Tick Tock: Evolving Views on Technology, Trade, Security and China
The past week has made clear once again that China, technology, and the interaction between the two, are central economic and policy issues of our time. Two newsletters that I follow, Stratechery by Ben Thompson and Sinocism by Bill Bishop, have been valuable complements for years, but have become indispensable to understanding the current trajectory of Western engagement with China. Notably, over the past year, both writers have argued that the dream of Chinese political liberalisation through economic integration is dead and that the West, to its detriment, has been slow to recognise this. Distilling their arguments offers an instructive proxy for understanding the rapidly shifting sentiment towards China by commentators and policymakers.
The Evolution of Sophisticated China Watchers
Bishop, a former entrepreneur and executive based in China for ten years, personally enjoyed the fruits of Western economic integration with China. It has, therefore, been striking to track his growing pessimism about the prospects of future Western engagement in Sinocism. Particularly since 2016, he has consistently and clearly, although reluctantly, warned that relations were deteriorating in a serious and potentially dangerous manner. However, while remaining critical of the approach taken by the current U.S. administration, he has placed blame primarily with China and advocated a clear-eyed reassessment of its policies under a Communist Party of China (CCP) tightly controlled by Xi Jinping.
John Garnaut, an Australian journalist who reported on China before becoming a policy advisor for Prime Minister Malcolm Turnbull, has frequently been cited as an influential source by Bishop. As a reporter, Garnaut was particularly known for his knowledge of and access to the “Princelings”, a cohort of powerful political and business leaders in China descended from senior CCP officials. As a policy analyst, Garnaut has become a prominent voice urging a rethinking of China strategy, particularly in Australia. In a widely discussed 2017 speech entitled “Engineers of the Soul: what Australia needs to know about ideology in Xi Jinping’s China” (later posted to Sinocism in 2019), Garnaut argues that understanding the history, scope and continuing force of CCP ideology is crucial to grasping the actions and ambitions of Xi Jinping’s China. To demonstrate the point, he reviewed the contents of a CCP policy document entitled Document № 9, “Communique on the Current State of the Ideological Sphere”, which was disseminated by Li Zhanshu, a princeling closely connected to President Xi, in 2013. The document, Garnaut said (emphasis my own),
set “disseminating thought on the cultural front as the most important political task.” It required cadres to arouse “mass fervour” and wage “intense struggle” against the following “false trends”:
1. Western constitutional democracy — “an attempt to undermine the current leadership”;
2. Universal values of human rights — an attempt to weaken the theoretical foundations of party leadership.
3. Civil Society — a “political tool” of the “Western anti-China forces” to dismantle the ruling party’s social foundation.
4. Neoliberalism — US-led efforts to “change China’s basic economic system”.
5. The West’s idea of journalism — attacking the Marxist view of news, attempting to “gouge an opening through which to infiltrate our ideology”.
6. Historical nihilism — trying to undermine party history, “denying the inevitability” of Chinese socialism.
7. Questioning Reform and Opening — No more arguing about whether reform needs to go further.
There is no ambiguity in this document. The Western conspiracy to infiltrate, subvert and overthrow the People’s Party is not contingent on what any particular Western country thinks or does. It is an equation, a mathematical identity: the CCP exists and therefore it is under attack. No amount of accommodation and reassurance can ever be enough — it can only ever be a tactic, a ruse.
Australia’s failure to take CCP ideology seriously has left it dangerously exposed to the actions and ambitions of China, Garnaut argued. Similar failures to confront and grapple with CCP ideology afflict nearly all of Australia’s Western allies. Bishop, in commentary on the speech, concurred (emphasis added),
some now say [Garnaut] has become a China hawk, but I see it as more the evolution of a sophisticated China watcher who believes in seeking truth from facts, no matter how difficult it may be to accept the reality of the direction Xi and the CCP appear to be taking China. This is a trajectory I have found myself on, along with many of the most experienced foreign China watchers I know.
