Stronger than Article 5 of the NATO Agreement, U.S. Will Defend Taiwan for TSMC Chips?

Hello everyone. Welcome to Zooming In China Tea Time. I’m Simone Gao. 

In an interview with ABC News on August 19th, President Biden suggested that the U.S. would intervene if the CCP invaded Taiwan. Arguing that the situation in Taiwan was “not comparable” to the one in Afghanistan, Biden said that “We have made, kept every commitment. We made a sacred commitment to Article 5 that if, in fact, anyone were to invade or take action against our NATO allies, we would respond. Same with Japan, same with South Korea, same with Taiwan.” 

But there is a problem with Biden’s claim. The agreement between the U.S. and Taiwan is different from the agreements with South Korea, or Japan, or NATO. Under Article 5 in the NATO agreement, an attack on one NATO member is an attack on all. In that context, the U.S. is sworn to stand and defend all other NATO nations. Article 5 does not extend to non-NATO nations, so it does not automatically apply to either South Korea or Japan or Taiwan.

The agreement between the United States and South Korea is the U.S.-Korea Mutual Defense Treaty signed in 1953. Under this treaty, if either South Korea or the United States is attacked in the Asia-Pacific region, the other will provide military assistance. In the nearly 70 years since the signing of that treaty, South Korea has sent military support to assist in most of the major wars America has been involved in. During the Vietnam War, South Korea sent 320,000 troops to assist the U.S. military. For its part, the United States stations nearly 30,000 troops in South Korea as a deterrent to their hostile neighbor to the north.

There is also the Treaty of Mutual Cooperation and Security between the United States and Japan that permits the presence of U.S. military bases on Japanese soil and commits the two nations to defend each other if one or the other is attacked.

In the case of Taiwan, though, the defense commitments offered in the Taiwan Relations Act of 1979 are much weaker. The Act mentions only that “the United States will make available to Taiwan such defense articles and defense services in such quantity as may be necessary to enable Taiwan to maintain a sufficient self-defense capability.” 

While the Act does say that the U.S. will consider “any effort to determine the future of Taiwan by other than peaceful means…a threat to the peace and security of the Western Pacific area and of grave concern to the United States,” grave concern does not necessarily equal a willingness to go to battle. But while the U.S. is not obligated to send troops in support of Taiwan, there has recently been a very public show of America’s support for Taiwan in the face of mounting pressure from China. 

And there is a good reason for that support. Though little talked about in the press, Taiwan is the epicenter of technology manufacturing, especially the hi-tech semiconductor chips that power most of our modern devices. From computers, cell phones and cars to household devices like washing machines and refrigerators, most of today’s devices function through semiconductor chip technology. And most of these chips are produced in Taiwan by the Taiwan Semiconductor Manufacturing Company, or TSMC.

Although TSMC is not the only semiconductor foundry in the world, it is by far the largest. TSMC has a market share of 56% in the global semiconductor foundry market. It manufactures 80% of the world’s most advanced semiconductors.

TSMC is also the go-to producer for the silicon powering companies like Apple, Nvidia and AMD. Intel will be contracting through TSMC in 2022 as well, once their 3nm process is fully functional. And because of advances in technology, including 5G technologies, demand has outpaced their ability to produce the needed components, leading to their current two-year backlog on production. TSMC’s manufacturing capacity for all of 2021 and 2022 is already fully scheduled. 

To catch up to the climbing demand in the industry they dominate, TSMC has outlined a $100 billion investment plan over the next three years. That plan includes a $12 billion semiconductor wafer production plant in Arizona with the possibility of as many as six new factories in that location over the next 10-15 years. But while production has already begun on the facility, the wafer plant is not expected to be fully operational until 2024.

The U.S. government has come to realize the critical importance of technology pipelines, tying them directly to national security interests. To secure those interests, encouraging manufacturing and production companies to bring their resources to America was critical. And while the first TSMC plant will account for just a small part of their current total production capacity, the U.S.’s $54 billion subsidies are drawing interest from Intel, Samsung and others as well.

Even if these other manufacturers could replace TSMC, even if they had similar technologies, and it would not be possible to immediately transfer production capacity from TSMC to other manufacturers. Each company has unique processes that are incompatible with those of others. It would take years for new manufacturers to complete the redesign necessary to produce TSMC chips.

But TSMC’s top-notch technology is not something that could be replaced by other manufacturers. Many original chip manufacturers were replaced by TSMC because they could not develop these top-notch technologies. In 2018, AMD transferred its chip manufacturing to TSMC in order to be more competitive in the chip market. One of the key reasons AMD has now surpassed Intel is that Intel has been unable to catch up with the 7-nanometer chips produced by TSMC. So, this is more than a question of funding and time. It is also a question of technological ability. And for now, technological breakthrough rests largely in the hands of TSMC.

It is clear that the U.S. needs TSMC, but this is not a one-sided relationship. While TSMC has developed the ability to manufacture these chips, the designs and patents for the chips come from the United States. If the U.S. withdrew their permission to use their technology, TSMC’s business would be paralyzed. We saw an example of this when the U.S. imposed an export ban on China, preventing any chips with American technology from being sold to China which led to substantial losses for Chinese companies, including Huawei.

As we move forward in the fast-paced world of emerging technologies, The U.S. and Taiwan need one another. The U.S. does not have the manufacturing capacity to replace that of TSMC. Taiwanese companies cannot afford to lose access to the technologies of the U.S. This kind of reliance on one another is not any weaker than the bonding force of Article 5 from the NATO agreement.

When I interviewed Keith Krach, former U.S. Under Secretary of State, I asked him if the U.S. intended  to establish diplomatic relations with Taiwan in the later period of the Trump administration. He said that while he could not share the specifics, they had a strategy, which was to encourage the rest of the world to invest in Taiwan and set up factories. In this way, the security of Taiwan would be directly related to the commercial interests of these countries, and they would be more willing to maintain peace in the Taiwan Strait and restrain the CCP.

This pattern was formed because of the existence and relevance of TSMC. Taiwan is not only tied to China and the United States but also has a very important stake in the rest of the world. A loss of TSMC to the control of the Chinese government would mean global economic and communications disruptions. Because the impacts are global, the protections offered to Taiwan need to be global as well. In this way, TSMC can be the sacred mountain for protecting their homeland that Taiwanese people have long claimed it to be. 

That’s all for today. Thanks for watching Zooming In China Tea Time. Please like, share, subscribe and donate to this production if you like our content. Also, head over to my new membership site at zoomingin.tv. You can get video/audio formats of my shows, full transcripts, and in-depth reports only available to members. I will also do live Q & A shows with members on the site. Just $5 a month or $50 a year, cancel anytime. Please check it out. Thanks for watching and I will see you next time.

Will Uyghers Become a Source of Terror or a Subject of Persecution Following the Afghan Debacle?

Welcome to Zooming In China Tea Time. I am Simone Gao. 

In the unfolding stories about Afghanistan, one story has often been missed or misrepresented: the story of the impact of these events on the Uyghur populations living in Afghanistan and China. 

To resist, to rise, requires that first you are free, and for the roughly 1.8 million Uyghur and Turkic people forcibly taken to China’s concentration camps in Xinjiang since 2017, there is no freedom. There is no freedom for the 13 million Turkic Muslims now are under constant surveillance by the Chinese government through the IJOP policing program. That program collects mounds of data from every avenue of their lives and flags citizens believed to be threatening, even when the activities in question are legal and reasonable.

The persecution of the Uyghurs is an ongoing objective for the CCP, and the narrative surrounding who and what they are is the centerpiece of their strategy. In a recent analysis published on Brookings, Ryan Hass, Senior Fellow in Foreign Policy at the Center for East Asia Policy Studies, says that while “Chinese leaders are not enthusiastic about the Taliban taking over Afghanistan,” they will recognize Taliban leadership and “will encourage the Taliban to deny safe haven to Uyghur fighters and other groups that could destabilize Central Asia or harm Chinese interests in the region or at home.”  

In doing so, Hess buys into the CCP story that the Uyghurs are a terrorist threat to China and the region. The Washington, D.C.-based Uyghur Human Rights Project suggests that that kind of analysis or reporting “takes at face value China’s claim that it is conducting counterterrorism.” They also caution that China has a pattern of using global events as a “pretext for the repression of Uyghurs,” and the more we believe the notion of a terroristic threat, the more justified the CCP feels in their genocidal policies.

We have only to look at China’s mining activity in Afghanistan to see that practice in place. As the Taliban took control of Kabul, commentators shared concerns that China may be after Afghanistan’s estimated $3 trillion worth of rare earth metals including veins of aluminum, gold, silver, zinc, mercury and lithium. 

These metals are used in many items including electronics, electric vehicles, satellites and aircraft, and China has made major advances in each of those sectors. That they will attempt economic inroads with the new Taliban government is likely, and mining is sure to be one part of that effort to build not only economic ties but goodwill as well. 

That process began long ago with the Afghan government, with the inking of a $2.83 billion lease on Afghanistan’s Mes Aynak copper mine in 2007. It seems both sides had high hopes for the mine, with Afghan leaders believing that this could be a big step forward in lowering their dependency on international aid. Currently, 40% of their domestic product comes from that aid, but they are expected to reduce that by half by the year 2030, so there is an urgent push for economic development. In this case, that leaves Afghanistan at the mercy of their economic ties with China. But halfway through that 30-year contract, China has done little to develop the mine.

