Swift TikTok ban a warning-shot to China, Inc., Plus Wallstreet invested in 'dozens' of blacklisted China firms, Congress says -- China Boss News 4.26.24
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What happened
President Biden on Wednesday signed a bill to divest-or-ban TikTok into law.
The legislation gives TikTok 9 months to find a suitable buyer for its US platform, with a possible three month extension at the White House’s discretion.
Biden’s signature followed closely on the heels of a surprisingly decisive 79-18 vote in the Senate on Tuesday. The House had passed a different version of the bill last month, but several senators said they had misgivings about forcing the app’s sale, hinting that they would not approve the measure.
According to Financial Times, however, Republican House Speaker Mike Johnson was able to get the bill through by “bund[ling] it with funding for Ukraine, creating a package that most senators would be very unlikely to oppose.”
Even the more reticent of senators made a easy flip, news staff noted.
Analysts say that China is unlikely to permit TikTok’s divestiture if, as expected, the app’s algorithm technology falls under a new export control law for “dual-use items, goods, technologies, and services related to national security and interests.” Other laws “governing foreign investments, mergers, acquisitions, and equity dealings involving Chinese companies” may also prohibit the sale.
In other words, unless Beijing finds special reasons for allowing a sale, it is all but certain that TikTok will be banned in the U.S.
Why it matters
TikTok outs itself (again)
TikTok has responded to the law by “vow[ing] to file a legal challenge” on the grounds that a ban is “unconstitutional.” It promised users it wasn’t bowing out and that it would protect the “space where Americans of all walks of life can safely come to share their experiences, find joy, and be inspired.”
Rich, yes. But CEO Shou Chew, a Singaporean surely hired by Bytedance to subdue concerns that TikTok is merely a tool of totalitarian influence used China’s information war with the West, went even further by extolling the virtues of a freedom-loving America as he tried to mobilize the app’s users against the new law and the American government.
In a video posted with the company’s statement, he told TikTok users that banning the app wasn’t due to its Chinese ownership.
“Make no mistake, this is a ban. A ban on TikTok and a ban on you and your voice. … It's actually ironic because the expression on TikTok reflects the same American values that make the United States a beacon of freedom. TikTok gives everyday Americans a powerful way to be seen and heard. … Rest assured we aren't going anywhere. We are confident and we will keep fighting for your rights,” he said.
Paradoxically, moves like Chew’s further undermine the company’s interests. They also demonstrate why permitting a Chinese-owned social media firm to latch onto the hearts and minds of millions of Americans’ is not the best idea.
That irony is not lost on lawmakers, either, especially after staffers last month were forced to spend a week of the legislative agenda fielding thousands of phone calls from confused app users - many of whom were minors - that TikTok organized.
Politico also noticed the sharp end the TikTok’s schtick.
“TikTok’s new tactic illustrates how the social media giant can quickly deploy its user base of 170 million Americans to do its bidding,” it said.
China’s ‘material support’ for Russia’s war
While Biden was signing the TikTok ban into law, Secretary of State Antony Blinken was making the rounds in China to give a final “warning that the US and its European allies are no longer prepared to tolerate [its] sale of weapon components and dual-use products to Russia,” The Guardian said.
A senior US official told news staff that the US is “committed to taking the steps necessary to defend our national interests,” and that new sanctions were being considered against companies “that severely undermine security in both Ukraine and Europe.”
“This will be a key issue of discussion while we’re in Beijing,” and “[m]y expectation is that friends in Europe will have opportunities to express their concerns both in public and private to Chinese officials as well,” the official added.
Earlier this month, the U.S. revealed intelligence showing China has been “surging equipment sales to Russia,” giving its war machine a level of support that borders on “material.”
“The White House believes that the public airing of the intelligence findings has led China, at least for now, to hold off on directly arming Russia. China’s economy has also been slow to emerge from the COVID-19 pandemic. Chinese officials could be sensitive to reaction from European capitals, which have maintained closer ties to Beijing even as the U.S.-China relationship has become more complicated,” AP said.
As if on cue, European officials, both, in Brussels and the various member states, initiated new crack downs on firms and persons linked to China.
Financial Times reported a “dawn raid” by the European Commission, together with Polish and Dutch law enforcement, on the Chinese security equipment supplier Nuctech. Four individuals linked to Chinese intelligence agencies - including one that was a top aide for a well-known far right European Parliament member - were arrested in Germany for spying.
But the pace at which American TikTok legislation was pushed past a more cautious Senate, taken together with the Wall Street Journal’s bombshell report on Tuesday that Biden officials are preparing to “cut some Chinese banks off from the global financial system,” is more than enough to make China, Inc.’s head spin.
