China-backed SPAC buyout of Forbes "rings alarm bells," USTR says China failed to meet Phase 1 commitments & “Groundswell of support for Taiwan” divides EU, angers Beijing -- China Boss News 2.7.22
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China-backed SPAC buyout of Forbes "rings alarm bells" among staff & U.S. officials
"[A]larm bells are ringing in the Forbes newsroom and at the highest levels of government" over a $620 million “merger with Hong Kong-based Magnum Opus Acquisition, a special purpose acquisition company, or SPAC, that was initially formed with financial backing from the Chinese government," Daily Mail reported.
Daily Mail:
The Forbes takeover, first announced last August, has largely flown under the radar, but as it nears consummation, alarm bells are ringing in the Forbes newsroom and at the highest levels of [U.S.] government.
'This deal raises serious and grave concerns about Forbes, which is truly the mouthpiece of democracy and capitalism, and is effectively being taken over by the Chinese,' a senior source at Forbes told DailyMail.com.
Forbes "was family owned" for nearly a century until it sold "a 95% stake to [a] Chinese investment group called Integrated Whale Media" for $475 million in 2014, Axios has reported. Not long after the acquisition, Integrated Whale Media appears to have run into financial troubles which resulted in a Forbes family lawsuit “for missing an interest payment from money it borrowed . . . to finance part of the deal.”
Integrated Whale later defaulted on payments, Axios staff said, and there have been signs in recent years that the company’s Chairman and former CEO wanted to sell. Hong Kong-based Magnum Opus Acquisition is set to acquire Forbes from Integrated Whale Media at the end of February through a SPAC that “was financially backed in its early stages by China Investment Corporation, the country’s sovereign wealth fund,” Daily Mail staff said.
Daily Mail:
The SPAC acquiring Forbes, Magnum Opus, was financially backed in its early stages by China Investment Corporation, the country’s sovereign wealth fund, which held a 5.8 percent stake in the shell company when the Forbes merger talks first began last March, according to regulatory filings reviewed by DailyMail.com.
By the end of 2021, after the deal to acquire Forbes was announced in August, CIC had divested its shares in the shell company for reasons that are unclear, a filing on Friday with the Securities and Exchange Commission showed.
‘There are a lot of interesting questions about this deal,’ said one top venture capital investor, who is not involved with the transaction but has followed it closely.
‘The CIC was a filer, which should get anybody’s interest. In a recent filing they disappeared, but they did provide the original capital,’ the person said.
In its report, Daily Mail revealed the other 19 investors, mostly from Hong Kong and Mainland China, that “provided another $400,000,000 in funding to finance the Forbes takeover through a private investment in public equity (PIPE).” That contribution will give China-based investors a 49% ownership stake on completion of the deal, and “Magnum Opus, controlled by Chairman Jonathan Lin, will hold an additional 6 percent of the new company on an undiluted basis.”
In a “warning” about Chinese censorship of “America’s business bible,” a former Forbes editor told Daily Mail:
Daily Mail
‘Any institution that ever was committed to good journalism being partially owned – in any percentage – by any sovereign wealth-type investors, any governments, would be problematic,’ the former Forbes editorial employee told DailyMail.com.
‘But of course the Chinese government – if you were going to list them from most problematic to least, China and maybe Saudi Arabia would be near the top. That seems disturbing.’
The person noted that although CIC had officially divested its shares in Magnum Opus, the bulk of the PIPE investors are still based in China or Hong Kong, and speculated that they could be susceptible to pressure from Beijing.
But Daily Mail staff also made clear that, in the years since Hong Kong-based Integrated Whale acquired Forbes, “the editorial staff at Forbes have continued to publish articles critical of China, in particular highlighting the crackdown on press freedoms in Hong Kong, where pro-democracy news outlets have been harassed and shuttered.” Other criticisms of China’s heavy clampdown on “free speech” were published, too.
The Daily Mail
In 2019, top Forbes editor Randall Lane personally championed the creation of The One Free Press Coalition, which publishes a monthly list of the ‘10 Most Urgent’ cases of attacks on journalists around the world.
Last month, the members of the coalition, including Forbes, devoted the list entirely to abuses of the free press in China.
In the number one spot was Jimmy Lai Chee-ying, the publisher of the now-shuttered Hong Kong pro-democracy newspaper, Apple Daily. Lai is now serving a 20-month prison sentence and awaiting trial on separate charges that carry a life sentence.
Nevertheless, the paper also highlighted concerns that “[s]ome Forbes insiders” have about “whether the publication of such a list would be possible under the company’s new ownership.”