Just months before the Taliban takeover, the Afghan government was pressuring China to take action on that contract. Afghan media reported in 2020 that inactivity at the time had resulted in $2 billion dollars of lost revenue for Afghanistan at a time when Taliban insurgents were making hundreds of millions of dollars on illegal mining activity each year. 

Haroon Chakhansuri, the Minister of Mines and Petroleum, told Foreign Policy that the Afghan government had issued an ultimatum to either renegotiate the contract in “mutually agreed terms” or it would be given to another country.

Afghanistan’s government had the leverage it needed to take such a demand of their much larger and more powerful neighbor after officials arrested an alleged Chinese spy ring operating in Kabul in December 2020. That ring had been operating for six or seven years and was there to track down Uyghur Muslims with the help of the Haqqani network, a terrorist network linked to the Taliban. 

Though the Afghan government had, at times, cooperated with China on detaining and deporting Uyghurs suspected of terrorist activities, they were “shocked at China’s duplicity.” Until then, they had believed China was operating out of goodwill, but after this arrest, one Afghan leader asked, “Is this the behavior of a friend?”

That notion of goodwill between countries looking out for one another’s interests was built with Pakistan in 1950 when they became one of the first nations to formally recognize the People’s Republic of China government on the mainland. Since then, they have remained close allies as China has continued to provide economic, military and technical help. 

They are also deeply coupled economically, with China investing heavily in Pakistani infrastructure and with a bilateral trade volume crossing the $20 billion mark for the first time in 2017.

For a country that is deeply coupled with China, favors will be expected, and in this case, the favor is Pakistan’s active participation in the arrest, detainment and extradition of Uyghurs, something they have been doing since 1997.

That was made clear recently, as Pakistani citizens who are married to Uyghurs now imprisoned in concentration camps begged their government to take action. In response, Pakistani Prime Minister Imran Khan said, “As far as the Uyghurs, look—China has helped us. China came to help our government when we were at rock bottom.” 

Help from China is not without cost, and their ties with the Taliban are remarkably deep. As one senior Afghan official reminded Chinese officials during negotiations about the Mes Aynak mine, China has “surprisingly strong back-channel contacts with the Taliban” and they could have smoothed out a way to develop the mine but chose not to.

Those deep ties now leave Afghanistan’s sizeable Uyghur community at risk, especially as the Taliban looks for opportunities to negotiate Belt and Road Initiative projects with China. 

In late July, after the U.S. had begun the process of removing troops from Afghanistan, Chinese Foreign Minister Wang Yi met with representatives from the Afghan Taliban in Tianjin. This was an important meeting, because it placed the Taliban as a major force on the international stage, something democratic countries were unwilling to do because of the Taliban’s known history of human atrocities. 

China’s Ministry of Foreign Affairs spokesperson Zhao Lijian justified the meeting by saying that “the Pakistani Taliban and the Afghanistan Taliban are not the same…. The Afghan Taliban claims to be a political and military organization and publicly prohibits any organization or individual from using Afghan territory to threaten other countries.” 

In almost identical wording, at the first press conference after the takeover, Taliban spokesperson Zabihullah Mujahid said, “We would like to assure our neighbors, regional countries, we are not going to allow our territory to be used against anybody, any country in the world. So, the whole global community should be assured that we are committed to these pledges that you will not be harmed in any way from our soil.” 

But their territory will be used against the Uyghur population. For several months leading up to the withdrawal of American troops, Uyghurs in Afghanistan and across the globe began sharing their fear that China and the Taliban were growing too cozy with one another. Now, with the Taliban at least temporarily in a governing role in Afghanistan, Uyghurs face an even greater risk of persecution or extradition to concentration camps. 

As outlined in a report by Human Rights Watch, Uyghurs face “massive arbitrary detention, torture, enforced disappearances, mass surveillance, cultural and religious erasure, separation of families, forced returns to China, forced labor, and sexual violence and violations of reproductive rights.”

With the Taliban in charge of Afghanistan, the Uyghur people are left with nowhere to go. They have not been safe in China or Pakistan. They will not be safe in Afghanistan. And little has been done on the international stage to combat the concentration camps, the reach of the Chinese government in extracting Uyghurs from other countries, or the attempts by Chinese Government to couch this in language that makes innocent Uyghurs responsible for the devastation of their human rights.

As we watch the events unfold in Afghanistan and as we think about ways to help bring peace and stability to the region, we must not forget the millions of Uyghur and Turkic people at risk not only in the borders of Afghanistan but in the entire region and at the mercy of the CCP.

That’s all for today. Thanks for watching Zooming In China Tea Time. Please like, share, subscribe and donate to this program if you like my content. Also, head over to my new membership site at zoomingin.tv. You can get video/audio formats of my shows, full transcripts, and in-depth reports available only to members. I will also do live Q & A on the website. The membership fee is $5 a month, or $50 a year. So be sure to check it out. Thanks for watching, and I see you next time.

China’s Zero Tolerance on Coronavirus Backfires | Zooming In China

Welcome to Zooming In China. I’m Simone Gao.

As China enters its fourth week dealing with a second outbreak of the Coronavirus within its borders, the CCP has reverted to its prior tactics of shutdowns and silence. Official reports show 583 new cases last week, an 85% increase over the prior week’s total. The increase is due to the highly transmittable nature of the Delta variant, a challenge multiple countries are now navigating, including the U.S. But China remains in the spotlight with this outbreak, in large part because of their own secrecy and their own deception.

The numbers are not likely to be true. As CNN reported during the early days of the pandemic, based on leaked health data, thousands of daily new cases were not reported by Chinese health officials. 

On just one day—February 10, 2020—officials reported only 2,478 cases when the total privately recorded was 5,918. 

Later evidence shows even that was an underestimated number. We can be sure that the numbers being released by the CCP on this second round of infection are underreported, too.

What we do know is that the majority of the new Coronavirus cases in China are among those who have been vaccinated. One cause of that may be the quality of Chinese vaccines. As has been reported, Chinese vaccines continue to be a concern to the international community, because they have not been shown to be as effective as those produced by other nations. Still, those who have been vaccinated are showing less serious symptoms and having better outcomes than those who are not. 

Despite those better outcomes, the Chinese government has returned to the strategies used during the early outbreak in dealing with this second round. The Delta variant has now been found in more than a dozen cities since it was first identified in Nanjing in late July. But their “zero tolerance” 

tactics have drawn criticism. Xi Chen, a health economist at the Yale School of Public Health, told the Associated Press that “I don’t think ‘zero tolerance’ can be sustained. Even if you lock down all the regions in China, people might still die, and more might die due to hunger or loss of jobs.”

The worries he shares have been seen by university students in Yangzhou. One of those students, Zhou Xiaoxiao, told press sources that food items like eggs and other necessities were difficult to find once shoppers stocked up to prepare for the lockdown they knew would come. She also noted that the price of vegetables has risen and, while it is not a problem for her, she said “to the kind of family whose life isn’t very good and who have no income, it’s very troublesome.”

To offset the real risk of vulnerable Chinese citizens starving during these lockdowns, Xi Chen says that China needs to learn how to “allow the virus to exist” in areas with high vaccination rates and stronger health care. The Chinese leadership disagrees. Responding to the suggestion that they allow the virus to exist, former health minister Gao Qiang said that “we not only cannot relax epidemic control but have to further strengthen weak links, plug loopholes, and resolutely monitor the epidemic situation and issue early warning. This is not to ‘coexist with the virus’ but to engage in long-term struggle to eradicate the virus.”

And that is the approach they are taking. On Tuesday of last week, the Zhangjiajie government announcing that no one would be allowed to leave the city, mimicking the approach in Wuhan and other cities last year. For those who want to leave the province of Jiangsu, they must provide a negative coronavirus test taken within the last 48 hours. Flights to Nanjing and Yangzhou were cancelled. Domestic flights are allowed to leave some cities with reported cases, except Nanjing, Yangzhou and Zhangjiajie, but flights and trains coming into Beijing from areas with reported cases are forbidden. 93 highway checkpoints have been established in Jiangsu province to test drivers for Covid. 

Those are just the actions that have been made public. Citizens within China are telling a far bleaker story. On a site for CCP-banned news, one author says that they are timid and afraid to resist and now the “country is closed, and I can’t leave” offering readers the advice that they should “prepare for winter and think about how to live in a black-market environment.”

Officials in Beijing have taken even more oppressive measures for those they believed helped to spread the virus, issuing warnings, fines and even imprisoning some. While the government at first said that the earliest cases of this second outbreak came from those who passed through Nanjing’s airport, and that employees may have been infected from improper handling of trash, that was later corrected to show that the virus had come from a Russian airliner that arrived on July 10th.  Employees involved in the cleaning of that plane, who later gathered in improper ways in an employee-designated area, have been punished. One traveler, a 64-year-old woman suspected to carrying the Delta variant from Nanjing to Yangzhou, has been arrested on charges of hindering disease prevention. And 47 officials across China, including heads of local governments, health commissions, hospitals and airports, have been punished for negligence.