Make no mistake, this is a well-coordinated multilateral effort to stop Chinese firms, who, at the behest of Beijing, are continuing Russia’s war of attrition in Ukraine.
It’s a imminent ban on any part of China, involved in hot or “grayzone” tactics, that will be implemented in order to protect the space where Americans, Europeans, Ukrainians and everyone else can live free of malign foreign influence and internationally-recognized crimes of aggression, like illegal invasions and wars.
This Week’s China News
The Big Story in China Business
HOUSE PROBE FINDS WALLSTREET INVESTED IN 'DOZENS' OF BLACKLISTED CHINA FIRMS: A new probe by Congress has revealed that “Wall Street used billions of dollars of American retirement savings and other investments to buy shares in index funds that included more than five dozen blacklisted Chinese companies,” Wall Street Journal’s Lingling Wei reported last week.
The bipartisan Congressional committee that conducted the probe found that Blackrock and MSCI, a stock index compiler, had “facilitated investment in Chinese companies accused of the US government of bolstering China's military and violating human rights,” she said.
In the report released last week by the House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party (CCP), found that BlackRock and MSCI “provided $6.5 billion to 63 PRC companies that the U.S. government has blacklisted or otherwise red-flagged because they advance the PRC’s military capabilities or support the CCP’s human rights abuses.”
“What may surprise many Americans is that the activity by U.S. financial institutions described below is not illegal. It is time for Congress to act,” the report said.
Wall Street firms are feeling the heat as Congress ramps up the pressure on managers to quit funding the Chinese military industrial complex. There’s unlikely to be any quick reprieve or near-term tolerance for lobbying, especially as the November election looms.
“As the November election gets closer, U.S. political and foreign-policy analysts say, Trump’s gloves-off approach is expected to put pressure on the Biden administration to move faster on tariffs and other trade and investment restrictions aimed at China. Biden on Wednesday called for more than tripling a key tariff rate on Chinese steel and aluminum products,” WSJ’s Wei wrote.
“Since late last year, Biden’s team has set up about a dozen working groups with Chinese counterparts to engage in conversations about economic and other policies. That has helped dial back rancor in the bilateral relationship, but is frowned upon by lawmakers advocating a tougher approach to China,” she added.
Law and International Xi
BIG WEEK FOR INTERNATIONAL CHINA SCANDALS: On Saturday, the New York Times released the results of an investigation "into an unreported case in which 23 top Chinese swimmers tested positive for a powerful banned drug in 2021,” but were subsequently “allowed to compete” at the Tokyo Olympics.
“Several of the athletes who tested positive — including nearly half of the swimming team that China sent to the Tokyo Games — went on to win medals, including three golds. Many still compete for China and several, including the two-time gold medalist Zhang Yufei, are expected to contend for medals again at this year’s Summer Games in Paris,” news staff said in their original report on the scandal.
Also last week Reuters reported that celebrated Chinese marathon runner, He Jie, and three of his African competitors “had their results cancelled after an investigation found that the three slowed down near the line allowing the Chinese athlete to finish first” at the recent international half marathon held in Beijing.
“He was slightly behind the three African runners as they approached the end of the race but they slowed down and waved the Chinese athlete ahead as they gestured towards the finish line. … The finish drew widespread skepticism with some social media users commentating that the result was ‘embarrassing’ for He, a member of China's marathon team and national record holder,” news staff said.
Shocking behavior at the UN: On Tuesday, former Office of the High Commissioner for Human Rights employee Emma Reilly testified at UK House of Commons Foreign Affairs Committee hearing that China “imposes a secret conditionality across UN agencies that the monies so provided may not be spent in states with diplomatic relations with Taiwan,” as Taipei Times reported.
“‘Essentially, the PRC instrumentalizes the UN to increase pressure on’ small island developing states and least developed countries, ‘which account for a majority of states that still have formal diplomatic relations with Taiwan,’ to transfer their allegiance to the PRC,” she said.
In another egregious abuse of the UN system, Reilly said that the “Chief of the Human Rights Council Branch in OHCHR, a French national, was secretly providing the PRC with advance information on which human rights activists planned to attend the Human Rights Council,” which “included British citizens and residents.”
“The families of non-governmental organization (NGO) delegates [in China] were visited by Chinese police and ‘forced to phone them to tell them to stop their advocacy, arbitrarily arrested, placed under house arrest for the period of the meeting, disappeared, sentenced to long prison terms without cause, tortured, or, as regards Uyghurs, put in concentration camps,” Reilley said.
