online to my writing accusing me of hypocrisy, saying if I truly cared about democracy and human rights in China, I should ‘go back and fight,'” Cheng writes. “Is there not a kernel of truth there?”

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