Protocol | China
The people, power and politics of Chinese tech, every Wednesday.
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Has the US already lost the tech competition with China?

U.S. Pentagon

Good morning, and welcome to Protocol | China. Jack Ma — China's most beloved capitalist until he gainsaid regulators — has "reappeared," recently having been spotted in Hong Kong. Huzzah? It's a bit silly to say Ma ever "disappeared" or was "missing" just because reporters haven't seen him lately. After all, the spotlight in China burns too bright these days for anyone not named Xi Jinping.

In today's Protocol | China: A former U.S. official says China's already won the tech race, Huawei's done Down Under, and bugs get a steampunk twist.

The Big Story

Has the US already lost?

In a blistering indictment of the U.S. military's capacity to innovate, the Pentagon's now-former chief software officer Nicolas Chaillan told the Financial Times on Sunday that "we have no competing fighting chance against China in 15 to 20 years. Right now, it's already a done deal; it is already over in my opinion."

  • Chaillan's main complaints: "kindergarten-level" cyber defense at many U.S. government departments and the staffing of cyber initiatives with civilian leaders who lack the relevant experience.
  • In the face of that, China's advances in AI and cyber mean it's heading for global dominance, he said.

The upshot of Chinese tech dominance is broad, Chaillan argued, suggesting that it could help the nation control things such as global media narratives and geopolitics.

  • You could say Chaillan is calling out "involution," U.S. style. China's tech scene often invokes the term to complain about relentless competition that leads nowhere in particular.
  • But maybe that's what's happening in the U.S. too, with a political system that manages to be both vicious and largely unproductive — all in the face of major challenges demanding coordination and cooperation.
  • The result may be a failure to mobilize resources around the biggest tech issues of the present, which could cause big problems for the U.S. in the future.

There are plenty of "China collapse" narratives to counter this picture, certainly according to the sources we at Protocol | China speak with. But that shouldn't make U.S. policymakers feel complacent.

  • It's been popular in the West to say that China's various difficulties — from a greying population to an overweening state to a massively overpriced glut of real estate — will ultimately bring down Beijing's leadership, somehow rendering much current hand-wringing irrelevant.
  • But none of that's a plan, and no one should hope for a messy collapse, which would have vast global ramifications and take nest eggs, livelihoods and possibly lives with it.
  • And Chinese society is resilient in its own way, with the country and the Party that controls it having weathered debt binges, shoddy construction, shadow banking products, social unrest, high inequality, demographic cliffs and on and on for decades.

The big picture: China is a massive force to be reckoned with, whatever its weaknesses. We should not assume that its internal challenges will reverse the technological progress it's currently making, even if those challenges constitute a real long-term threat to Chinese power.

  • A recent Atlantic piece contends that "Beijing's political and military strength can continue to build only if its economic resources and technological prowess continue to advance." But Beijing could secure major technological advantages that bolster its political and military power, and that endure even after an economic decline sets in.

On Protocol | China

China loves its virtual idols. They toe the Party line perfectly, they take no salary and they never make mistakes — be those political errors or "forgetting" to pay taxes. With the metaverse set to be a major force, the virtual idols that fill it could become Made in China. Shen Lu has more.

Mapping the fallout from China's crypto crackdown. Crypto's finally been all but banned in China. So where are its many crypto champions going to go? Zeyi Yang tracks who's doing what to weather the latest, biggest crackdown.

Chinese independent media has its NFT moment. Censorship can breed creativity, and that's no more evident than among indie Chinese-language media that's been using the power of NFTs to raise money — and create enduring memorials that push back on state narratives. Shen Lu has the goods.

A MESSAGE FROM ZOOM

Zoom — the communications platform that has become synonymous with streaming video calls — experienced an even greater increase in that same time period. In June 2020, close to 3 million consults took place through Zoom's 100 top EPIC integrations. With its simple, reliable interface that patients — and health care workers — already knew, Zoom became the go-to for health care offices everywhere.

