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Protocol | China
The people, power and politics of Chinese tech, every Wednesday.
Image: Christiaan Colen / Protocol

Data doesn’t respect borders

Data doesn’t respect borders

Good morning and 牛年大吉! This week in Protocol | China: a Github freakout, debates about where Clubhouse data goes and a new wave of Chinese IPOs.

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THE BIG STORY

Is Clubhouse data flowing into China?

In an analysis released last Friday, the Stanford Internet Observatory found that Agora, a Shanghai-based and Nasdaq-listed company that powers the tech infrastructure for Clubhouse, likely has access to users' raw audio feeds. This is most immediately concerning for the (small and dwindling, but influential) pool of Chinese users, who have often said things Beijing could deem illegal.

  • Under China's Cybersecurity Law, Beijing could compel the firm to hand over user audio data, although Agora has said it doesn't store audio data in China.
  • Unique Clubhouse ID numbers and chat room IDs are transmitted in plaintext, which makes it easy to find out who's having conversations where, the report says.
  • No one's audited the data flows. As investor Kevin Xu pointed out on Twitter, we haven't seen what the cloud data center flow logs actually show.

It's a reminder that data doesn't respect borders. For all the talk of tech "decoupling," what happens in U.S. social media doesn't always stay there.

  • Chinese users include those in the mainland with a VPN, but also millions abroad.
  • Chinese tech, or tech companies with at least one foot in China, are powering a number of U.S. platforms, and even providing open-source code used by U.S. developers.

We've seen this movie before. Last year, U.S. authorities eyed TikTok warily for possible China-side storage of data generated in the U.S., and even threatened to ban it. Because the U.S. lacks a comprehensive data protection regime, we'll keep revisiting this question of who shares what with China — at least, until Washington does something grander than banning individual apps.

UP NOW AT PROTOCOL | CHINA

  • Get ready for a wave of China tech IPOs in 2021. They include three of four Chinese "AI dragons," which will rake in cash despite (and because of) their sometimes troubling closeness with big government surveillance. Shen Lu tells you everything you need to know.
  • China's televised Spring Festival Gala embraced livestreaming ecommerce. It's an over $150 billion industry in China that the world is rushing to copy, and the state just signaled it's all in by inviting the country's top streamer onto its top annual television event. Zeyi Yang explains.

A MESSAGE FROM SLACK

Slack

You have to find the right solution that meets both your internal and external collaboration needs.

That's why competitive businesses today are turning to Slack, the channel-based messaging platform, to close communication gaps with partners and customers in the age of remote work.

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BIG BROTHER BEIJING

  • Mind your ownership: Xi Jinping scuttled the Ant IPO because of undisclosed investors, among other concerns about unregulated financial risk, according to The Wall Street Journal. The Ant offering prospectus alarmed regulators because it didn't reveal that family members of major former senior officials like Jiang Zemin were investors. Expect lots more pre-IPO diligence about the stakeholders of the many multibillion-dollar tech firms set to IPO this year.
  • The state says yes to more med tech. Last week, China's Ministry of Industry and Information Technology released a five-year blueprint for the medical equipment industry pledging support for "new integrated technologies" that help combine traditional medical equipment with tech such as 5G, AI, IoT, cloud computing and 3D printing to care for the country's aging population. What the state says goes, so expect investors to fall in love with med tech quickly.

ONE COMPANY YOU SHOULD KNOW

JD Logistics is at your door. It's no Alibaba, but China's second-biggest B2C ecommerce platform is also huge: It's JD, the Nasdaq-listed company currently valued at over $160 billion. Among China's ecommerce giants, JD resembles Amazon the most, not least with its ultra-fast shipping network. On Tuesday, the Hong Kong Stock Exchange released the IPO prospectus of JD Logistics, the subsidiary behind this service. It has over 800 warehouses and employs 240,000 workers in delivery, warehouse and customer service. Its stated goal: "To become the world's" — not just China's — "most trusted supply chain solutions and logistics services provider."

CHINA GOES GLOBAL

  • China's Twilio goes "pop" on the NYSE. Chinese cloud-based communications service provider Cloopen went public on the NYSE last week, raising $320 million, and its stock has since nearly doubled from its offering price. It was reportedly the first Chinese SaaS company to be publicly listed stateside. Cloopen's pre-IPO investors include Sequoia Capital, Trustbridge Partners and Prospect Avenue Capital.
  • A Chinese open-source code repository went down and everyone freaked out. Ant Design is an incredibly popular open-source design system developed in China, which web developers rely on to create attractive websites and UIs. So when its GitHub repository and website went down this past weekend, developers and web designers collectively freaked out. The code's maintainers reported that the repo went down because it had been hacked, but users speculated that it might have been Beijing at work. While GitHub quickly reinstated the repo, the scare illustrates how much everyone relies on Chinese tech tools in their daily work — and how quick people are to jump to conclusions when things go wrong.
  • Huawei and Xiaomi are among the world's largest semiconductor buyers. According to market research firm Gartner, Huawei, burdened with heavy trade restrictions, cut its semiconductor spending by 23.5% in 2020, the largest drop among top buyers. Stepping up was smartphone-for-the-masses firm Xiaomi, which saw the largest increase in semiconductor spending — a 26% jump over the same period.

STRAIGHT FROM CHINA'S WEB

  • Labor disputes are spiraling in Chinese tech. In the past five years, the number of legal cases involving tech company labor disputes in China has quadrupled, from more than 10,000 cases per year to nearly 40,000 cases per year according to tech outlet Qioupai. Beijing, where the largest number of tech companies are concentrated, witnessed the biggest number of labor cases from 2016 to 2020. Hardware hub Shenzhen and finance center Shanghai ranked second and third.
  • Show your Valentine some love with cold, hard cash. Ever since WeChat (and Alipay) took over Chinese people's financial lives, sending what are known as red packets has become a new Chinese tradition to celebrate just about anything. Valentine's Day was no exception. On Monday, WeChat published data about who sent digital so-called "520 packets" this Feb. 14, which contain 520 RMB (about $80) and the name of which sounds like "I love you" in Mandarin. Among all Chinese cities, Shanghai had the most packets flying around. The most popular user received over 200, collectively worth $16,000.

One More Thing

The Great Firewall of … everywhere?

Last week's newsletter said Clubhouse offered us a "glimpse" of a world without a Great Firewall. Reader Paul Legato offered a 180-degree take: "The list of countries that have blocked major chunks of the worldwide Internet for their own citizens is [long] … and many of them are doing it with technology they bought from China, the very same infrastructure used to build the Great Firewall itself. That cashflow will only drive further economies of scale and make it even more cost-effective to build countrywide firewalls."

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