The U.S. has played no part in this second round of coronavirus transmission in China, just as it played no part in the first. Yet, instead of using the press to calm and inform their citizens, the CCP has used it to attack America, its favorite scapegoat. As the U.S. and the rest of the world seek to find the origin of the virus and the CCP’s responsibility in covering up the pandemic, Beijing  launched a media and diplomatic campaign to accuse America as the maker and spreader of the virus, a familiar tactic by the CCP. 

We know the truth that the coronavirus began in the city of Wuhan sometime in 2019. That it began in that region is not in question. How it started has remained a source of debate. The international community believes that the virus emerged either through transmission from animal to human in that region or from a leak from the Wuhan Institute of Virology. China, however, is claiming that American soldiers attending a military sports games in Wuhan, China in october 2019 brought the disease with them from Fort Detrick, the original location of the U.S.’s biological weapons program prior to the dissolution of that program in 1969. This is a baseless claim. The U.S., as a member of NATO, does not have a biological weapons program. No NATO member country does. What we have is a biological weapons DEFENSE program to guard citizens of this country and of the world from a potential bioterrorism attack.

China is battling the highly contagious Delta variant of Covid-19, as is most of the world. They are struggling to find a way to control the outbreak, just like many other nations. They are attempting to find a balance between controlling the spread through quarantine and keeping a stable economy by allowing work and socializing to continue, with proper precautions. So are the United States and our allies. So why, in the midst of a struggle common to all countries and economies, is China pointing fingers and placing blame? And why is that blame centered on a biological weapons argument? 

Because the Wuhan Institute of Virology is far more than a benign research facility studying bats. It is an institute connected to the Chinese military where they are studying biological elements for use in bioweapon programs. That is the reason that several researchers at the lab became ill prior to the first identified case of the outbreak with symptoms “consistent with both Covid-19 and common seasonal illnesses,” according to the State Department. That is the reason for the rush to destroy records as news of the virus outbreak began. It is the reason for the resistance to any investigation, by the World Health Organization or others, into the activities there around the time of the earliest cases. And it is the reason they have tightly guarded all research from that facility.

Until now. On August 5th, CNN reported that U.S. intelligence agencies had obtained and were sorting through “a treasure trove of genetic data” that they had extracted from China’s Wuhan Institute of Virology. That data includes genetic blueprints of virus samples from bats and rats being studied at the lab.

There is a lot to talk about regarding this database, including the Biden administration’s approach of searching for origins of the virus based on science instead of intelligence findings. Why take an approach like that? What could it mean? We will analyze this in our next episode.

That’s it for today. As many of you may have known, we released a documentary movie on the Clean Network this week, it is part 2 of the documentary series “The American Dream Takes on China Inc”, that tells the story of a group of Silicon Valley veterans beating the CCP in the economic battlefield. We first published it on our membership website, now it is available on our YouTube Channel Zooming In with Simone Gao and Zooming In China. Be sure to check it out. And if you like our production, please sign up for our membership website or donate to me. Our website is zoomingin.tv. Thanks for watching, I am Simone Gao and I will see you next time.

How China’s Nationalism Turned the Olympics Into a Battlefield for Chinese Supremacy

Simone Gao: Hello, everyone. Welcome to Zooming In China. I’m Simone Gao.
 
The Olympics have a storied history, running first from the 8th to 4th century B.C. in Athens, Greece, before beginning again in 1896. 241 athletes from 14 different nations competed in 43 different events during that first revival of Olympic competition. In this year’s 2020 Tokyo Olympics we are witness to 205 nations with more than 11,000 athletes competing in 339 events. But it is not the numbers that tell the story.
 
The story of the Olympics is meant to be one of spirit and of heart. Of solidarity among athletes who have spent the better part of their lives focused on this one dream, this one moment, where they might rise to be recognized as the greatest in the world. While the athletes represent their countries, and there is pride in that, at its core, the Olympics is meant to unite the world under one common purpose: to bear witness to the pinnacle of human athletic achievement and to celebrate greatness, no matter its source. 
 
Could that be a problem? 
 
On the bright side, people would want to believe that no team may more fully represent what the Olympic spirit might look like in practice than the Refugee Olympic Team, the plus one to the 205-nation total. Since the introduction of this team at the 2016 Rio de Janeiro Games, the Olympic Solidarity project has provided more than $2 million in scholarships allowing these talented but displaced athletes to “train for the Games while continuing their sporting career and building for the future.” In Tokyo, 29 athletes from 11 countries are competing on this truly international, truly unified team.
 
But in reality, the Olympics can not and has not lived up to this ideal. The International Olympic Committee says that “we oppose any form of discrimination against a country or individual on the basis of race, religion, politics, gender or other reasons. With the broad minds of global citizens, we will tolerate, respect, appreciate and learn from other cultures, learn from each other’s strengths, and make progress together.”
 
Those are values that cannot be fully realized in a single athletic competition, even one the size and length of the Olympics. Those are values that, to be upheld, must extend to the life each athlete is able to live in their home country, to the ways those countries treat their citizens and to the behavior of each country as a member of the global community. 
 
We have borne witness to a world where there have been genocide Olympics repeatedly. In 1936, the Olympics were allowed to be held in the host city of Berlin, Germany, granting Hitler an opportunity to showcase himself as an honorable leader and his country as a prosperous one. In truth, Hitler had begun his concentration camp system three years earlier with the creation of Dachau on March 22, 1933. And in 2008, the world willingly overlooked China’s role in the Darfur genocide, overlooked China’s severe human rights violations within its borders against the Christians, Falun Gong, the Uighurs, the Tibetans, the Mongolians and any political dissidents. World leaders, including U.S. president George W. Bush, chose to participate in the Beijing Olympics and settled for small protests at the event. Can we uphold the so-called Olympic spirit if those Olympics are being hosted by a country engaged in unspeakable crimes against humanity?
 
The failures of the Olympic spirit run far deeper than large-scale human rights violations. They run into the individual lives of athletes chosen to represent their country and to the tensions those countries carry with one another. 
 
China’s approach to the Olympic games is one of winning at all costs, even the cost of its athletes. Their Olympic program, built after the Soviet model and refined through Chinese efficiency, is duplicated year-after-year in their 2000 government-run sports schools spread across the country. Children, hand-picked by State scouts, usually in their pre-teen years are removed from their families and required to focus exclusively on training for six grueling days a week, year-round, with few visits home and no real education. They are denied a childhood in the name of winning gold for their country. And for the tens of thousands who fall short of Olympic selection, they will carry the weight of lifelong hardships in their home country. With little education, damaged bodies and no career training, they will be left without options and without support from their government. 
 
For those who are selected for Olympic competition, they will carry the weight of expectation. In the case of China, that means an expectation of gold. Silver and bronze are seen as failures. Just before the beginning of the 2020 Tokyo Olympics Games, Gou Zhongwen, head of the Chinese Olympic Committee, said that “we must resolutely ensure we are first in gold medals.” 
 
That attitude has now been taken up by the Chinese nationalists attacking their own athletes and rival countries on social media. “To these people, Olympic medal tables are real-time trackers of national prowess and, by extension, of national dignity. In that context someone who fails at a competition against foreigners has let down or even betrayed the nation,” said Dr Florien Schneider, director of the Netherlands’ Leiden Asia Center.
 
We see the cost in the tears and apologies of Chinese athletes who, in the eyes of their country, have failed in the expectation to put nation above self. China’s table tennis mixed doubles team Xu Xin and Liu Shiwen, heavily favored to win, came up just short in a 3-4 loss to Japan’s Jun Mizutani and Mima Ito. 
 
Instead of celebrating the incredible accomplishment of being second in the world at the Olympic Games, the pair tearfully apologized and said that the Chinese team as a whole “cannot accept this result.” 
 
They did not, neither did their fans. The social media pages of the two Japanese players were so bombarded with verbal harassment and threats from angry Chinese people that they had to turn off the commentary function of their accounts.  
 
This kind of response is bred from a nationalistic approach to competitive sports. The Chinese government’s obsession with gold began with the founding of the People’s Republic of China in 1949 and from the earliest essay of Chairman Mao Zedong who wrote of China’s need to overcome the “sick man of Asia” perception and develop its strength. In the eyes of the CCP, only gold showcases that international strength, that defeat of other nations. Only gold is good enough.
 
Especially in a match against host country Japan. These two geographic neighbors have a complicated history fractured by Japan’s invasion and occupation of Manchuria, in northern China, in 1931 followed by the Second Sino-Japanese War from 1937 to 1945. Despite 76 years of distance from the end of the war, Chinese nationalists still saw the table tennis mixed doubles match not as an athletic event but, instead, “a standoff between China and Japan.”  
 
But not all Chinese citizens support this kind of nationalistic view of sports performance. One Weibo user replied that the mixed doubles match “was brilliant. Both sides were very strong and were very humble and respectful toward others.” Even State-run Xinhua news agency posted that, “I hope that all of us in front of the screen will establish a rational view of gold medals, and of victory and defeat to enjoy the Olympic spirit.”
 
But to say it is not necessarily to live it.  Dr. Jonathan Hassid, political science expert at Iowa State University, noted that “the CCP tries to exploit online nationalism for its own purposes, but events like this show that once Chinese citizens get riled up, the state has great difficulty in controlling those feelings.” Once a country stifles dissent of any kind and requires strict allegiance and obedience to anything believed by its leaders, it breeds a nationalism that bleeds into the ideal of the Olympics. The kind of nationalism that promotes country over citizen. The kind that promotes the grandeur of the Games over the travesty of human rights violations. 
 
