Silicon Valley turns against China

Dear Access member,

This just in: Trump’s China-bashing trade adviser, Peter Navarro, has an imaginary friend. He has been quoting “Ron Vara” in his books for years. Ron Vara is an anagram of Navarro, not a real person. Check out the story by Tom Bartlett in the Chronicle.

Our word of the day is Silicon Valley (硅谷 guīgǔ). 

The China Project Direct Conference Call: A reminder — today, October 15, at 8 p.m. Eastern Time, I will host a call with Rob Petty. Rob is a Hong Kong–based investor and frequent speaker at global forums on China and Asian investment and business trends.

You can go here to register, but you can also join without registering with the information below:

• When: Tuesday, October 15, 8 p.m. ET

• Join by phone: +1 646-664-1267

• Join by web / data: www.uberconference.com/supchinadirect

—Jeremy Goldkorn, Editor-in-Chief

An anti-sexual harassment poster designed by a Guangzhou-based feminist group in 2017, but never publicly posted due to censorship. See related story #2: “First court ruling in China against sexual harassment on public transportation.”

1. After NBA affair, Silicon Valley turns against China

The NBA kerfuffle seems to have been a turning point in Corporate America, at least in the tech sector. Shelly Banjo, Hong Kong correspondent for Bloomberg, just got back from a trip to the U.S. She says that “a red scare has washed over the San Francisco Bay Area” and that Silicon Valley “has decidedly turned against China.” 

She wrote up her thoughts on Twitter and on the Bloomberg website. Excerpt: 

At a dinner party, an executive from a big tech firm admitted to a table of a dozen people that he had barely thought about China before but now worries its approach to censorship and authoritarianism is bleeding into the U.S., posing a severe threat to America. The table nodded along.

A banker spoke of the confusion around working on financing for Chinese tech upstarts that last week got added to America’s blacklist and can no longer do business with U.S companies. A venture capitalist starting a new fund told me they now check general partners’ passports and only allow U.S. citizens to participate, excluding even Chinese citizens with U.S. green cards for fear of tripping up U.S. foreign investment prohibitions…the Silicon Valley outposts that China’s Tencent, Alibaba and Baidu use to make investments in U.S. upstarts have gone dark…

The real choice for American tech companies, venture capitalists and startups seems to have narrowed to just two options: Either take China at face value and decide that as a rational business, profits matter more than any kind of moral high ground, or make a conscious decision to stop pursuing business in a country that will require you to adhere to its viewpoints inside — and outside — its borders.

Related: Basketball superstar LeBron James has been condemned as a bootlicker by the sports press and on social media after he criticized Daryl Morey — the Houston Rockets general manager whose tweet set off the firestorm — for not being “educated on the situation at hand.”

Hongkongers — of course — protested in reaction, burning LeBron James sweaters. 

—Jeremy Goldkorn

2. First court ruling in China against sexual harassment on public transportation

Shanghai has stepped up its initiative to combat sexual harassment on the city’s public transit system, sentencing one man to six months in prison after he groped an adult woman and an underage girl on a subway train.

According to the indictment (in Chinese), the incident occurred on July 1, when the 34-year-old sex offender, whose last name is Wang, was caught grabbing the victims’ breasts and other body parts on a Line 8 subway train. After the woman called Wang out for his molestation, he was surrounded by other passengers on the train, and then apprehended by the police as he attempted to flee the scene. 

Wang was arrested on indecency charges in August and sentenced to six months in jail by the Jing’an District People’s Court, making him the first person to be criminally punished for groping passengers on public transportation in the city.

For more on this, click through to The China Project. Related: The head of a university TV station is under investigation for alleged sexual assault, which we’re also covering on The China Project.

—Jiayun Feng

3. Citi to set up brokerage in China?

Bloomberg reports (porous paywall) that “people with knowledge of the matter” say that “Citigroup Inc., which is dissolving its investment-banking joint venture in China, is now planning to set up a wholly owned securities business [that] may initially focus on brokerage and futures trading while expanding its custodian services in China.”

If this goes ahead without a hitch, it will be another sign that China’s opening of its financial sector is real. 

4. Further confirmation that trade ‘deal’ is nothingburger

Today brings further confirmation that what Donald Trump over the weekend called “by far…the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Country” is in fact a nothingburger (空汉堡 kōng hànbǎo is our made-up translation).

“Beijing wants a rollback in tariffs in its trade war with the U.S. before China can feasibly agree to buy as much as $50 billion of American agriculture products that President Donald Trump claims are part of an initial deal,” reports Bloomberg (porous paywall).

“New tariffs on $156 billion of Chinese goods will be imposed if a trade deal is not agreed by 15 December, the U.S. Treasury Secretary has warned,” reports the BBC. 

Steven Mnuchin said he still hoped a tentative US-China deal agreed last week to suspend fresh tariffs would be formally approved.

But his caution, during a CNBC interview, seemed in contrast with President Trump’s optimism last week.

