Protocol | China
The people, power and politics of Chinese tech, every Wednesday.
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The butterfly effect comes for global tech

Sheep graze on a farm next to a large coal power plant in Baotou, Inner Mongolia

Good morning. In this week's Protocol | China: Chinese geopolitics comes for your tech, Beijing doubles down on blockchain, and TikTok reaches a global milestone.

The Big Story

The butterfly effect comes for tech

What starts as global politics, often far away, is increasingly ending up hitting tech. This week gave us two huge examples of how they intertwine.

Beijing may not have been thinking about supply chains for global technology or the fate of U.S. tech companies when it struck back at Australia for investigating COVID-19's origins by banning coal imports from the continental nation. But it turns out it should have been.

  • A dearth of coal (and Beijing's understandable insistence on cutting overall energy intensity) is leading to nationwide power outages, particularly at factories in Guangdong and Jiangsu provinces.
  • Supply chains for chipmakers and several Apple suppliers have been hit, adding yet more uncertainty into a global economy that's already showing serious trouble meeting overall demand with enough supply.
  • That could ultimately affect the price, and availability, of multiple chip-powered products, including your iPhone.

Canadian officials may have struggled to pronounce "Huawei" when its border services first detained executive Meng Wanzhou at Vancouver International Airport in December 2018, based on a U.S. extradition request for skirting sanctions against Iran. Yet that too has had massive effects on China's relations with the West that are just beginning to be understood.

  • Meng's release this week from house arrest in Vancouver to a rapturous reception in China conceded with Beijing's release of Canadian citizens Michael Spavor and Michael Kovrig on "medical parole," despite Chinese authorities declaring again and again that they had "ironclad" evidence both were spies.
  • The sad episode of the "two Michaels" is the beginning, not the end, of an ugly new phase in China's relations with the West, one that will likely demarcate further division between their tech spheres.

Tech used to work around political divisions, or so we thought. But it's clear by now that it is subordinate to politics, and will be for the foreseeable future.

  • In large part due to Spavor and Kovrig's treatment, about half of Western China experts surveyed in June have already said they probably won't be heading to China again — ever. Journalists from major outlets working in China have already been expelled. When (OK, if) full travel reopens in the future, how many tech execs will return? The slow exodus of Westerners from China over the past few years is an under-covered trend.
  • On a long enough timeline, the lack of in-country knowledge will create what I've called an "information winter," making it ever harder for big tech companies to make intelligent investment decisions about China, even when it's a Chinese company listing on a U.S. exchange.

The takeaway: It's not feasible to view tech, business and politics as separate spheres any more. What happens in any one of these areas is ultimately coming for tech, too.

On Protocol | China

  • Crypto's banned in China. So why are NFTs so popular? Turns out, you can separate the two. Zeyi Yang explains how China has managed to develop a thriving — and unique — NFT market.
  • But Beijing is doubling down on blockchain. A dislike of cryptocurrencies clearly doesn't mean a dislike of the underlying technology. Just days after formalizing a crypto ban, Chinese authorities said they want to create "famous companies" and "famous brands" in the blockchain space. Zeyi Yang has the story.
  • A game "companion" platform's phantom shutdown. Bixin, a platform that has connected (primarily female) "companions" with (primarily male) gamers in the virtual world, told the world it was shutting down under regulatory pressure. But it told its users it would keep on doing what it was doing. Shen Lu has more.

A MESSAGE FROM TRELLO

Michael Pryor, co-founder of Trello (now a part of Atlassian), explains what he's learned along the way and his advice for other companies that are looking to build a truly collaborative culture that keeps employees feeling connected — from wherever they choose to work.