We made the mistake of overlooking early concentration camps in Germany in favor of the 1936 Olympics being held on schedule in Berlin. We mistakenly thought that small protests at the 2008 Beijing Olympics would impact the genocide without disrupting competition in the Games. We were wrong, and we failed not just Olympic values but humanity because of it. Countless lives were lost.
 
In response to the question of whether the U.S. should boycott next year’s Beijing Olympics, an unnamed former senior Treasury official told CNBC that, “It’s better to go there and dominate.” I disagree. It is better for the United States to stand in solidarity with the people, the human beings held in the Xinjiang internment camps and refuse to support a nation that would inflict that kind of extended torture on its people. It is better to uphold the values that underlie humanity than to disregard them in the hunt for athletic supremacy.
 
Genocide olympics can not be tolerated. 
 
That’s it for today. Again, we will release a documentary movie on the Clean Network today, it is part 2 of the documentary series “The American Dream Takes on China Inc”, that tells the story of a group of Silicon Valley veterans beating the CCP in the economic battlefield. We will publish on the membership website today and premiere it on Youtube two days later, on Sunday. For future documentary movies that are not part of this series we will put the full length movies on the membership website only. So if you would like to watch this movie earlier and to support me, please sign up for our membership website zoomingin.tv.
 
Thanks for watching. I am Simone Gao and I’ll see you next time.
 
Oh, before I leave, enjoy the trailer of the documentary movie The American Dream Takes on China Inc part 2: The Clean Network.

China and India Heading to War Over Water? China to Build Huge Hydropower Station on Border

Hello, everyone. Welcome to Zooming In China, I’m Simone Gao.

A new report from Bloomberg on August 3rd seemed to bring hope to a darkening border dispute between China and India. China and India have mutually agreed to pull back troops from the site of a deadly dispute in June 2020 where 20 Indian and 4 Chinese soldiers were killed. After more than a year of both sides protecting that border, it will now be replaced with a demilitarized zone neither side will patrol in order to prevent a repeat of that conflict. Similar zones exist throughout their disputed 2,170-mile border.

The photos coming from the area capture a different story for the rest of that border. They show heavily armed vehicles traversing dangerous terrain, carrying more soldiers and heavy weaponry to a battle the international community sees coming but seems powerless to stop. Both sides have sent troops to the area over the past year, China increasing their troops from 15,000 to over 50,000 and India keeping pace with tens of thousands of their own. The deployments on both sides have reached the highest level in decades, and what the August 3rd announcement does not show is a willingness to remove those troops altogether.

The propaganda coming from China’s People’s Liberation Army has increased in tempo, too, most recently with a video posted online by the Henan provincial military district. In the video, a graphic clip of the June 2020 battle shows troops, who had been denied guns to reduce skirmishes, wading through waist-deep water while throwing stones and waving bayonets at one another. The video was shown during an interview with the family of one of the four Chinese soldiers killed in that dispute. Clearly this is an attempt to fuel anger and a desire for justice among the Chinese people to gain their support for a coming war. A war between two nuclear-armed countries.

The preparations are already in place. Both China and India have been at work building infrastructures that will support a lasting presence in the area, including insulated cabins and huts for use by the soldiers during the long Himalayan winter. China has built underground bunkers and tunnels, power structures including hydroelectric power stations and solar panels, and helipads and field hospitals. They have also moved heavy artillery to the area, including advanced surface-to-air missiles.  

India is deep in preparations as well, building their own roads and tunnels as well as housing for around 18,000 troops. Previously, they had housing for only 5,000. And along with their own heavy artillery, they have sent a squadron of 18 fighter jets to the surrounding regions, prepared to engage if necessary. A second squadron is being readied.

It would be easy to cast this as a simple border dispute, an argument over land that was only vaguely defined following the last China-India war in 1962. An official border was never determined after that war, the land instead being drawn by a demarcation line, or what is known as the Line of Actual Control. India draws that line at the location where Chinese troops withdrew in 1962. China draws it in the location they held before the war, in 1959. One area China continues to try to claim is an area where India has established a full state: Arunachal Pradesh.

If this were just a battle over an ill-defined border, it would be easier to believe that there is daylight coming, a reversal of the march toward what may become a nuclear incident. But there is more at stake. There is a reason this land is so hotly contested and so important to each side. And that reason is water. 

The international water at the heart of this conflict is the Yarlung Zangbo River that runs through China’s territory in Tibet. It then flows into India, known there as the Brahmaputra River, and through Bangladesh as the Jamuna River until it finally flows into the Indian Ocean. This is a river that matters. It matters to the identity of the Tibetan people, to the economy of the Chinese people and to the very lives of citizens in India and Bangladesh. The fighting, then, is not about the land itself. It is about the survival of people, countries, and identities.

During the disastrous floods in China’s Henan Province, rather than staying in the area to help his people through the crisis, General Secretary Xi Jinping traveled instead to Tibet. He went to survey the area surrounding Linzhi, part of the land contested between these two countries, and to the Niyang River Hydropower Station. Both sites important to China’s intention to “implement hydropower development in the lower reaches of the Yarlung Zangbo River” outlined in the country’s 14th Five-Year Plan and their 2035 Vision.  It is scheduled to begin construction between 2030 and 2035 with an estimated completion date of 2045. It will be three times the size of the Three Gorges Dam.

This new project, called the Mo Dehydration Power Station, comes from a country that has exhausted its ability to build dams in many other areas. Chinese water conservancy expert Wang Weiluo reports that “The hydropower resources in other provinces except Tibet are almost exhausted. The only thing left is the Tibet Autonomous Region, and the hydropower resources of the Tibet Autonomous Region are concentrated in the lower reaches of the Yarlung Zangbo River.” With so many hydroelectric projects scattered throughout China, why risk a war with India to build a new one on contested lands in international waters? 

Money is a big part. This is a project estimated to bring in a total of 3.6 trillion yuan for China, with 22.19 billion yuan slated for Tibet. While that might seem like a needed boost for the Tibetan people, it is meant as a benefit to the Chinese government. Tibet’s total fiscal revenue for 2019 was just 22.19 billion yuan, which was then subsidized by the Chinese government who added another 190.12 billion yuan. This power station, then, does little more than offset part of what the Chinese government was subsidizing to the region. It does not improve the lives of the Tibetan people who live there.

But controlling the water is bigger than money. Constructing the Mo Dehydration Power Station will give China the complete strategic control over the water resource of the Yarlung Zangbo River. This will be China’s most powerful move against an ever hostile and dangerous rival: India. Likewise, handing the security of these powers over to the CCP would mean a loss of control and survival, not just in this contested area but in their entire country. And it means putting the lives of 1.37 billion people in India and 163 million people in Bangladesh at the mercy of the CCP. 

For India and Bangladesh, this is about life itself. The Brahmaputra River is the most significant source of water in both countries, and any diversion of that water would be disastrous for both countries. 130 million people in India and Bangladesh live along the Brahmaputra delta with another 600,000 living on the river’s islands. These people rely on the river’s yearly flooding for the moisture and sediment it brings to the soil. That flooding brings the nutrients needed for their agriculture and marine farming that are key to their food production and their economies. The fish caught on the river’s floodplains and ponds are the primary source of protein for people in the area, and two of their three seasonal rice varieties cannot survive without the floodwater. Already facing serious climate refugee challenges due to rural lands being lost under the rising seas, a loss of the Brahmaputra’s river natural flooding would ravage both countries. 

The Tibetans won’t be happy either. As Weiluo also makes clear, “In the hearts of the Tibetans, the Yarlung Zangbo River Grand Canyon is the place where gods live. It is the mother river of the Tibetans and the cradle of the Tibetan culture.” Chinese author Han Xuemei adds that “among the primitive Tibetan religion Bon, the sacred concept of awe of nature and ecology has the deepest impact on Tibetans. They believe that the Qinghai-Tibet Plateau is a holy land, and the sacred mountain and lake are the ancestors and protectors of their nation. Not only would this project be destroying their sacred areas and cultural spaces that are critical to their identity as a people, the Tibetan people do not economically benefit from the project. Tibetans are not employed in dam construction projects because the Chinese government is worried that they will destroy the engineering facilities, according to Weiluo.

How will the Mo Dehydration Power Station project unfold? We will keep you updated. 

That’s it for today. As some of you may have already seen, we are about to release a documentary movie on the Clean Network. It is part two of a documentary series “The American Dream Takes on China Inc.” that tells the story of a group of silicon valley veterans beating the CCP in the economic battlefield. We will publish it on the membership website first on Friday and premiere it on YouTube two days later on Sunday. 

For future documentary movies that are not part of this series, we may put them on the membership website only. So if you would like to watch this movie earlier and to support us, please sign up for our membership website: zoomingin.tv. Thanks for watching. I am Simone Gao and I will see you next time. Oh, before I leave, enjoy the trailer of the documentary movie, the clean network.

Why Does Beijing Want to Destroy Didi What’s in DIDI’s Data that CCP Fears Zooming In China

Simone Gao: Hello! Welcome to Zooming In China Tea Time, I am Simone Gao.

