Jun 16, 2020

Axios China

Welcome back to Axios China. Today we've got Zoom's dilemma, China's solidarity with 1960's black activists, coronavirus in Beijing, and lots more.

  • Our new "Axios Today" podcast, hosted by @NialaBoodhoo, gets you smarter in just 10 minutes on the latest news and trends. Listen here!

⚡️ Situational Awareness: China has lost a landmark WTO dispute with the European Union, ending the country's bid to be granted market-economy status.

Today's newsletter is 1,395 words, a 5-minute read.

1 big thing: Zoom walks U.S.-China tightrope

Illustration: Aïda Amer/Axios

Last week, videoconferencing company Zoom sought to reassure global users that it would no longer shutter accounts outside of mainland China at Beijing's behest. But Zoom's struggle to please two governments with radically different ideologies is only just beginning.

Why it matters: U.S. tech companies with a significant presence in China face penalties or even expulsion from the country if they don't abide by Chinese government requests, and severe censure from U.S. civil society and government officials if they do.

  • These opposing pressures are forcing U.S. companies to create two sets of values within the same company to be able to operate in both markets — a phenomenon that may not be sustainable long term.

What's happening: Zoom said it would build up the capacity to block mainland Chinese users from joining online meetings, thus allowing it to comply with Chinese government requests without affecting users outside of China.

But Zoom's statement only inflamed further criticism.

  • U.S.-based professors who use Zoom to teach online classes to students in China worry their students could face repercussions if class discussion veers into territory the Chinese Communist Party considers off-limits.
  • U.S. senators pushed Zoom CEO Eric Yuan to uphold democratic values, writing in a letter, "We urge you to be true to your company’s stated values, which include embracing 'different ideas and visionaries.' Zoom must be transparent and not allow foreign governments, such as the PRC government, to dictate the terms of usage."

Zoom's primary dependence on China isn't a massive consumer base but rather its research and development team.

  • Zoom has about 700 engineers in China and several China-based subsidiaries, according to the company's most recent SEC filings.
  • The company has stated that having its research and development team in China helps it cut costs and is therefore a major driver of profit.

The big picture: The Chinese Communist Party is pushing foreign companies to comply with the demands of its surveillance state, which goes against the values of privacy and free speech that U.S. tech companies have traditionally espoused.

  • “You have these global companies that are trying to straddle doing business in the free world and doing business in the autocratic world," said Jacob Helberg, a senior adviser at the Stanford University Cyber Policy Center.
  • The dilemma is "how to be a company that has company values, and then trying to build products that are value agnostic," said Helberg. "It’s really hard to articulate and defend that. And it’s even harder over time when you try to gerrymander the same product, where you make one version for one market and another version for another market."

What to watch: A 2015 Chinese national security law obligates individuals and companies to provide assistance to the government to "safeguard national security," and a 2017 law requires private sector cooperation with China’s intelligence services.

  • This means Chinese law requires local employees to assist with government information and censorship, said Helberg.
  • That's an enormous security risk given that government officials, tech startups working on sensitive technologies, defense contractors and many others rely on Zoom meetings in both their professional and private lives.
  • Zoom denied that it provided user data or meeting content to Chinese authorities in the circumstances surrounding the recent account closures.

The bottom line: “If they don’t solve their fundamental problem of their engineering presence in China, all of the other adjacent steps they take are almost immaterial,” said Helberg.

2. When China stood with African American activists

Black Panther Party leader Huey P. Newton holds a press conference on his return from China where he met with Chinese leader Zhou Enlai, 1971. Photo: Bettmann/Contributor/Getty Images

Since the Black Lives Matter protests swept the U.S., Chinese government officials have repeatedly made public statements condemning racial injustice in the U.S. Those comments may seem largely opportunistic, as Beijing isn't known for standing up for oppressed groups these days.

  • But in the mid-20th century, the Chinese Communist Party and some black activists in the U.S. actually did make common cause.

Why it matters: Anti-racist activism in the U.S. has long attracted international support.

  • Yes, but: After opening in 1978, the Chinese Communist Party abandoned much of the revolutionary ideology that had previously guided its foreign policy.

The big picture: There was a time when China actively supported revolutionary causes beyond its borders and when Chinese leader Mao Zedong was viewed as a hero among colonized and oppressed groups around the world.

  • In the 1960s in particular, after the Sino-Soviet split, the party claimed China as the center of world revolution.
  • In August 1963, Mao gave a speech denouncing systemic racism against black people in the United States. He cast it as a result of imperialism, thus making it the duty of all enlightened revolutionaries around the world to fight for the "complete emancipation" of black people in America.