The entire speech is worth careful consideration, but Document № 9 must give any Western reader with an interest in China serious pause. The premise of engagement has been that trade and bilateral cultural exchange and openness, including through technology, would wield an inexorable pull on Chinese political practices towards those of the West. Yet, Garnaut makes a compelling case that, several decades later, the West continues to underestimate the power of CCP ideology and appreciate that it is fundamentally at odds with Western values. Bishop’s has endorsed this view, pushing his readers to understand the conviction of the CCP to not only withstand political liberalisation, but exercise a reverse transformation and rewrite the rules of international engagement more to the CCP’s liking.
Tanner Greer, a writer and strategist focusing on China who blogs at The Scholar’s Stage, wrote a two part (one, two) response to Garnaut’s speech in which he endorsed the central claim, summarised as “Xi Jinping sees himself as the heir of Stalin and Mao and that this communist heritage is vital for understanding the modern Communist Party of China”. However, he was careful to state the limits of the historical comparisons. Xi’s China is not, at least not yet, a totalitarian nightmare on the scale of Stalin’s Soviet Union, Mao’s China, Cambodia under the Khmer Rouge, or Nazi Germany. While the CCP leadership has certainly studied those regimes and internalised what they believe to have been their fatal mistakes, current analysis can be clouded if the differences are not appreciated. Specifically, Greer argues that political ideology, while very powerful, as Garnaut argues, is not all encompassing in present day China. Unlike true totalitarian regimes, there remains substantial spheres of activity beyond the reach of CCP-dominated politics. While this does not excuse of reduce the terrors committed by the current regime, most notably the technology-enabled persecution of Uighurs in Xinjiang, it should be accounted for in analysing how to respond. At the same time, Greer says, the path towards totalitarianism is present and concerning because
[a]s the Communist Party of China grows more vicious, hostility to its ambitions grows. The more hostile its neighbors and rivals are perceived to be, greater the need to mobilize the masses to resist them. The stakes of this struggle will reach extremes. In that day the totalitarian temptation will beckon. Party leaders will have little reason to ignore it. Dark times lie in wait for the people of China.
For Garnaut, Bishop and Greer, the trajectory of China under Xi’s CCP is alarming for the Chinese people and a central strategic challenge for Western security in the coming decades. Analysing China’s ambitions and actions in the technological spheres helps to ground and understand their arguments.
Technology as Instrument of Economic and National Security Policy
Technology is a central feature of the recent tensions between the West, led by the United States, and China because all parties now view the issue as core to their trade and national security agendas. China has clear strategic ambitions for technological supremacy, such as those documented in its Made in China 2025 plan, and a history of using unsavoury tactics, including theft and corporate espionage, to bootstrap its way there. The current U.S. administration has ramped up efforts to counter China in the economic sphere, wielding sanctions against firms such as ZTE and Huawei and leveraging enhanced scrutiny through the Committee on Foreign Investment in the United States (CFIUS) to block transactions linked to China, such as the attempted acquisition of Qualcomm by Broadcom. More recently, the US ordered the closure of the PRC consulate in Houston in response to espionage and IP theft.
Thompson, while a prolific writer, rarely wrote specifically about China in Stratechery before 2019. However, over the past year he has, with increasing regularity, integrated explicit political considerations, from economic to national security, into his analysis of tech. He explained that evolution in an article which refers to Garnaut’s talk (paywall),
Over the last year, though, like Garnaut, I have felt compelled to be more outspoken about the impact of China’s politics on tech. First, in China, Leverage, and Values, I highlighted that China’s vision of the role of technology was fundamentally different than the West’s; in the China Cultural Clash, I warned that China wasn’t simply interested in being different, but in exporting those differences to the West. And finally, yesterday’s The TikTok War is very much a call to action on the part of the West, rooted above all in a recognition that this isn’t simply an economic battle, but an ideological one. I will freely admit, as I have all along, that I come at these issues as a Westerner, as an American, and as a believer in liberalism. This is not about being anti-China; rather, it is about respecting China, and recognizing the Chinese Communist Party for the ideological foe that it is, which Garnaut’s essay details.