The disastrous IPO of Didi Global in early July has set off a firestorm for all Chinese companies looking to be listed on U.S. stock exchanges. Following their $80 billion valuation after two days of trading, Didi, China’s equivalent to Uber, looked to be a rising star with the largest IPO of any Chinese company since Alibaba in September 2014. But in going forward with their IPO, they had rejected a request from the Chinese government to postpone that IPO until their public filing documents could be thoroughly reviewed by the Cyberspace Administration of China. The Chinese government quickly responded, placing Didi under a mandated cybersecurity review and removing their apps from all Chinese app stores.

That review took a more extreme turn on July 16th. Chinese regulators from multiple agencies, from multiple government agencies — including the Ministry of Public Security, the Ministry of State Security, the Cyberspace Administration of China, the Ministry of Transport and the Ministry of Natural Resources — raided the corporate offices of Didi. They announced the move in a public statement, likely to make the punitive response to corporations that disregard their requests obvious to the entire international community.

The outcomes of the review may be more serious than the falling valuation of Didi Global stock. Punishments can include financial penalties, suspension of business licenses or even criminal charges. We can expect the punishment to be severe given the very public nature of this dispute. The CCP can be counted on to make a public example of Didi. To show leniency to a company who disregarded the full control of the Chinese Communist Party would be to weaken that control, and that is unthinkable within the current regime.

Not when there is that amount of data at stake. As reported in the Wall Street Journal, Didi’s 377 million annual active users and their 13 million annual active drivers in China turn over their real names, vehicle information, criminal records, and their credit card and bank information to Didi. Those users often choose to share photos, home and office destinations, and identifying information like their age, their gender, their occupation. And even, they may be subject to submitting facial-recognition data.

The CCP’s response might be understandable, given their dedication to tight control, if their punishments had centered on only Didi. But they did not stop there. Just after the announcement of the cybersecurity review for Didi, they announced the same app restrictions and cybersecurity review for Full Truck Alliance, an Uber-like service for freight trucks, and Kanzhun, an online job recruitment service.

Days later, the Chinese government tightened their grip. The Cyberspace Administration of China posted, for public comment, an extensive revision to their Measures for Cybersecurity Review. The most notable change in that revision is one requiring any Chinese company with control of data for more than a million users to seek permission from government regulators before filing for an overseas IPO. That revision, according to Henry Gao, a law professor at Singapore Management University, “would make it very difficult or even impossible for Chinese internet firms to get listed in foreign exchanges. Many of them would probably choose Hong Kong or domestic listing due to the tedious regulatory approval process.”

In addition to the mandated review process, the revision also extends the period of review from 45 working days to 3 months or longer, marking yet another deterrent to Chinese companies listing on foreign exchanges. Most Chinese tech companies have far more than the 1 million user threshold making every one of them subject to a lengthy review that is likely to end in a denial of permission.

But why now? Why Didi?

Didi has a great deal of data on Chinese citizens, but the data collected on its users is not likely to be cause for this level of alarm. It is certain that Alibaba collects similar kinds of data, and they currently have 811 million users, far more than Didi’s 377 million. Yet, Alibaba had a very successful IPO and remains a success in foreign markets with less interference from the Chinese government.

If it’s not the average citizen data, then there is another source of data at stake.

According China observers, High level Chinese Communist Party leaders use the DIDI app to go to places without using official cars or drivers. These trips can give a lot of information out about these officials in terms of where they went and possibly who they dealt with. Many secrets of these officials could be revealed by the DIDI app data. China is afraid somehow these data could fall into the hands of the American government.

After the Holding Foreign Companies Accountable Act passed in 2019, Chinese companies like DIDI is required to submit original accounting records that will reveal  who Didi is funded by, who they are partnering with, how the data gathered by Didi is shared among those players, and the Chinese government is afraid these information will also become available for the Americans.

Whether the primary source of their concern is citizen or corporate data may not be known, but we can be sure that the CCP knows exactly what kind of information is at risk, because they have engaged in an international theft of similar data at a scale previously unseen. On July 19th, President Biden revealed that China has either directly ordered or has allowed ongoing theft of data from numerous countries, theft that includes a partnership with cybercriminals who obtained data for the Chinese government while also engaging in cyber ransom activity for their own financial gain.

President Biden was joined by allies from Australia, the United Kingdom, New Zealand, Canada, Japan, the United Nations and NATO in condemning the attacks and calling for an international inquiry into the type and extent of these attacks. While President Biden stopped short of any direct punishment for these actions, he later stated that the investigation is ongoing and that U.S. officials need a full understanding of the scope of the attack prior to making decisions on the consequences for them.

If the United States is to understand the attacks that have taken place by China, including the 2021 attack on the Microsoft Exchange email server software and other attacks on unnamed companies with ransom demands in the millions, we need to take a closer look at Didi. The international community needs to know why the Chinese Communist Party reacted so immediately and so excessively to Didi’s IPO. What data does Didi have that is different from the data of other Chinese tech companies listed on American exchanges? Why is Didi a threat at a level that is much larger and more notable than any other Chinese tech companies? When we find the answer to those questions, we will find part of the answer to how the CCP has carried out the extensive cyberattacks revealed by President Biden and what data they were after with those attacks.

Thanks for watching Zooming In China. Please like, share, and subscribe to our channel if you like our production. Most importantly, please sign up for our membership website at zoomingin.tv. $5 a month, or $50 a year. We have video audio formats of the show, transcript for the show, we will also have in-depth reports for the members in the future, and also Q&A, live Q&A with me on the website. So thanks again. I am Simone Gao and I will see you next time.

Flood Explosion and Land Subsidence in China, Natural or Man made Disaster? Zooming In China

Simone Gao: Hello everyone, welcome to Zooming In China. I’m Simone Gao. 

China’s Henan Province was hit by historic heavy rains on July 20. The subway in Zhengzhou, the capital of the province, was submerged in the floods. The city remains in a state of paralysis. Floods in the urban area are surging and up to 1.2 million Chinese citizens have been displaced by the water. Chinese officials have admitted to 25 deaths, though the actual count may be much higher.

The scenes from Henan are horrific, the worst coming from a Zhengzhou subway station platform where citizens were caught by rising waters in the subway cars and were suffocated by a lack of oxygen. Photos and videos of many corpses on the Zhengzhou subway station platform have gone viral on social media. Over 500 people were rescued from that train, though media reports indicate that more than 10,000 were trapped on trains throughout Henan, some for more than 40 hours with food and water having to be brought in by railway workers.

Outside of Zehngzhou, the water levels of 32 large and medium-sized reservoirs across the province exceeded the limit. According to Agence France-Presse, the Chinese military warned that a reservoir in Luoyang was likely “to collapse at any time,” and the whole of Henan was in a desperate situation. That situation is not expected to end soon.

The rains began on July 17th, ranging from moderately heavy in some areas to extremely heavy in others. Disaster-stricken Henan received more precipitation in three days then they normally would in a year. Monitoring at the Central Meteorological Observatory showed that Zhengzhou received nearly 8 inches of water in just one hour, 4 and 5 pm, on the 20th. That 8 inches, added to the total from three full days of heavy rains, raised the flood control emergency response to Level 1. 

The heavy rainfall was mainly concentrated in the western, northern and central regions. Extremely heavy rain occurred in Zhengzhou, Jiaozuo, Xinxiang, Luoyang, Nanyang, Pingdingshan, Jiyuan, Anyang, Hebi, and Xuchang.

Meteorologists report that the heavy precipitation is expected to last until the evening of the 21st. The heavy precipitation is still concentrated in the northem and central areas of Henan, and the precipitation can reach 4 to 10 inches, and locally 12 to 15 ½ inches. Large-scale heavy precipitation is not expected in Henan Province from the 22ndto the 26th.

But while the worst of the flood conditions may come to an end tonight, the cleanup and recovery is likely to take far longer, especially business cleanup. Reports broke late yesterday of an explosion at Dengdian Group Aluminum Alloy Company. in Henan Province. 

The explosion was caused by soaring water levels from the Yinghe River. The waters exceeded company warning levels around 4 o’clock in the morning. Shortly after, the wall collapsed, and the plant was flooded. By 6 o’clock, the flood spread to the alloy tank in the plant, causing the explosion. Fortunately, there were no casualties.

Another business currently at risk is Apple’s foundry factory Foxconn. Foxconn has three factories in Zhengzhou and is the main manufacturing base for iPhone production with more than 90 production lines and around 350,000 workers. 

About half of the world’s Apple mobile phones are from Foxconn in the Zhengzhou factory. This company is also critical for the Zhengzhou economy, accounting for 81% of Zhengzhou’s total exports. 

Foxconn’s representative told reporters on the evening of July 20th that “Currently, operations are normal and will continue to monitor the situation.” With rains expected to continue through this evening, the concern over this critical industry remains.

While the impacts of Henan’s floods are obvious, the causes may not be as simple. Chinese meteorologists gave the environmental perspective, saying that the reason for such extreme rainstorms is the special airflow characteristics combined with the topography of Henan. Instead of elaborating on those details, I want to focus here on another possible factor causing floods: the connection between China’s reservoirs and dam systems and the frequent floods in contemporary China.