Learn more

On Our Radar

  • Alibaba and WeChat finally reconnect. The two tech titans have had an acrimonious, often petty rivalry dating back to 2013, with the companies having blocked content from each other's ecosystems. But those artificial firewalls have started to collapse at Beijing's insistence: Chinese media reported on Tuesday that several Alibaba apps, including Taobao, are now connected to WeChat's digital wallet. Alibaba confirmed the news to Chinese tech publication 36Kr, adding in a statement that the firm now believes that "sharing, connectivity and openness are the foundation of a healthy digital ecosystem."
  • Content moderation is ByteDance's biggest department based on employee numbers, according to Chinese publication Baobian. It's also the easiest one to get into for many young graduates — if, that is, you can endure the long hours, low pay and tedious tasks. Shanshan, an ex-ByteDance content reviewer, told Baobian she was required to review 1,390 videos every day, each longer than 1.5 minutes. (For those doing the math, that adds up to well over 24 hours in a day.) She eventually left ByteDance.
  • TSMC's global footprint, illustrated. Taiwan's hugely important chipmaker has faced challenges in keeping up with global demand. Small wonder given that the U.S., China and other countries are all competing to source the most advanced chips. Independent Chinese-language media Initium recently published an interactive map illustrating TSMC's 34-year history of global expansion. Click here to watch how a small, local factory in Taiwan has transformed into a behemoth supplying 50% of all contract chip fabrication. (Chinese language.)
  • China's digital economy is growing like gangbusters. Beijing released the 2021 China Internet Development Report on Sunday at the annual World Internet Conference in Wuzhen. According to China National Radio, the report shows that China's digital economy surpassed the equivalent of $6 trillion in 2020, up 9.7% from last year, and accounted for 38.6% of the country's GDP. By comparison, the U.S. digital economy amounted to $2.1 trillion in 2019, or 9.6% of U.S. GDP, according to the latest figures released by the Bureau of Economic Analysis.

Big Brother Beijing

  • Here come the socialist algorithms. China's powerful Cyberspace Administration announced on Wednesday that it will require algorithms to be "fair and transparent" and "uphold socialist values" in a set of rules to be released within the next three years.
  • Ant Group was told to stay in its lane. In a payment industry forum on Friday, Fan Yifei, deputy governor at People's Bank of China, said the PBOC and other financial regulators have talked to Alibaba's Ant Group several times, asking the company to "return to its payment processing origin."
  • Yet more internet restrictions for Chinese youngsters. In Beijing's latest 10-year guidelines designed to improve the welfare and well-being of women and minors — yes, it puts those two groups in the same category — the State Council now mandates internet service providers (including online gaming companies, livestreaming platforms and social media platforms) set up systems to control the screen time and access for users under 18. And those service providers cannot provide livestreaming accounts to anyone under 16.

Straight From China's Web

  • Tesla China is suing its own customers for defamation. Several Chinese Tesla owners who publicly protested against the company for what they said were faulty parts have since been sued by the company for defamation, according to one owner's Weibo post on Monday. That owner, known nationwide for protesting a brake issue while standing atop a Tesla car at an auto trade show in April, said Tesla has counter-sued her and asked for over $770,000 for compensation. Another Tesla owner, who just won a lengthy court case against Tesla for deceptive marketing this month, was also sued by the company for the same reason, according to a profile of him in Chinese publication Perpetual Light Studio.
  • A crossdressing influencer's Douyin and Weibo account were suspended, with Douyin citing "vulgar" content. On Sunday, the influencer, Kangyaya, "confessed" on Weibo that his cross-dressing videos had had a bad influence on minors and apologized for his behavior. To top it off, he announced he'd stop filming and leave the internet altogether.
  • Ultraman is censored, then uncensored. On Sept. 24, Chinese web users found that popular Japanese superhero sci-fi series Ultraman Tiga had disappeared from video-streaming platforms, including Bilibili, Tencent Video and iQiyi. On the same day, a trending topic on Weibo referred to Ultraman's "violent" content. The removal of the superhero show caused uproar on social media; three days later, Chinese media reported that the video platforms had put Ultraman back on the shelf, albeit with certain content still censored.

China Goes Global (TikTok Edition)

  • TikTok reached a mega milestone: it now has 1 billion monthly active users. Earlier this year, Sensor Tower revealed the app and its Chinese original Douyin had together passed 3 billion installs globally, becoming the first non-Facebook app to hit that number. It's taken just five years for TikTok to reach the Big B; by contrast, it took Facebook eight years.
  • Satya Nadella said the TikTok deal was "the strangest thing" he'd ever worked on while speaking at the Code Conference on Monday. TikTok approached Microsoft about the deal to help navigate geopolitical tensions, the Microsoft CEO said, but then the pressure coming from the U.S. government mysteriously died off. "There was a period of time when I felt that the [U.S. government] had some particular set of requirements, and then they just disappeared," Nadella said, answering questions from journalist Kara Swisher.

One More Thing

Pride and protest, with Chinese characteristics

A picture of a T-shirt that remixes the iconic rainbow colors with WeChat's 404 error message is making the rounds on Chinese social media. The T-shirt, a protest against censorship of LGBTQ+-related accounts and content on WeChat, contains language familiar to many Chinese web users: "This account has been blocked. Content cannot be viewed."

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