Thompson’s May 2019 post, China, Leverage, and Values analysed China’s geopolitical ambitions through a technology lens. While the article was prompted by U.S. efforts to block sales of technology between Chinese and U.S. firms, Thompson made efforts to emphasise that China had been the instigator.
This is where I take the biggest issue with labeling this past week’s actions as the start of a tech cold war: China took the first shots, and they took them a long time ago. For over a decade U.S. services companies have been unilaterally shut out of the China market, even as Chinese alternatives had full reign, running on servers built with U.S. components (and likely using U.S. intellectual property). To be sure, China’s motivation was not necessarily protectionism, at least in the economic sense: what mattered most to the country’s ruling Communist Party was control of the flow of information. At the same time, from a narrow economic perspective, the truth is that China has been limiting the economic upside of U.S. companies far longer than the U.S. has tried to limit China’s.
In a later post, entitled The China Cultural Clash, he recaps the Pollyannaish assumptions driving U.S. engagement with China at and since the time of establishment of Permanent Normal Trade Relations in 2000.
The problem from a Western perspective is that the links [the Clinton administration were] so sure would push in only one direction — towards political freedom — turned out to be two-way streets: China is not simply resisting Western ideals of freedom, but seeking to impose their own.
His recent post on TikTok, is the best analysis I have read about why this viral mobile video application, which is privately owned by Chinese firm ByteDance, has become a topic of national security debate. Technically, TikTok has created a compelling experience by coupling a powerful content curation algorithm, honed through its news app TouTiao, with clever features to improve the quality and virality of user-generated content. It is, essentially, YouTube optimised for mobile and has kept hundreds of millions of people entertained during pandemic-induced lockdowns over the past several months.
From a purely economic perspective, it is fascinating to consider TikTok as one of the first Chinese-developed consumer social media applications to gain broad traction in the West. (I exclude the case of WeChat, which is widely used for communicating with people in China by those abroad but not much within Western domestic markets.) Relative to its social media application peers, TikTok’s data collection techniques, while prolific, are not exceptional. Like many applications, it collects data about users including location, IP address, and contacts, subject in some cases to user-controlled settings.
What, then, makes TikTok unique from a security perspective? First, TikTok is clear in its privacy policy that information collected by the app may be shared with its corporate affiliates, including those based in China. In addition to this intentional sharing for internal corporate purposes, as a PRC-based company, ByteDance is subject to China’s National Intelligence Law (NIL) under which the government can compel Internet companies to turn over any data the government demands without territorial limitation. In other words, whether through discretion or compulsion, the personal location and app usage data of tens of millions of Western citizens are available for processing by the Chinese government should it choose to do so. TikTok defenders may argue that the U.S. reservers similar powers under the CLOUD Act (or similar legislation), which is a source of concern even for U.S. allies, as demonstrated in the recent decision of the European Union Court of Justice in Schrems II. However, even if you are inclined to endorse the similarities (which I am not), the intermediation of the process by the U.S. judicial system is significantly different from the direct and unlimited access powers of the PRC government under the NIL.
Second, TikTok’s content curation algorithm, incredibly successful at capturing and maintaining the attention of users, represents a black box. That power, by itself, is no different than the algorithms powering Western Internet giants like Facebook, Google, Netflix and Amazon. In fact, Internet scholars have long written about the possibility that algorithms of U.S.-based Internet firms may influence political outcomes in a non-transparent way (e.g. Zittrain, Thompson). This possibility has, of course, been a major source of attention and analysis since the 2016 U.S. election and Brexit votes. But, in the hands of a firm subject to oversight by the CCP, that algorithm becomes a powerful tool of manipulation with the consequent potential for suppressing dissent and amplifying propaganda. There is plenty of evidence that it has already been used for just that purpose. The Guardian published the firm’s content moderation policy in 2019, which provided that content disfavoured by the CCP be suppressed,
TikTok, the popular Chinese-owned social network, instructs its moderators to censor videos that mention Tiananmen Square, Tibetan independence, or the banned religious group Falun Gong, according to leaked documents detailing the site’s moderation guidelines.