There are four major water systems in Henan, namely the Yellow River, Huaihe River, Weihe River and Hanshui River. Historical records show repeated flooding in that region throughout its history. The most recent one was the “75.8 Flood” on August 6th of 1975 when heavy rains triggered a major flood in the upper reaches of the Huaihe River causing a small reservoir to collapse.

Early in the morning on August 8th, two large reservoirs and nearly 60 small and medium-sized reservoirs collapsed one after another within just a few hours. Among them, the Banqiao Reservoir collapsed. The maximum instantaneous flow out of that reservoir was 79,000 cubic meters per second. The flood peak was nearly 50 feet high and with 36 million cubic feet forced downstream within 6 hours.

The flooding caused over 63 miles of Beijing-Guangzhou railway line to be destroyed. It also laid a devastating human cost on the region. The dam collapsed at 1 am, when tens of thousands of people were still asleep, leading to mass casualties. Many villages and towns disappeared instantly.
The most conservative report of the death toll was 26,000, but the additional death toll brought about by plagues and famines caused by the flood was between 220,000 and 240,000. At that time, which was during the Chinese Cultural Revolution, the government mentioned nothing about this disaster. The devastation was not revealed until many years later.

Dam failures are a common cause for the flooding in China. In an interview I did with water conservancy expert Wang Weiluo last year, he said that the Chinese have not recommended and are not good at constructing reservoirs and dams to control water. 

In 1949, when there were roughly 20 total reservoirs in China, almost all of them had been built by the Japanese during World War II. Years later, the CCP sent people to the Soviet Union to learn methods of dam construction and the proper function of a reservoir: storing floods so that water can be used in times of drought. They built that belief from the theories in Joseph Stalin’s book Political Economy. In it, Stalin claims that we have mastered the tools to defeat nature by, for example, building reservoirs. 

There are now 98,000 reservoirs in China with 52,000 reservoirs in the Yangtze River Basin alone. If the reservoirs can safely store floods to fight droughts, as the CCP said, then China should have no floods or food shortages. But this is not the case. In recent decades, China has seen severe floods repeatedly. Why is this?

Because a reservoir needs to meet certain conditions for flood storage and drought resistance. However, in China, those conditions are not met. 
First, the capacity of the reservoir must be very large. For example, the capacity of the Aswan Reservoir dam in Egypt is 1.86 times the annual runoff. China’s Three Gorges Reservoir is 8%, leaving a smaller total capacity than the 9% annual runoff of the Yangtze River. What problems can this cause? As soon as the rainfall increases, the reservoir cannot hold any of the flood. Instead, floods need to be discharged downstream so that they will not break the dam or cause overflow around the reservoir. But discharging that water will cause floods downstream. Right?

Second, flood prevention for the benefit of Chinese citizens must be the first goal rather than a secondary one. But, in the process of the CCP’s economic reform, the right to use local reservoirs has been privatized. Reservoir operators must pay the government for the right to use the dam. Because of that, operators must rely on the dam to make money, For example, power generation and the sale of the water. The more dams they operate, the more money they make. 

To meet that need, dams are often built quickly, sacrificing quality in the process. That lack of quality has become a major cause in the floods seen in town and cities downstream of the dam. In fact, Chinese reservoirs have a failure rate that is twice that of other countries. It has been reported that from 1954 to 2020, more than 3,000 reservoirs in China had failed. 

Also because of these interests, reservoir operators are reluctant to discharge the flood in the reservoirs or they would discharge it at the last minute. You can imagine, this caused great danger to the residents living downstream.  

Now, the water level of 32 large and medium-sized reservoirs in Henan has exceeded the limit, and the situation is urgent. Agence France-Presse quoted a warning issued by the People’s Liberation Army, which supports local disaster relief efforts, that the Yihetan Reservoir in Luoyang “may burst at any time.” 
Phoenix.com reported that the Yihetan dam had a breach of about 20 meters on the 20th. The river embankment was seriously damaged, and the dam may collapse at any time. 

According to the Global Times, Zhengzhou has begun to release floods downstream due to the seriousness of this potential disaster. The water level of Zhengzhou Changzhuang Reservoir has dropped by 70 cm in one day, indicating that the flood discharge downstream is very strong. This will cause the human and industry costs already experienced downstream to continue to worsen. 

The Henan flood disaster is not only a natural disaster but also a man-made disaster. A disaster that could have been prevented, and an example of disasters that will continue to come. 98,000 poorly constructed reservoirs in China have become a sword hanging over the heads of the Chinese people. I hope that the people in the disaster-stricken area in Henan can survive this disaster smoothly. And I hope that the Chinese government will see the need to prevent these tragedies in the future by repairing these dangerous dams.

Thanks for watching, I’m Simone Gao and I see you next time.

Will DIDI Set Off US China Capital Market Decoupling? The Story Behind Didi’s Disastrous IPO

Simone Gao: Hello. Welcome to Zooming In China, I am Simone Gao.

On the final day of June, ride-sharing giant DIDI Global, China’s equal to Uber, made its initial public offering on the New York Stock Exchange. This listing had been years in the making, with industry insiders whispering about such a move nearly five years ago. But once the decision was made, the filing and approval moved at lightning speed with help from U.S. bankers backing the listing, including Goldman Sachs, Morgan Stanley and JPMorgan Chase.

For the first two days, DIDI’s IPO was a global success, emerging as the largest Chinese IPO on the U.S. stock market since Alibaba’s offering in September 2014. By the second day, Didi’s shares rose 16%, leading to a valuation of the company at about $80 billion. Then came the international firestorm.

The Chinese government, taken by surprise by this public offering, struck back quickly. The Cyberspace Administration of China, or CAC, announced on July 2nd that Didi would be placed under cybersecurity review. During that review, new users would be banned from accessing the app. 25 of the company’s other apps, accusing them of violating laws surrounding the collecting of personal information. On Sunday, the CAC announced that the Didi app would be removed from all Chinese app stores.

Following the announcement of that review and restriction by the CAC, investors left in large numbers, leading to a 5% drop on Friday and a 25% drop when markets opened on Monday morning. While the stock has recovered some of those losses, it still sits well below its success prior to the CAC review.

At its core, this is a conflict over data: who has it, who controls it, who can access it, and how it is used. Despite operating in 16 countries, most of Didi’s business comes from China where it controls nearly 89% of the rideshare market. With a market that size comes mass amounts of data, including sensitive data displayed on its map function. Even after the CAC ban, Didi has 377 million annual existing users and 13 million drivers who are still able to use the app.

After their early June public filing, Didi set a goal for an early July initial offering. Because they are incorporated in an “offshore tax haven,” they were not required to seek government approval for an overseas public offering. Still, Didi informed China’s National Development and Reform Commission and Beijing cyberspace regulators of their intent. Chinese regulators urged Didi to pause the offering over concerns that IPO documents required by U.S. regulators could provide sensitive Chinese data. One point of concern may have been the U.S. law passed last year named Holding Foreign Companies Accountable that requires Chinese companies to turn over audit documents including original accounting books for regular review.

Even though that law was not fully implemented before July 12th which has already passed Didi’s IPO date, the Chinese authorities worried about the documents submitted after the company’s IPO since the U.S. regulators would review audit documents every year.

Back to Didi.

So Didi did not commit to postponing the sale, saying only that they would consider the Chinese regulators’ request. Government officials claimed they did not intend to block the sale but wanted a chance to review Didi’s records. But rather than pause the IPO, Didi sped up the process, setting a sale date for June 30th.

It is not clear why Didi chose that path. One speculation is that Didi tried to finish the IPO procedure before the Holding Foreign Companies Accountable law was fully implemented so they didn’t have to provide sensitive documents required by the new law, at least for the IPO.

Didi’s only public statement has been that they were not aware that Chinese regulators would place them under review. But there is reason to believe that Didi was also concerned about regulators blocking the sale, and they had good reason to be concerned. The Chinese government blocked the Shanghai and Hong Kong IPO of the Ant Group last November, expected to be the largest IPO in their history, two days before trading was to begin. And, as several Chinese tech executives have said, despite the regulatory pushback from Beijing, this will likely still be a win for Didi.

The CCP has not taken this loss of control well, though, and the reigns placed on Didi have been added to other recently listed companies as well. Full Truck Alliance, an Uber-like service for freight trucks who had their U.S. IPO on June 22nd, and Kanzhun, an online job recruitment service whose IPO was one day later, have now been ordered to reject new user registrations and submit to a cybersecurity review.

A tightening of CCP control over the Chinese tech sector has been a long time coming. After the debacle with Didi, that control is growing. On Saturday, the CAC posted a proposed revision to their Cyber Security Review Measures on their website. The revised measures would compel companies with more than one million users and those “newly listing on foreign markets” to secure CAC approval and turn over IPO materials for review before listing shares in those markets. The CAC has made that proposal available for public comments until July 25th, though public feedback will mean very little in CCP-controlled China.

Because Didi has been classified by Chinese law as a “critical infrastructure provider,” they are viewed as holding national-security level data. The revisions to China’s cybersecurity law make that clear, nearly all of them centering on the holding and transmission of data. To the “Cybersecurity Law of the People’s Republic of China,” they have added the “Data Security Law of the People’s Republic of China.”

