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Axios China

Welcome back to Axios China. Today we've got the latest on the Justice Department's China Initiative, good news on Chinese consumer confidence, a new China ending to "Fight Club," and lots more.

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Today's newsletter is 1,655 words, a 6-minute read.

1 big thing: DOJ's China Initiative under scrutiny

Illustration: Annelise Capossela/Axios

The tide of public opinion may be turning against the Justice Department's China Initiative, as more cases fall apart and more of the researchers charged are speaking out.

The big picture: Chinese government-linked economic and industrial espionage in the United States is a real concern, but the China Initiative's flaws may be overshadowing the problem it was intended to address.

Driving the news: A high-profile China Initiative case fell apart last week when prosecutors dropped all charges against Massachusetts Institute of Technology scientist Gang Chen.

  • "For 371 days, my family and I went through a living hell," Chen wrote in an essay published last week by the Boston Globe, referring to the number of days between his arrest and the charges being dropped.
  • “While I am relieved that my ordeal is over, I am mindful that this terribly misguided China Initiative continues to bring unwarranted fear to the academic community and other scientists still face charges,” Chen said in a statement.

Catch up quick: Chen's arrest in January 2021 on grant fraud charges followed a string of similar arrests of researchers of Chinese heritage, but it generated a wave of public indignation the previous arrests had not.

  • Chen's colleagues immediately took to Twitter to contest and even ridicule the charges against him.
  • More than 170 MIT professors signed an open letter declaring their support for their colleague, and MIT backed him and covered his legal costs — unlike scientist Anming Hu, whose employer, the University of Tennessee, fired him after his arrest in February 2020 for wire fraud, reinstating him after a judge dismissed the charges against him.

A growing number of lawmakers, Asian American organizations and civil rights groups have demanded a probe of the China Initiative for what they say is racial profiling of Chinese American researchers.

  • "The news about Dr. Chen's case is a promising development," said Patrick Toomey, a lawyer with the American Civil Liberties Union, in a statement.
  • "We have seen the damaging effects of this discriminatory program and hope this is the beginning of the end. ... Under President Biden, the Justice Department must fundamentally reform its policies that enable racial profiling in the name of national security," Toomey said.

The China Initiative has resulted in several guilty verdicts, sometimes involving clear cases of economic espionage and tech theft, but in other cases for what appear to be relatively minor administrative infractions.

  • Harvard chemist Charles Lieber was recently convicted of lying to the FBI about his China ties and for not reporting income from a Chinese university on his tax returns.

What they're saying: The Department of Justice should separate actions aimed at preserving research integrity from those targeting espionage, Georgetown Center for Security and Emerging Technology analyst Emily Weinstein wrote recently for Foreign Policy magazine.

  • "Lumping together cases such as Lieber’s under a broader espionage umbrella does more harm than good."

Go deeper: The DOJ's China Initiative could be problematic for civil rights

2. Chinese consumer confidence stabilizes

Illustration: Aïda Amer/Axios

After falling sharply in late 2021 due to COVID outbreaks and real estate worries, Chinese consumer confidence stabilized in January, according to a new survey by Morning Consult.

Why it matters: "Economic disruptions in China could potentially spill over to present headwinds to the global economy," the report states.

Details: Consumer confidence in China tumbled throughout November and December, according to Morning Consult’s Index of Consumer Sentiment for China, as strict lockdowns hit numerous cities affected by new coronavirus outbreaks.

  • Uncertainty in the real estate sector also drew concerns among consumers, many of whom have parked their household wealth in apartments, as real estate giant Evergrande defaulted on payments on its massive debt.
  • Consumer confidence stopped falling and leveled off throughout January, though it hasn't recovered to the higher levels seen in summer 2021.

What to watch: Analysts have long sounded the alarm about China's overheated real estate sector, which may be headed for decline after decades of speculation pushed prices sky high.

3. The rise of China's secondary sanctions

Illustration: Aïda Amer/Axios

In its dispute with Lithuania, Beijing has debuted a form of economic pressure analogous to America's powerful secondary sanctions.

Why it matters: The approach challenges the idea that decoupling from China's market can free a company, or a country, from Beijing's coercion.

What's happening: Beijing is pressuring multinational companies with business in China to cut ties with Lithuania, after the Baltic nation allowed Taiwan to open an unofficial representative office.

  • Lithuania has relatively little direct trade with China, but its factories supply many multinational companies that do.
  • German companies with Lithuanian suppliers have since seen their business with China grind to a halt, and they're pressuring the Lithuanian government to meet Beijing's demands, Reuters reported.