Next month’s acquisition has also attracted attention from senior members of U.S. government. Senators Dan Sullivan (R-Alaska) and Marco Rubio (R-Florida) have been “briefed on potentially troubling elements of the takeover,” although, at time of post, neither had released public statements in response.
For the rest of the Daily Mail’s exclusive, Forbes insiders slam deal with SPAC initially funded by China sovereign wealth fund, click here. For Axios’ report, Scoop: Private investors plot Forbes buyout as SPAC alternative, click here. For Isaac Stone’s 2017 op-ed in The Washington Post, Opinion: Chinese ownership is raising questions about the editorial independence of a major U.S. magazine, click here.
Law and International Xi
USTR: “China has failed to meet Phase 1 commitments.”
Deputy U.S. Trade Representative Sara Bianchi Tuesday told reporters that "China has failed to meet its commitments under a two-year "Phase 1" trade deal that expired at the end of 2021, and discussions are continuing with Beijing on the matter," Reuters reported.
Reuters:
Agriculture Secretary Tom Vilsack in late January told lawmakers that China's purchases of U.S. farm goods fell short of the Phase 1 goal by about $13 billion.
The U.S. Census bureau is expected to release final 2021 trade data for goods and services on Feb. 8, which will provide specifics on the shortfall.
Although she didn't provide any details of an official U.S. response at the time, Bianchi told reporters that it wasn't "our goal to escalate here," but that USTR was looking at all "tools we have in our toolbox" to hold China "accountable."
In an update posted today (Feb. 7th), however, Reuters’ said that the U.S. has called “for ‘concrete action’ from China to make good on its commitment to purchase $200 billion in additional U.S. goods and services in 2020 and 2021 under the "Phase 1" trade deal.”
Reuters:
The officials said Washington was losing patience with Beijing, which had "not shown real signs" in recent months that it would close the gap in the two-year purchase commitments that expired at the end of 2021.
The comments come a day before the U.S. government is due to release full-year trade data that analysts expect to show a significant shortfall in China's pledge to increase purchases of U.S. farm and manufactured goods, energy and services.
For the rest of Reuters’ report, U.S. trade official says China failed to meet 'Phase 1' commitments, click here. For Reuters’ Feb. 7th update, EXCLUSIVE U.S. calls for 'concrete action' from China to meet Phase 1 purchase commitments, click here.
FBI: China’s economic espionage “more brazen” and “more damaging” than ever
FBI director Christopher Wray again accused China of "stealing American ideas and innovation and launching massive hacking operations," describing its operatives as "more brazen" and "more damaging" than ever in a “stinging rebuke of the Chinese government just days before Beijing is set to occupy the global stage by hosting the Winter Olympics,” The Guardian reported.
Wray said the FBI is opening an new counter-Chinese intelligence case every 12 hours or so. He also discussed specific examples of Chines espionage, including “a recent case from Ohio” involving a Chinese operative and GE Aviation that he described as “a great illustration of the Chinese government’s multiprong strategy.”
Wray, January 31st, Reagan Presidential Library Speech Transcript:
…This past November, a Chinese intelligence officer named Xu Yanjun was convicted of economic espionage in Cincinnati. He was part of the Chinese Ministry of State Security, which is one of their spy services, and he was in a unit responsible for stealing aviation-related secrets.
Xu was targeting an advanced engine made by GE and a foreign joint venture partner—an engine that Chinese state-owned enterprises were openly working to copy. He corrupted insiders with access to sensitive company data and access to company IT infrastructures, so Xu could help MSS hackers, in cyber units back in China, target the same data at the same time. Xu used one of his recruits, or co-optees—this one a senior company IT official—to help him plant malware on a joint venture company laptop.
He kept in touch with the MSS hackers in China to make sure that they could access the implant that he’d uploaded. And then, to steal a particular composite fan blade technology that only GE possesses, he used another co-optee—this one an official at a prominent Chinese university—to contact a GE engineer through LinkedIn.
…So, they offered this engineer a trip to China to give a presentation on his work at a university there, and then another trip, to Europe. When we saw what was happening, we and GE were able to use our relationship to work together to foil the attempted theft—letting the scheme appear to play out but helping GE provide the engineer altered documents to steal. So, in this case, at least, because of GE’s quick work and cooperation, China was not able to leapfrog over a decade of hard work and billions in investment to undercut a major U.S. employer with nearly 50,000 employees. But we’re waging this battle every day.
For the rest of The Guardian’s update, China more ‘brazen and damaging’ than ever, says FBI director, click here. For the transcript of Wray’s Jan. 31st speech, Countering Threats Posed by the Chinese Government Inside the U.S. | Federal Bureau of Investigation, click here.
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