“Some individuals had died in detention, and ‘in at least one case, the Chinese government issued an Interpol red notice against an NGO delegate,’” she added.
To watch Reilley’s oral testimony, click here.
Geopolitics
ARGENTINA’S MILEI SNUBS CHINA, GREEN-LIGHTS US NAVAL BASE: Argentina made an abrupt turn in its foreign policy last week with a decision on military procurement that is likely to have “far-reaching repercussions for the U.S. and China,” analysts told the VOA.
“Argentina’s decision to purchase 24 F-16s from Denmark rather than go with a competing bid from China led some Chinese commentators to lament the setback. Beijing has been trying for more than a decade to sell Argentina JF-17 fighter jets China developed with Pakistan,” news staff said.
London-based Argentina specialist Christopher Ecclestone told VOA that “[t]he choice was ‘somewhat inevitable’ given the pro-freedom, anti-communist position of recently elected Argentine President Javier Milei.”
But “Milei’s decision to partner with the U.S. more broadly,” especially on a new naval base near the Strait of Magellan could be a real game-changer. China has been pursuing a new base, located in the same spot, for years.
“In a speech earlier this month, Milei said Argentina would coordinate closely with the United States on the development of the Ushuaia naval base. Milei’s remarks were made after he flew from Buenos Aires to meet U.S. Army four-star General Laura Richardson in Ushuaia. Her visit to Argentina this month was her third since taking the helm at the U.S. Southern Command in October 2021,” VOA staff noted.
The Ushuaia naval base has been used by Argentina’s navy since the Peron era. Situated on the southernmost tip of the country, it's a deep water port perfect for Antarctic exploration, but it's strategic location facing the Strait of Magellan could have given China command of the seas between the Atlantic and Pacific Ocean, experts say.
FBI SAYS CHINESE HACKERS ‘BURROWED’ INTO CRITICAL INFRASTRUCTURE: In a speech at Vanderbilt University on Thursday, FBI Chief Christopher Wray said that "Chinese government-linked hackers have burrowed into US critical infrastructure and are waiting “for just the right moment to deal a devastating blow,” The Guardian reported.
“An ongoing Chinese hacking campaign known as Volt Typhoon has successfully gained access to numerous American companies in telecommunications, energy, water and other critical sectors, with 23 pipeline operators targeted . . . China is developing the ‘ability to physically wreak havoc on our critical infrastructure at a time of its choosing.’ … ‘Its plan is to land low blows against civilian infrastructure to try to induce panic,” Wray warned.
As I mentioned last week, Microsoft’s Threat Analysis Center has also warned that “China is using fake social media accounts to poll voters on what divides them most to sow division and possibly influence the outcome of the U.S. presidential election in its favor.”
And, in August, I told you about the hunt for PRC malware in military systems, and that the New York Times reported Microsoft found Chinese malware in Guam, home to Andersen Air Force Base, in May.
Best Reads
They helped China enforce zero-Covid. New rules will see them go ‘professional’ (Phoebe Zhang, South China Morning Post): Zhang highlights how China could be bringing back Mao-era community surveillance using the “[e]xisting community ‘grid’ workers, such as those recruited during the Covid years to track public movement.”
Making Sense of China’s Magical 5.3% Growth (Shuli Ren, Bloomberg): Former investment banker and Bloomberg Opinion’s Asian Markets columnist Shuli Ren gives two reasons that might explain the “difference” between China’s recent surprise growth numbers and ordinary folks more pessimistic “daily perceptions.”
Stop appeasing China at the World Bank and IMF (D.J. Nordquist and Dan Katz, The Hill): Nordquist and Katz argue that the West should “ostracize China” from the Bretton Woods institutions as it’s non-market system defeats their purpose.
Middle Kingdom Surreal
GERMANY ARRESTS FOUR PERSONS ON CHINA ESPIONAGE CHARGES: Politico reported on Monday that police took custody of three German nationals “suspected of supplying information on military technology to a Chinese intelligence service."
Those arrests preceded the more scandalous news that an aide to a top European lawmaker who was “working for the far-right Alternative for Germany (AfD) party” had been detained “over accusations he spied for China,” Politico said in a separate report.
“The staffer, identified as Jian G. by German authorities, works for MEP Maximilian Krah who is the AfD’s top candidate in the European Parliament election in June. …The bombshell arrest, which rocks the AfD while it polls in second place nationally, sparked calls from one top European lawmaker for a tougher crackdown on Chinese and Russian infiltrators attempting to influence EU democracy,” news staff said.
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Thank you, Shannon