In the past, Beijing has used denial of market access to punish companies and countries for political infractions, such as criticizing Chinese policies in Xinjiang or engaging too closely with Taiwan.

  • This only gave the Chinese government leverage over companies and countries with direct business interests in China.
  • Pressuring third parties to exclude an entity that has offended Beijing is similar to the concept of a U.S. secondary sanction that punishes third parties outside the U.S. for doing business with a sanctioned entity.
  • Secondary sanctions could potentially allow Beijing to greatly expand the reach of its economic coercion.

The big picture: "China is increasingly using its trade dominance to sanction countries in ways that strongly resemble the U.S.'s dominant position in international finance, but are much less transparent and comprehensible, and to what are arguably much less constructive ends," said Matt Schrader, adviser for China at the International Republican Institute.

  • Though the effects are similar, Schrader said he is leery of a direct comparison with U.S. secondary sanctions, because "U.S. sanctions go through a careful legal process, are appealable, and are actually declared."

What to watch: The EU has not yet taken significant measures to support Lithuania, even though it is an EU member.

  • "With everything going on in Ukraine, China and Lithuania are not on the top of everyone’s mind," said Bryce Barros, China affairs analyst with the German Marshall Fund's Alliance for Securing Democracy.
4. Catch up quick

1. Beijing officials are urging local districts to maintain "full emergency mode" for COVID protocols as the Olympics approaches. Go deeper.

2. Democrats are trying to revive a $250 billion tech investment bill, aimed at competition with China, after it stalled in the House, the Wall Street Journal reports.

3. Chinese state media Twitter accounts are echoing Russia's talking points on Ukraine, Brookings Institution's Jessica Brandt noted in a Twitter thread.

4. Peru joined the China-led Asian Infrastructure Investment Bank with a deposit of $154.6 million, dwarfing the $20 million combined total deposits of AIIB members Chile, Argentina and Brazil, the AIIB's website shows.

5. The Chinese Consulate in New York is hiring Western TikTok influencers to promote positive Olympic content, The Guardian reports.

5. Learning from the Cold War

Image: Yale University Press

The U.S. is facing another era of great power rivalry — this time with both China and Russia. Policymakers should learn everything they can from Cold War history to avoid repeating its mistakes, an American historian writes in a new book.

Why it matters: Long-term competition can exhaust a nation and cause deadly conflict if handled poorly, but fallout can be limited and higher ideals can gain a stronger footing if competition is handled well.

Details: In "The Twilight Struggle: What the Cold War Teaches Us about Great-Power Rivalry Today" (Yale University Press, 2022), Hal Brands, a professor of global affairs at the Johns Hopkins School of Advanced International Studies, puts into historical context the challenges that Russia and China present today.

  • The Cold War isn't a perfect analog to today's situation. But "put simply, the Cold War is the only history of sustained competition that America has," Brands writes. "To prevent policymakers from using that history badly, scholars must help them use it well."

Read the full story.

6. What I'm reading

Back in the USSR: Chinese policy adviser warns against blind pursuit of absolute security (South China Morning Post)

  • Jia Qingguo, a former dean of Peking University’s international relations school who also sits on the standing committee of the Chinese People's Political Consultative Conference, has written a journal article warning against following in the Soviet Union's footsteps to pursue "absolute national security."
  • His article is "full of thinly veiled criticisms against hawkish outlooks," and "cites the Soviet Union’s decades of massive defense spending as a typical example of the drawbacks of ignoring long-term security, which led to the federation’s ultimate disintegration in 1991," SCMP's Jun Mai writes.

School's out: For China’s international students, two years of limbo take a toll (Wall Street Journal)

  • "Many foreign college students once determined to grab a piece of China’s success say they are deeply frustrated by China’s 'zero-Covid' restrictions, which continue to shut most of them out of the country."
7. 1 movie thing: New ending for "Flight Club"

Image: 20th Century Studios

The 1999 film "Fight Club" starring Brad Pitt and Edward Norton has a new ending in a new online release in China, Vice's Viola Zhou writes.

The big picture: Chinese government regulators tend to censor movie content that glorifies anti-government sentiment. They prefer storylines that show (good) state authorities triumphing over (bad) rebels and lawbreakers.

  • The anarchist, anti-consumerist leanings in the movie's original ending didn't quite make the cut, Zhou writes.

The new ending cuts out before the film's shocking denouement, which involves a bomb exploding and the implied dissolution of society, and simply inserts a card with white text on a black background that reads:

"Through the clue provided by Tyler, the police rapidly figured out the whole plan and arrested all the criminals, successfully preventing the bomb from exploding. After the trial, Tyler was sent to the lunatic asylum receiving psychological treatment. He was discharged from the hospital in 2012."

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