It wasn't a one-off statement. "The Chinese endeavor to cultivate political alliance with the African American left was meticulous, targeted, and effective," writes scholar Ruodi Duan.

The result: Those outreach efforts found success.

  • Malcolm X spoke admiringly of Mao's global leadership at a rally in Harlem in November 1964.
  • Huey Newton, the founder of the Black Panther Party, came to view Mao as a hero and visited China in 1971, meeting with Chinese leader Zhou Enlai.

Fast forward: Though it no longer openly supports revolutionary movements abroad, the Chinese Communist Party still claims to carry the mantle of a formerly subjugated nation standing up to the West. And that still has a degree of appeal in countries that were once colonized, such as Pakistan and Zimbabwe, which have close relationships with Beijing.

3. Decreasing concern about coronavirus preceded new outbreak in China

Illustration: Sarah Grillo/Axios

Chinese people had finally begun to feel a bit less worried about the coronavirus just before the new outbreak in Beijing late last week, according to a new poll by Morning Consult.

Driving the news: A new infection was reported in Beijing on June 12, the first local transmission there in months, and now more than 70 new cases have been found.

By the numbers: Around the end of May, 33% of Chinese poll participants said they were "very concerned" about the virus.

  • By last week, right before the new outbreak, just 26% of respondents said they were "very concerned."

But that's only a relative decline. 82% of Chinese people say they are at least somewhat worried about the coronavirus, a higher degree of concern than anywhere else.

4. What I'm reading

Research probe: Fifty-four scientists have lost their jobs as a result of NIH probe into foreign ties (Science)

  • "Some 54 scientists have resigned or been fired as a result of an ongoing investigation by the National Institutes of Health into the failure of NIH grantees to disclose financial ties to foreign governments. In 93% of those cases, the hidden funding came from a Chinese institution."

Hotseat: Zoom beefs up lobbying as privacy concerns accompany growth (Bloomberg Government)

  • This article from May details how, amid growing pressure from lawmakers, Zoom retained a squad of lobbyists to press its cause in D.C.
  • What to watch: The company will surely be making heavy use of its government relations specialists amid heightened scrutiny of its China connections.

Long arm: Serbian club denies releasing Chinese player over politics (Associated Press)

  • Hao Runze, who plays for a Serbian soccer club, lost his job last week after his father Hao Haidong, a former Chinese soccer star, publicly denounced the Communist Party.
  • Background: Last year, Serbia signed a major infrastructure deal under China's Belt and Road Initiative. Consider this the latest in a long parade of examples of how Beijing can use economic relationships for political leverage.

The new political correctness: Corporate intimidation and censorship in China (Human Rights Foundation)

  • “Many foreign companies that do business in China increasingly find themselves betraying the liberal values they were founded upon to placate the authoritarian pressure from the Chinese government."
  • The report finds that CCP pressure on foreign companies to self-censor rose dramatically in 2019 amid the Hong Kong protests.
5. 1 cartoon thing: Zoom is watching

Chinese political cartoonist Wang Liming, who goes by the pseudonym Rebel Pepper, drew this cartoon and posted it on his twitter account last week after Axios reported that Zoom had closed the accounts of U.S.-based Chinese activists:

Bonus: Seeking Axios reader questions

What's happening: Axios is partnering with the Center for a New American Security (CNAS) for the 14th Annual CNAS National Security Conference, The America Competes Summer Series. (Register here!)

Details: I'll be sitting down with CNAS CEO Richard Fontaine tomorrow (Wednesday) at 2pm, to talk about America and the post-pandemic world.

Get involved: Send me your questions and I'll choose a few to ask him during the event.

P.S. Thank you for sending along your book recommendations last week. Some of the highlights that I've now added to my reading list:

Perry Link's "An Anatomy of Chinese: Rhythm, Metaphor, Politics"

  • From the Axios China reader who recommended it: "The politics section is the simply best primer out there for comprehending CCP official pronouncements. The metaphor section ponders how Chinese speakers might perceive the world in fundamentally different ways due to predominant metaphors in the Chinese language. And the rhythm section is really fun."

A few others:

  • "Narrative Economics: How Stories Go Viral and Drive Major Economic Events" by Robert Shiller
  • "The Year 1000: When Explorers Connected the World — and Globalization Began" by Valerie Hansen
  • "Genghis Khan and the Making of the Modern World" by Jack Weatherford