Thompson himself has documented apparent censorship of content in the Chinese market about the Houston Rockets in the wake of controversy around their general manager, Daryl Morey, tweeting support for Hong Kong protestors.
TikTok is, therefore, unique insofar as it makes sensitive data of millions of Western citizens potentially available directly to the CCP and wields a content curation algorithm that has already been used to promote CCP interests and ideology abroad. If we take the conclusions of Thompson, Bishop, Garnaut and Greer seriously, and take literally the conclusion of the CCP that it is in a direct ideological conflict with the West, the direct and unmediated access to the personal data and attention of Western citizens for hours per day is a nearly unprecedented type of security threat. When cast in these terms, it becomes hard to not be alarmist about the threat of TikTok. Frankly, it makes the much analysed and hyped efforts of the Russian-based troll farms in support of Donald Trump and Brexit look laughably quaint in comparison.
Like Clockwork
As I was concluding this post, news broke that time may be up for TikTok,
Donald Trump has vowed to ban TikTok, the Chinese-owned video-sharing app, from operating in the US as his administration finalised a national security review of the company.
The move, announced by Mr Trump as he flew back to Washington from Florida on Friday night, is likely to further inflame geopolitical tensions with China. It also could quash, or at least complicate, efforts by several potential US buyers of TikTok, including Microsoft, to purchase the company.
“As far as TikTok is concerned we’re banning them from the United States,” Mr Trump told reporters on Air Force One, adding that he could use his executive powers to formalise the decision as early as Saturday
Trump, if inclined, could likely implement the ban under the International Emergency Economic Powers Act (IEEPA), possibly in concert with the Committee on Foreign Investment in the United States (CFIUS). Bishop presciently discussed the possibility last month,
To invoke IEEPA the President would have to designate an “unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States”, per the Act:
“Any authority granted to the President by section 1702 of this title may be exercised to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the United States, if the President declares a national emergency with respect to such threat.”
If the US does succeed in shutting down TikTok it would destroy billions of dollars in value. Caixin reported last week that India’s banning of the app and two others owned by parent company ByteDance could cost the parent $6 billion in revenue.
Perhaps the best route for TikTok is to find a buyer before even more value is destroyed. Such a buyer would have to be one that is palatable to the US government, big enough to buy the entire company and then make the investment to truly separate the entire company from any PRC entanglements, but also able to avoid possible antitrust issues. It is a short list.
Surveying this news and the broader landscape around current engagement with China, I found myself compelled to think and write about China, but also subject to reservations. As someone who has visited China several times and immensely enjoyed the rich history and culture of the country, I have found myself instinctively pushing back on the growing alarm. Yet, as a Canadian, the CCP’s treatment of the “Two Michaels”, who have been imprisoned for 600 days in retaliation for the arrest of former Huawei CFO Meng Wanzhou in Vancouver at the request of U.S. authorities, I find myself on the same evolutionary arc as the writers discussed here.Thompson captured this feeling in 2019,
I am not particularly excited to write this article. My instinct is towards free trade, my affinity for Asia generally and Greater China specifically, my welfare enhanced by staying off China’s radar. And yet, for all that the idea of being a global citizen is an alluring concept and largely my lived experience, I find in situations like this that I am undoubtedly a child of the West. I do believe in the individual, in free speech, and in democracy, no matter how poorly practiced in the United States or elsewhere.
Bishop, Garnaut, Greer and Thompson are smart China observers who have all reached similar conclusions. I expect that many more Western companies, governments and individuals, will experience similar evolutions in coming years.