The earlier law applied only to those “procuring network products and services,” but will now also apply to “data handler, conducting data handling activities that influence or may influence national security.” As part of that review, companies will have to provide a written declaration; an analytic report on the possible influence on nationa lsecurity; a procurement document, agreement, or contract to be signed; and IPO materials provided for submission. Publicly, the CAC says their concerns are that “core data, important data or large amounts of personal information” might be “stolen, leaked, damaged, or illegally used or exported” and that the data of Chinese companies could be “affected, controlled or maliciously exploited by foreign governments” once listed. What they are not saying, though, is that they are equally concerned with the power and position their online platform giants, like Didi, will gain through these added investments. These Chinese tech giants are simply not allowed to exist like before. Their power has to be reined in.

As Chinese companies grow more powerful, they become a direct threat to the regime, and the CCP has consistently squashed any threat to its power. But TS Lombard’s expert on China’s economy, Rory Green, wrote in a recent note that “crackdown on Didi opens a new front in China’s tech assertiveness: this is a question of sovereignty. The battle for data sovereignty is beginning and China is already fully motivated.”

It is not clear how long the crackdown on Didi will continue nor how many future Chinese companies may be affected. What we do know is China’s online “platform economy” has joined Big Tech under the hawk-eyed watch of the CCP regime. As China continues to strong-arm the giants of their corporations—including Didi, Ant Group and, recently, even Tencent when they attempted a merger the CCP believed would give them too much power in their sector—Are we going to see a China that will go back to the old days of the planned economy where the government controlled everything? Let’s wait and see.

Thanks for watching Zooming In China. Please like, share, and subscribe to our channel if you like our production. Most importantly, please sign up for our membership website at zoomingin.tv. $5 a month, and you can cancel anytime. We have video audio formats of our show, in-depth reports only for the members, and live Q&A with me on the website. Thanks for watching. I am Simone Gao and I will see you next time.

China’s Top Spy Head Did Defect!? Media Reports Show China lied about Him Attending a Meeting

Hello everyone, Welcome to Zooming In China Chat. I am Simone Gao. As you can tell, this is not my normal setup because I am on vacation right now, but there is some really important stuff coming up that I have to report for you guys, so I just did an interview with Solomon Yu who has some detailed information about the Chinese defector Dong Jingwei. Solomon is Republican National Committeeman for Oregon. Vice Chairman and CEO of Republicans Overseas. He received Dong Jingwei’s information from a high level U.S. official who he can’t reveal the identity of. His source confirmed that Dong Jingwei was the vice minister of China’s public security bureau, he did defect and he brought bombshell information about the origin of the virus, China’s biological weapons program, China’s spy operation in the U.S., and information on specific compromised U.S. officials.

So far, I can not independently verify the information he provided. And because some of the information he provided is very sensitive and likely to be censored by YouTube, I moved part of my interview with him to my brand new membership website. My website is Zoomingin.tv. If you register as my member today, you will be able to watch the rest of the interview tomorrow on my site. My membership fee is $5 per month, benefits include video, audio format of my shows, most transcripts, behind the scene clips, and exclusive in-depth report that will come in the future. I will also do live Q & A with members from time to time.  Becoming a member of Zoomingin.tv is the best way to support my work. So friends, please spread the words and register today. Now let’s go to my interview with Mr. Solomon Yu.

Simone Gao (00:00):

Solomon, you have information on this, supposedly a Chinese defactor. A high-level Chinese official that recently defected to the U.S. Tell me about it.

Solomon Yu (00:16):

Yes. I got a secondary source, which I can’t reveal, and confirmed it. DIA, that stands for Defense Intelligence Agency, run by our military, has the defector in its custody, protective custody.Simone Gao (02:41):

Okay. Yeah. So there are a few things that we need to get to detail of. First of all, this person, he is, his real name is actually Dong Jingwei, and he is the Vice Minister of the public security of China. Is that true?

Solomon Yu (03:00):

That’s correct. Dong Jingwei actually is a highest ranking contra-espionage match officer in China’s State Security Ministry.

Simone Gao (03:27):

so when did he defect?

Solomon Yu (03:35):

In mid-February.

Simone Gao (03:39):

So he has been in the U.S. For, for four months, almost

Solomon Yu (03:45):

That’s correct. As a matter of fact, here is the background. If you remember that high-level meeting between U.S. Secretary of State and National Security Advisor in Anchorage, Alaska with Foreign Minister Wang Yi and, uh Mr. Yang they asked for U.S. To return Mr. Dong, the defector, and of course the Secretary of State didn’t even know DIA has uh, Mr. Dong, and Mr. Dong was working with DIA for quite some time, because Anchorage meeting was about March some time, right? And so now the White House, everybody else starts scrambling. They say, “Hey, who really got you know, spy, or defector.” And pretty soon, DIA has to come clean and say “we got it.”Solomon Yu (05:20):

And also bad news for Biden and Biden family, because he also provides information about Biden’s son Hunter, was in China, and the picture of having sex with minors, all those stuff also came out. And so that was the reason actually Biden ordered 90 days, U.S., uh Intel community review. When we talk about Intel community, we will talk about 16 U.S. Intel agents and review what happened to Wuhan virus. And the latest thing was White House National Security Advisor will say no to Xi Jinping. And gave Xi Jinping’s choice between allow Western scientists going to Wuhan lab to investigate or free world will isolate China.

Simone Gao (06:41):

Right. Let me just get this clear. I don’t quite understand the rationale between, so supposedly China has photos of Hunter Biden in China having sex with minors, and they are using this to threaten President Biden? And somehow the, how is this related to Biden then decided, you know, they’re gonna, they’re gonna investigate the origin of the virus in China? How are these two, two things related?

Solomon Yu (07:15):

Okay. When DIA reported to the White House saying that the defector provide us a list of information including Chinese assets in U.S. Companies, individual, U.S. Companies, and individuals fund Wuhan virus involvement. And, last part of it was U.S. Individuals, the Americans, actually paid by CCP to betray American America and providing information to CCP. And there is a DVD. And that is information on Hunter Biden, basically information confirmed Hunter Biden’s lots of pictures and those sex pictures in China, okay? And so Biden is not that stupid. You can’t be seen soft on China, especially six hundred thousand Americans are killed by the CCP virus, right? And for that reason, he has to show, he also gets tough on China. That’s why he were not,ugoing to investigate,uCCP virus. And now he changed his mind. Ordered 90 days review. That’s how it played out.

Simone Gao (09:20):

So, President Biden just knew about the existence of this, uh, defector recently, right before he decided to research for the origin of the virus?

Solomon Yu (09:33):

That’s correct. Very recently. And if I have to say, DIA played everyone, including State Department CIA, FBI, and the White House. Very, very well.

Simone Gao (09:53):

Okay. So why did they not release the information to the State Department and White House in time?

Solomon Yu (10:02):

Because they suspect many, many Chinese assets, agents, in those agency, including CIA, FBI, at State Department. They don’t want to compromise what they got.

Simone Gao (10:20):

Okay. Okay. All right. So now let’s go to another important detail. What did this person actually reveal about the origin of the virus and also the Wuhan lab?

Solomon Yu (10:34):

Okay. P4 lab and a couple of things. Actually, they have several bioweapon programs, and the Wuhan virus is one of them.

Simone Gao (10:51):

Okay. So Wuhan lab is one of China’s biological weapon programs. It belongs to the, the PLA, I mean, at least…

Solomon Yu (11:04):

It’s a civilian lab, but also they do, uh, PLA, uh, bioweapons research. Dr. Fauci and the…yeah. Daszak, who also has a, nonprofit program and who Dr. Fauci fund the Wuhan program through Dr. Daszak. As a matter of fact, Dr. Fauci, uh, lied to Senator Rand Paul during Senate hearing. And so all this is kind of come together. Basically, the flood gate is open.

Simone Gao (12:34):

Okay. So this defector confirmed that Dr. Fauci’s program funded Wuhan lab, right? Okay. Did he say why Dr. Fauci would fund a biochemical weapons program in China? Related to…?

Solomon Yu (12:57):

No, I don’t know. And basically they fund several biprogram bioweapons programs, not just one. Uh you know, you also have to speculate there are many, I call, traitors in America and they take money from CCP, and then they provide information to CCP and they fund the CCP program. So if, if I have to speculate, it’s driven by greed.

Simone Gao (13:45):

Okay. Okay, great. What about the origin of the virus? Was the virus leaked by the lab or released by the lab? What, what, what did he say?

Solomon Yu (14:00):

I think it is leaked by lab and right now, based on, White House national security advisor’s interview. And our goal is getting into that lab as to see what is going up to investigate.

Simone Gao (14:19):

Okay. So this person did not exclusively, definitively say this virus was leaked from the lab or released from the lab, or it is lab made or naturally formed? Did he say that?

Solomon Yu (14:37):

He did not say leaked or purposefully released, and, but that is part of the weapon program.

Simone Gao (14:48):

Okay. So Wuhan lab is doing these very dangerous gain of function research with bat coronaviruses, which is part of the China’s biological weapons program. And he said, he confirmed it, right?

Solomon Yu (15:05):

That is correct. Right. And it’s not just one, okay? AndCovid 19 is not the only one. There are others. Other bio weapons programs.

Simone Gao (15:19):

Okay. did he say how many?

