Baidu, Alibaba and Tencent Escape Investment Ban

An Alibaba provisional office in China. (https://tinyurl.com/y62d6jbb; CC BY-SA 4.0, https://creativecommons.org/licenses/by-sa/4.0/deed.en) After weeks of internal U.S. government deliberation, Baidu, Alibaba and Tencent—the Chinese internet giants also known as the “BAT”—will remain available to American investors. The companies are symbols of China’s economic modernity and growth but are also accused of having links to the Chinese military and state surveillance efforts. On Jan. 7, reports surfaced that Baidu, Alibaba and Tencent might be included on the Trump administration’s growing list of entities off-limits to American investment. A week later, the companies were officially spared . Recent reporting suggests that the Treasury Department’s concerns over investor sentiment and economic ripple effects outweighed the State Department’s and Pentagon’s worries about Chinese civil-military “fusion.” While American entities owned only a tiny fraction of most of the companies banned so far, U.S.-based investors own one-third of Alibaba and 12 percent of Tencent. U.S. investors have poured $1.4 trillion into those two companies alone. The companies’ exclusion from the list may demarcate the upper bound of domestic dislocation that the Trump administration was willing to weather to exclude Chinese entities from U.S. markets. The considered action against Baidu, Alibaba and Tencent stemmed from the executive order Trump signed on Nov. 13, 2020, prohibiting American investment in a group of Chinese companies alleged to have inappropriate ties to the Chinese military. Compliance with the order has been confused , in part because of the vague criteria and subsequent Treasury Department memoranda. (Bill Bishop, author of the China-watchers’ newsletter Sinocism, described the administration’s last few weeks of China policy as “a driverless clown car careening into a ditch.”) The effects of the administration’s decision-making process were on display in the New York Stock Exchange’s (NYSE’s) attempt to comply with Treasury guidance. On Dec. 31, the NYSE announced that it would delist Chinese telecom companies’ American depositary receipts (ADRs), one mechanism by which U.S. investors can easily own foreign stocks. The NYSE reversed itself and then, a day later, reversed once more: The exchange finally halted trading of China Mobile, China Telecom and China Unicom on Jan. 11, and U.S. banks delisted their derivatives. Since November, the list has grown to include some companies without direct military ties but with varying degrees of Chinese Communist Party (CCP) affiliation. Xiaomi, the world’s third-largest mobile phone manufacturer, is among the latest additions to the list of entities from which Americans are required to divest. Xiaomi’s ties to the Chinese military are less well documented than other banned firms’. A recently drafted executive order would have expanded the criteria to any company under the “control and influence” of the CCP. Given China’s state capitalist system, that would be a rather long list. The order was not signed prior to the expiration of Trump’s term. On Jan. 9, Beijing issued new guidance to Chinese firms, prohibiting them from complying with foreign sanctions that are “unjustified.” President Biden’s team will have to decide whether to reverse, maintain or expand the Trump administration’s exclusions of Chinese companies. U.S. Declassifies Strategic Framework for the Indo-Pacific In its last days, the Trump administration declassified its 2018 “Strategic Framework for the Indo-Pacific,” 21 years ahead of schedule. On Jan. 5, National Security Adviser Robert O’Brien ordered the declassification of the 10-page document, which outlines goals, interests and “lines of effort” to serve American interests in the region. Publicly released on Jan. 12, the framework posited that top security threats include Beijing’s attempt to “dominate cutting-edge technologies, including artificial intelligence and bio-genetics, and harness them in service of authoritarianism.” According to the framework, “Chinese dominance in these technologies would pose profound challenges to free societies.” (Left unstated is what such “dominance” entails.) Another technological threat noted in the strategy is “China’s proliferation of its digital surveillance, information controls, and influence operations.” In response, the United States adopted the objective of “maintain[ing] American industry’s innovation edge vis-a-vis China.” According to analysts of Sino-American relations, the U.S. framework was informed and driven in part by the China strategies of U.S. allies and partners, particularly Japan, Australia and India. One expert argues that while the document reveals the existence of a multifaceted U.S. strategy toward China, Trump’s actions often defied the strategy outlined in the document. Commentators view the declassification as an attempt to entrench Trump’s tough-on-China stance, making it more difficult for President Biden to shift course. In a regular press conference on Jan. 15, a spokesperson for China’s Foreign Ministry called the declassification of the framework an attempt to “smear and contain China and undermine regional peace and stability.” Chinese Tech Worker Deaths Spark Outcry on Working Conditions The recent deaths of two employees of Pinduoduo, a Chinese e-commerce giant, sparked widespread public outcry against the cultures of overwork that exist in Chinese technology companies and start-ups. On Dec. 29, a Pinduoduo worker in her 20s collapsed while walking home with colleagues in Urumqi, the capital city of Xinjiang. Pinduoduo later confirmed her death but did not disclose the cause. On Jan. 5, a Pinduoduo worker in Changsha, Hunan province, died by suicide after asking for time off from the company. And a former Alibaba employee self-immolated in protest over unpaid wages. The video of his self-injury has gone viral on Chinese social media in recent days. Another former Pinduoduo employee claims he was fired after posting a photo of a colleague being carried into an ambulance on Jan. 7. (Pinduoduo disputes the reason for the firing.) The photo and the employee’s associated claims of harsh work requirements went viral on Weibo, reigniting public criticism of the Chinese tech sector’s controversial “996” work culture. The term “996” refers to the tacit expectation that employees work from 9 a.m. to 9 p.m. six days a week. The 996 office schedule has been endorsed by tech billionaires including Alibaba founder Jack Ma and JD.com chief Richard Liu, who view the practice as necessary for survival in a highly competitive industry. But the Chinese public, particularly younger generations, are critical of the culture of overwork. A hashtag about the Pinduoduo employees’ deaths drew more than 260 million views on Weibo. Chinese state media, rather than cracking down on public backlash against Pinduoduo, has allowed criticism to spread online. China’s state news agency, Xinhua, called for shorter work hours in the country’s tech sector in an editorial on Weibo. The CCP’s flagship newspaper, the People’s Daily, also condemned the excessive 996 overtime practices as unfair to employees. The criticisms come at a time when China’s technology champions are already under fire for other business practices. Chinese regulators have launched an antitrust probe into one of its biggest e-commerce companies and have passed new financial regulations on firms involved in online lending. Some commentators think the recent employee deaths and associated public outcry give Beijing “timely and very visceral publicity which it can leverage to further its policy objectives.” China’s state-run CCTV published a commentary calling for authorities to increase regulatory oversight of Pinduoduo and other tech companies to protect workers’ rights. The Shanghai Municipal Human Resources and Social Security Bureau has pledged to open an investigation into Pinduoduo’s labor practices over the employee deaths. After news of the first Pinduoduo employee’s death, the company’s stock fell by 6.1 percent. Other News China Sanctions Trump Officials After U.S. Accuses China of Genocide A day after the Trump administration declared that Chinese actions in Xinjiang amount to “genocide and crimes against humanity,” Beijing struck back with sanctions on individuals including former Trump administration officials. The 28 individuals include former Secretary of State Mike Pompeo, National Security Adviser Robert O’Brien, Deputy National Security Adviser Matt Pottinger, trade adviser Peter Navarro, National Security Adviser John Bolton and Trump campaign adviser Steve Bannon. Those individuals and their families will be banned from traveling to mainland
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