However, in Beijing, the foreign ministry is still saying (in Chinese) that “the two sides have made substantial progress in some areas and agreed to work toward the final agreement.” That’s very light on the details, but at least they’re still talking. 

5. China hacked technology for passenger jet — report

CrowdStrike, a highly respected cybersecurity company, has released a report that shows “how Beijing used a mixture of cyber actors — sourced from China’s underground hacking scene, Ministry of State Security (MSS / 国安部 guó ān bù) officers, company insiders, and state directives” to acquire technology for dual-use turbine engines. 

According to CrowdStrike, such engines “could be used for both energy generation and to enable its narrow-body twinjet airliner, the C919, to compete against western aerospace firms.”  

—Jeremy Goldkorn

BUSINESS AND TECHNOLOGY:

• The social credit economy
  The apps using social credit in China / TechNode  

Early this year, the National Development and Reform Commission (NDRC), the state body responsible for the implementation of China’s social credit system, held a credit-app awards event designed to provide a platform where the public and private sectors could learn from each other’s innovations. A similar event, the Xinhua Credit Cup, ran from September 24-25, recognizing outstanding achievements in urban credit development projects.

We took a look at several of the winning mobile platforms from both of these conferences, as well as some interesting platforms that didn’t make the cut. Taken as a whole, these apps paint an interesting picture of the mobile ecosystem springing up around social credit.

• Bad news for consumers and factories
  Consumer inflation nears six-year high as pork prices enter stratosphere / Caixin (paywall)
  The source data (in Chinese) was published today by the National Bureau of Statistics (NBS).
  China’s wealthy eastern regions report shrinking industrial profits / Caixin Live

Of the 10 provincial-level regions of eastern China, six saw industrial companies’ profits decline year-on-year in the period from January to August, according to data from the National Bureau of Statistics (NBS).

Shanghai led the drop, posting a 19.6 percent plunge in profits. Beijing came second with a 14.4 percent decrease. 

• The wild, wild Shenzhen Stock Exchange
  China fertilizer maker on brink of bankruptcy rallies 51 percent / Bloomberg (porous paywall)

A local court in Qinghai — a huge and sparsely-populated province that’s home to the country’s largest lake — threw a lifeline to Qinghai Salt Lake Industry Co. when it accepted a creditor’s request to restructure the firm. Stock investors took it as a sign the struggling state-owned potash producer will survive: the shares are up 51 percent since the petition was filed in August. On Tuesday the stock closed up by the 5 percent daily limit imposed by the Shenzhen exchange.

• A working UFO?
  China built a flying saucer / Popular Mechanics
  Is the Chinese government making an investment in flying saucers? It looks that way, based on images circulating from this past weekend’s 5th China Helicopter Exposition, held in the northern Tianjin region.

• Market regulator rejects listing for data privacy issue
  Weather-forecast app operator denied Shenzhen listing / Caixin Live
  The China Securities Regulatory Commission (CSRC) rejected the public listing plan of Moji Fengyun (Beijing) Software Technology Development Company for “a series of issues including potential data privacy violations.”

• Cryptocurrencies
  Controversial crypto coin’s rise fueled by China trading ban / Bloomberg (porous paywall)

In recent months, over-the-counter crypto trading in China has exploded, just as Chinese spot traders began buying nearly all of their Bitcoin with the stablecoin Tether, according to a study by researcher Chainalysis Inc. Tether was used in 99 percent of Bitcoin spot trades in China this year, almost completely displacing the yuan, while Bitcoin trading in markets like Japan and Korea is still mainly conducted through fiat, the researcher found.

• The on-demand bike economy’s not dead yet, says one of the zombies
  Cash-strapped bike-sharing app Ofo says it “hasn’t given up” / Caixin Live

Beleaguered bike-sharing company Ofo is saying reports detailing some of its financial difficulties aren’t true. The company that was once a powerhouse but has been relegated to also-ran in China’s competitive shared bike business has issued a rare public statement refuting online rumors that it had borrowed more than 1.7 billion yuan ($240 million) in a bid to kick-start its moribund business.

• A swaggering tycoon is humbled
  Chinese tech Mogul Jia Yueting files for bankruptcy in U.S. / WSJ (paywall)
  Jiǎ Yuètíng 贾跃亭 — who used to say that Apple was “outdated” — “has filed for chapter 11 bankruptcy in the U.S., seeking protection from banks and other creditors that are owed as much as $3.6 billion.” Jia is a “major investor in electric vehicle maker Faraday & Future.” He is also known as the founder of Le.com, which became LeEco.

• Huawei in India
  China’s Huawei says open to ‘no backdoor’ agreement with India / Reuters
  “China’s Huawei Technologies is ready to enter into a ‘no backdoor’ agreement with India to allay security concerns, the telecom group’s local head said on Monday.” How reassuring. 