Solomon Yu (15:23):

No, I don’t know.

Simone Gao (15:27):

Um alright. Did he also say China’s spy operation in, uh in, in the U.S.?

Solomon Yu (15:37):

Yes.

Simone Gao (15:39):

Okay. What did he say?

Solomon Yu (15:40):

He said that, one third of Chinese students studying in America are spies. And they got assignments, and also their networks CCP funded programs, agents operating in U.S. And that you enlist all that.

Simone Gao (16:12):

Okay. Alright. I’m looking at the report right now. What other information you get from your source about this guy?

Solomon Yu (16:28):

Well like I said before Americans actually paid by CCP to provide information and to help China to steal our technology. And the other thing is like I said, American companies and Americans funded China’s bioweapons program research.

Simone Gao (17:09):

Okay. So it’s very hard for me to imagine that NIH, those government agencies has no idea that the Wuhan lab is doing this kind of gain of function research that’s related to the Chinese biological weapons programs. And they are funding them through a third party. I think they do this intentionally. Knowingly. So is this just because Fauci is compromised, is corrupt, or is this a government action, government behavior and they want to…

Solomon Yu (17:51):

Fauci is corrupt. No question in my mind. And also anybody lie to Congress, okay, in his case, lied to Senator Rand Paul during the Senate hearing and knowing it is a perjury and I’m hitting Rand Paul. I already hit it. Rand Paul should do a criminal referral of Fauci, for perjury. So it’s not just funding CCP on bioweapon research, then lie about itself is a perjury. It’s double jeopardy now.

Simone Gao (18:42):

Right, right. I’m still, I can’t imagine those American traitors. They use the American taxpayers’ money to fund China biological weapons knowingly, just to make a few bucks?

Solomon Yu (18:57):

Yeah. So this, this thing really big.

Simone Gao (26:46):

Do you think this do you think Mr. Dong Jingwei will appear on media and testify or go to Congress to testify in the near future?

Solomon Yu (27:02):

No. I don’t expect that. By the way, the good news is, he is not the only defector.

Simone Gao (27:10):

Okay. Who are the others? How many are there?

Solomon Yu (27:16):

I was told that at least one more, and I could not confirm the rank. And the name. But there Is another one.

Simone Gao (27:28):

They defected the same time?

Solomon Yu (27:32):

There’s some space between those two. You know, they kind of verify each other. You can talk to one and talk to the other, kind of confirm each other’s story. So there are two defectors, at least, I know of.

Simone Gao (27:49):

Okay. And they defected at the similar time, around the same time?

Solomon Yu (27:55):

Around the same time. And I don’t know how many months apart, okay? I can’t confirm name and title and all that, but, hey, when you have one is talking, the other one also talking, you can verify information.

Simone Gao (48:41):

Okay. Thank you so much Sullivan.

Solomon Yu (48:45):

Bye-Bye. Bye.

The Biggest Myth of China’s Economy: Why Doesn’t the Real Estate Bubble Pop? | Zooming In China

Simone Gao: Hello everyone! Welcome to Zooming In China. I’m Simone Gao.

Would you enter a lottery where the grand prize was a chance for you to spend $1.5 million? Or pay an extra $30,000 at closing, without protest or pause, when the seller suddenly raises the asking price? Would you risk it all on real estate knowing it would take 40 years to pay off a 750 square foot apartment?

The answer for those living in China’s premier cities, including real estate hotspots in Beijing, Shanghai, Shenzhen and Guangzhou, is yes.

In Shenzhen, 288 apartments offered in a new property development sold out online within 8 minutes. Another new real estate development led 9,000 people to put down a deposit of one million yuan just to qualify to buy the apartments.

In the same city, in 2019, average house prices are 35 times of a family’s gross annual income.

The real estate market in China is hot. Too hot. It’s a market condition that cannot hold. But in China, it must.

It must hold, because 78% of the country’s wealth is tied up in real estate. It must hold, because, as China analyst Nigel Vinson recently said: “The economic fallout of a bursting property market bubble would be catastrophic. A burst would lead to a sharp decline in property values, which would then send shockwaves through the financial industry as millions of Chinese investors trigger mass mortgage defaults. Additionally, China’s emerging middle class would be disproportionately affected, dealing a solid blow to a fragile Chinese economy.”

But while financial experts and fintech analysts keep their eyes on the sharp rise and expected dive in China’s property values, it is not the property that will keep the bubble from its catastrophic burst. It is the land beneath it.

That land is owned by the Chinese government.

They took possession of all lands within China’s borders after the 1949 creation of the People’s Republic of China and following a bloody “land reform movement” in the countryside. That movement encouraged the laborers to take possession of landowners’ lands by any means necessary, including violence. Those revolts led to an estimated 2 million landlords killed and up to 4.5 million total deaths. In the end, though, it was not the laborers but the PRC who claimed the lands as their own.

They secured permanent possession of that land in the 1982 Constitution, writing that “the land in the city belongs to the state. The land in the countryside and the suburbs of the city, except for the state owned by the law, is owned by the collective.” That means the land is owned by a group of people within the community or belongs to certain community organizations.

However, the central government or the local government has the authority to requisition such collectively owned land for use that serves the interest of the country. A lot of times, such interest  falls into the category of urbanization. After the countryside is urbanized, the land would be rented out by local government to real estate developers. On top of that,  the leaders of such rural communities are all Communist members. They decide how the land should be used.

It is not an exaggeration to say that the CCP is now the sole landlord in China. There is a sale not of the land itself but of the right to build on that land. For commercial use, the lease is 40 years, for residential use, it is 70 years.

The CCP control the supply of buildings because they control the land beneath those buildings. And because they are the only actor in this game of land ownership, they also own the market, control the supply, and can manipulate the rise and fall of housing prices. And with the CCP in control, no matter how strong the economy may be, housing prices can fall; no matter how weak the economy has become, housing prices can rise.

Thomas Orlik, author of China: The Bubble That Never Pops, wrote that “for China’s government, real estate is the ballast that keeps the economic ship afloat.” In the past, that has often led the CCP to insist on building more real estate at any sign of the economy slowing down. And for outsiders, that move may look like a benevolent government trying to protect its citizens by offering more property in order to drive down real estate prices. More supply means less demand for the available supply, leading to more manageable costs. And that would be a reasonable assumption in a democratic society.
In the case of the CCP, though, their interest is self-preservation, and their ballast is the land transfer fees, or the costs the Chinese people pay to rent the land they live on. Those fees are a sizeable portion of the CCP’s fiscal revenue. In 2020, a full 44% of the local government’s revenue came from land transfer fees.

But now that ballast is faltering. The pandemic stripped the economic foundation of many Chinese citizens, the kind of foundation needed to support a booming real estate market. Average Chinese families are left with debt outpacing their income, raising the risks of defaults on home loans. And rigid controls on overseas investments, paired with fears about the stability of local stock markets, have pushed wealthier Chinese citizens to invest their money in real estate, further reducing the supply of housing and driving up costs on what is still available. In fact, real estate investment is the only viable investment option left for the rich Chinese people.

A crisis is approaching. And the CCP knows it.

In March, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, revealed his concern over the “bubble” in Chinese real-estate prices and unveiled steps the government would be taking to stabilize the market. His first concern was the purchase of properties as investments rather than as homes. But one concern is even more critical, according to Guo: the likelihood of a sharp drop in home prices leading to economic instability in Chinese banks.

Based on China’s central bank data, roughly 1/5 of all loans at China’s banks are home loans and the majority of bank credit was granted based on real estate collateral. Because of that, the financial stability of China lies in stable property prices, and skyrocketing prices have already led to serious financial industry impacts. Guo told reporters that in 2020, Chinese banks had to dispose of $470 billion dollars in bad debt. That followed a $1.36 trillion disposal of debt between 2017 and 2020, a total equal to the 12 previous years combined.

The government has developed new tactics in their attempt to control the rise in property costs, a battle best seen in the southern city of Shenzhen where a modest apartment now costs more than one million dollars. Their first tactic is the most aggressive, and it targets the banks and their lending practices.
In February, the Chinese government set new standards for banks to follow when reviewing mortgage applications. In Shenzhen, the banks received an 84-page document listing maximum prices for more than 3,500 city real estate developments. While buyers could pay more if they chose, they would have to come in their down payment and not in funding from the bank.

While these measures by the Central Government of the Communist Party of China suggest an effort to suppress the sharp rise in housing prices, it is not a sincere move towards bettering this housing situation for millions of China’s citizens or the economic viability of the developers funding the construction projects.

However, experts say the CCP government would likely drive the real estate prices up again once they need to stimulate a slowing down economy. After all, real estate remains the backbone and the most powerful engine of China’s economy.

That is to say, as long as the Chinese Communist Party continues to own all the land, continues to charge fees for its citizens to live on that land, and continues to rely on that income to fund its regime, the Chinese economy will remain in danger of a catastrophic burst of the real estate bubble.

Thanks for watching. Please like share and subscribe to our channel if you like our production. Most importantly please sign up for our membership website, zoomingin.tv. $5 a month, cancel anytime. We will have audio video formats of our show. Transcript, in-depth report, extra interview clips, live Q&A with me just for the members. So please check it out. I am Simone Gao and I will see you next time.