Learn more

China Goes Global

Nokia briefly pulled out of a U.S.-backed telecom standards group. According to a Wall Street Journal report published Tuesday, Nokia backed out of the O-RAN alliance in August because it was concerned that two Chinese participants were on the U.S. Commerce Department's entity blacklist. O-RAN has since changed its procedures enough that Nokia felt comfortable re-entering, but the situation may signal what a former Nokia exec called a moment of "bifurcation" between the American and Chinese telecom ecosystems.

Huawei is done Down Under. The beleaguered giant is effectively exiting Australia, The Daily Telegraph reported Sunday, with "only 145 members of its once 1200-strong workforce" still employed there. None of Australia's major carriers sell Huawei handsets anymore, and the company's revenue from carriers crashed in 2020, falling to less than half of what it made in 2019.

A U.S. electronics maker fessed up to "transferred" Uyghur labor. A spokeswoman for remote-control maker Universal Electronics admitted with surprising frankness to Reuters reporters that the company currently employs 365 "transferred" Uyghur workers at a plant in southwestern China. Rights groups like Amnesty International and Human Rights Watch say the program is a form of forced labor, and this is the first time an American company's participation was confirmed.

Tencent invested in another overseas gaming studio. The Chinese tech giant is not about to end its global gaming studio spending spree. Last week, the Polish studio Bloober Team, an indie developer behind several psychological horror games, disclosed that Tencent had spent about $19.5 million to acquire 22% of its shares.

Big Brother Beijing

Xi's "common prosperity" is having predictable effects on corporate "philanthropy." As predicted in this newsletter, major Chinese tech companies are rushing to return cash dividends to Chinese society in ways that the Communist Party will notice. In the past few days, Chinese tech companies have collectively donated over $54 million toward disaster relief in Shanxi Province, which has been hit by severe flooding, according to KrAsia. Participants include Tencent, Baidu, Xiaomi, Alibaba, Ant Group, ByteDance, NetEase, Pinduoduo, Vipshop, Oppo, Vivo and DiDi.

Esports tournaments of PUBG will be banned in China, the Sports Business Journal has reported, citing a Chinese esports observer. As Beijing tightens its control over the gaming sector, domestic gaming streaming platforms, including Tencent's, have also started to remove any mention of the game.

Straight From China's Web

Influencers race to repay back taxes. The Zhengzhou Evening News reported Monday that a local taxation bureau in the central Chinese city "used big data" to track tax evasions and recovered 6.6 million RMB, or over $1 million, from an unnamed social media key opinion leader, or KOL. The news garnered a ton of attention on Weibo; observers expect Chinese KOLs, who have raked in cash through livestreaming sales, to race to repay their arrears. Last month, the State Taxation Administration and other central government agencies issued a directive that requested local taxation agencies "further strengthen the taxation management of practitioners in the field of culture and entertainment."

Sorry, your delivery bot got into an accident. On Saturday, a cute yellow-and-black unmanned vehicle from Chinese delivery giant Meituan collided with a private car in Beijing, tech publication Pandaily reported. Meituan was deemed fully responsible for the crash by police. The vehicle was released in April this year and comes equipped with three laser radars, 19 cameras, two millimeter-wave radars and nine ultrasonic radars. That's apparently not enough to make sense of traffic in the Chinese capital.

Arise, ye lie-flatters! Residents of tech hub Shenzhen have noticed a new ad campaign in the city's subway: no "lying flat" (躺平), authorities exhort, and no "touching fish" (摸鱼) — meaning slacking off. The term "lie-flat" earlier this year was censored across Chinese social media platforms, but this ad campaign, probably designed to motivate Shenzhen's vast number of tech workers, misses the mark, doing little more than making sure everyone knows what these terms mean and is talking about them. As one popular comment on Weibo reads: "Just take out the 'Nos.'"

One More Thing

Dead bugs → pseudo-Victorian art

Here's the most steampunk thing you'll see this week: A group of bug enthusiasts in China has turned "steampunk insects" into a thriving community and a lucrative market, reported SupChina. Take Wang Peng, for example: This 40-year-old ex-engineer uses gears and motors to replace dead insects' body parts. He said he is making $15,500 a month by selling the artworks. And his work is mesmerizing; have a look here.

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