SCIENCE, HEALTH, AND THE ENVIRONMENT: 

• Climate change and Chinese policy
  Podcast: Guide to Chinese climate policy / Columbia SIPA Center on Global Energy Policy
  “Host Bill Loveless is joined by David Sandalow, the inaugural fellow at the Center on Global Energy Policy and the author of the 2019 edition of the Center’s Guide to Chinese Climate Policy, a book that helps readers navigate the complexities of China’s response to climate change.”

• Xi Jinping on Yellow River ecology
  Xi’s article on ecological protection, development of Yellow River basin to be published / Xinhua State media is heavily promoting an article by Xí Jìnpíng 习近平 “on ecological protection and high-quality development of the Yellow River basin” that will be published tomorrow on Party theory journal Qiushi. The story is a top headline on the People’s Daily website today (in Chinese). 

• Pesticide overuse on Chinese-owned farms in Laos
  Chinese banana plantations bring work and pollution to Laos / Chinadialogue
  “Banana plantations are raising local salaries but the chemicals used are poisoning rivers and land.”

• Meteorite fall
  Brilliant midnight fireball lights up sky over northeast China / Livescience.com
  “Videos of what appears to be a dazzling meteor were captured by surveillance cameras in the city of Songyuan in the province of Jilin, as well as by many residents across northeast China.”

POLITICS AND CURRENT AFFAIRS:

• Xi and Macron have a phone call
  Xi, Macron agree to jointly uphold multilateralism, tackle global challenges / Xinhua
  “Chinese President Xí Jìnpíng 习近平 and French President Emmanuel Macron agreed in a phone conversation Tuesday to join hands to uphold multilateralism and tackle global challenges.” Chinese readout here.

• Prague welcomes Taiwanese official after cutting Beijing sister city tie
  Official meets with Prague mayor after city shuns Beijing / Taipei Times  

[Taiwanese] Deputy Minister of Foreign Affairs Hsu Szu-chien (徐斯儉 Xú Sījiǎn) on Monday met with Prague Mayor Zdenek Hrib in the Czech capital to discuss the city’s decision to cut sister-city ties with Beijing due to a dispute over the latter’s ‘one China’ principle. 

The Prague City Council on Monday last week voted to terminate the pact after Hrib unsuccessfully tried to make Beijing remove Prague’s recognition of “one China” from the sister-city agreement, which was approved in 2016.

• Hong Kong protests
  Hong Kong protesters are targeting Starbucks. Apple could be next. / NYT (porous paywall)
  “Pro-democracy demonstrators have begun singling out companies that they consider enemies of their movement. Vandalism and calls for boycotts have followed.”

• Human rights
  Press freedom watchdog dismisses China’s ’70 Years of Progress on Human Rights’ white paper as ‘smokescreen’ / Hong Kong Free Press

While China claimed that it has become a true democracy and a champion of human rights [in a white paper] titled “Seeking Happiness for People: 70 Years of Progress on Human Rights in China”…international press freedom watchdog Reporters Without Borders slammed the report as a “smokescreen” intended to mask China’s “horrendous record” when it comes to human rights and freedom of the press.

• Commentary on Xi in Nepal and India
  China’s growing influence on display in Xi’s Nepal visit / Axios
  Xi’s visit was “massive news” in Nepal:

The president, prime minister and all members of the Cabinet went to the airport to receive and see off President Xi. The ruling party even organized a discussion on “Xi Jinping Thought” ahead of the visit.

“Nepal and China are brothers,” the Chinese president said. India used to say things like that and Nepalis would see it as an unwelcome reference to Indian domination.

• Xi Jinping’s trip to India and Nepal ‘was a much-needed win for China at critical time’ / SCMP

—Few tangible results from Chinese president’s unofficial summit with Indian Prime Minister Narendra Modi as leaders steer clear of touchy subjects.

—But trade talks commitment with New Delhi a diplomatic victory, analyst says, while Xi also shored up Kathmandu’s support for belt and road scheme.

• Xi Jinping is the first Chinese leader to visit Nepal in decades — why and what’s at stake? / ABC Australia

• Vietnam and South China Sea
  Vietnam calls for restraint in South China Sea after months of tensions with Beijing / SCMP
  “Vietnamese President and Communist Party chief Nguyen Phu Trong has called for restraint in the disputed South China Sea amid a tense months-long stand-off involving Chinese ships, state media reported on Tuesday.”

SOCIETY AND CULTURE:

• “Why couldn’t we have this little corner even online?”
  “We feel like cyber-refugees”: The decline of the last online sanctuary for China’s liberals / Quartz (porous paywall) 

Users last week found that Douban’s “broadcast” function — a way for users to follow one another directly, similar to Facebook’s news feed — had been disabled. The site now automatically turns user updates into private posts, which can’t be seen by anyone else. Users described the change in terms of a disaster: an “earthquake,” “massive power outage,” or the “collapse of a building.” 

“I feel like I’ve been thrown into outer space, none of my thoughts can be heard by others,” wrote Douban user Huo Niao (link in Chinese) on Matters, a Medium-like Chinese website. “The whole internet is now covered in darkness. Why have we suddenly become cyber refugees? Why couldn’t we have this little corner even online?”

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