This is the web version of Eastworld, Coins2Day’s newsletter focused on business and technology in Asia. Subscribe here to get future editions in your inbox.
Donald Trump campaigned for president on a promise to build a “big, beautiful wall” between the United States and Mexico. Now, as his bid for re-election heads into the home stretch, Trump’s top diplomat is calling for the construction of another wall, this one digital, to separate the U.S. And China.
On Wednesday, U.S. Secretary of State Mike Pompeo outlined a sweeping five-point “Clean Network” program designed to remove “untrusted” Chinese apps like TikTok, the wildly popular social media platform, and WeChat, China’s leading messaging app, from U.S. App stores.
Pompeo’s call for a crackdown on Chinese tech firms follows Trump’s vow to ban TikTok from the U.S. The president has since relented a little, agreeing the app can remain if it is sold to American owners no later than September 15—and if the U.S. Treasury gets a cut of the proceeds.
Beijing expressed outrage at Trump’s decree. Chinese foreign minister Wang Yi called it “a textbook case of bullying.” TikTok’s parent company, Beijing-based Bytedance, says it is in talks with Microsoft about a possible sale.
But Pompeo’s new measures go far beyond regulating TikTok. Taken together, they would significantly expand the scope of U.S. Confrontation with China on tech issues and hasten the devolution of the global Internet into a “splinternet” of fragmented national markets.
Pompeo vowed to limit the ability of Chinese cloud service providers to collect, store, and process data in the U.S., an effort could impede the U.S. Operations of tech giants including Alibaba, Tencent, and Baidu. He promised the administration would work to bar American software providers like Google and Apple from allowing their apps to be preinstalled on handsets sold by Chinese companies like Huawei Technology or ZTE, and prevent those companies from featuring U.S. Apps on their app stores.
He also called on the Federal Communications Commission to revoke permission for China Telecom and three other unidentified firms to provide international communications services to and from the U.S. And urged closer scrutiny of Chinese firms operating undersea cables.
Trump officials charge that China’s tech companies aid and abet the nation’s communist rulers in surveilling and controlling citizens at home. They allege that allowing those firms to operate in the U.S. Would risk the privacy of American consumers and expose American businesses to Chinese hacking and intellectual property theft.
It’s easy to dismiss Pompeo’s proposals as political theater. With less than three months before election day, Trump is sinking in the polls. Republican strategists have long argued that attacking China is one of the few campaign gambits that resonates with voters from both parties. But multiple recent polls show Americans aren’t convinced Trump would do a better job dealing with China than Joe Biden.
And the breadth and character of Pompeo’s proposal gives even critics of Chinese tech policies pause. Some worry that, in an effort to resist China’s authoritarian control of the Internet, the U.S. Has become an authoritarian regime itself, aping the idea of “Internet sovereignty”—the notion that the Internet’s purpose isn’t to empower individuals and encourage the exchange of information and ideas but bolster the legitimacy of the state—that was first articulated by China.
China, of course, has erected an elaborate “Great Firewall” to block U.S. Tech giants, including Google, Facebook, and Twitter, to prevent its people from viewing information Beijing deems “sensitive”—and to protect its homegrown tech firms. I wrote about how and why China built that wall in a Coins2Day cover story as far back as 2006. My conclusion: that China’s digital wall, much like its stone counterpart, was “beginning to crumble.”
That naiveté now makes me cringe. The Great Firewall endured and grew—and now seems to be spawning an American equivalent. Jane Li, writing in Quartz, notes that Pompeo’s “five cleans” are an eery echo of Chinese Internet reform propaganda. The Trump administration’s attempt to shut out platforms based on national origin, Li fears, “would suggest that Beijing’s vision of a fragmented, tightly controlled Internet is triumphing.”
New America Foundation’s Rebecca McKinnon, a former Beijing correspondent for CNN and expert on Chinese Internet policy, expresses similar concern to SUPChina: “If we are going to start blocking Chinese things just because they are blocking our things, then we’re just saying, ‘In order to spite China, let’s turn ourselves into China.’”
Eastworld Spotlight takes a break this week. More Eastworld news below.
Clay Chandler
[email protected]
This edition of Eastworld was curated and produced by Grady McGregor. Reach him at [email protected].
Eastworld news
Deal or no deal?
In last week’s newsletter, Eastworld outlined how TikTok would be the next geo-political flashpoint in U.S.-China tensions. The following day, U.S. President Donald Trump declared that the app would be banned in the U.S., only for the U.S. Government to backtrack from the decision and open the door to a potential Microsoft buyout of Tiktok’s operations in the U.S., Canada, Australia, and New Zealand. This deal now appears on shaky ground as Trump says he wants the U.S. Government to take an unprecedented cut. Coins2Day
From COVID-19 hero to gene harvester
BGI Group, a Chinese giant in the field of genomics research, has become one of the world’s most key pandemic-era company, selling 35 million rapid COVID-19 test kits across 180 countries this year. But now U.S. Officials are questioning the company’s ties to the Chinese government, alleging that it may be gathering and sharing the sensitive genetic data of millions of people across the world with the Chinese Communist Party. The company denies the claims. Reuters
China's space force
China is attempting the most ambitious Mars mission in human history. On July 23, the Tianwen-1 launched from China’s southeastern Hainan island in a bid to deploy an orbiting satellite, a lander, and a small roving car to collect the most advanced data from the faraway planet. The probe is set to reach Mars by 2021, and China hopes it will cement its position as a global leader in space and technology force on earth. This week, The Wire China outlines China’s outer space ambitions and how the China-U.S. Rivalry in this field has echoes of the Cold War. The Wire China
Talking trade
Trade was once the center of U.S.-China tensions, and now it appears to be one of the only things keeping the relationship intact. The U.S. And China will meet on August 15 to discuss China’s compliance with the Phase One trade deal signed in January. As of now, China appears to be lagging behind in its purchase commitments, from agricultural goods to energy imports. In a move that threatens to derail the already precarious talks, U.S. Health Secretary Alex Azar announced an upcoming trip to Taiwan this week, a rare visit by a high-level cabinet official to the self-governing territory. Beijing subsequently denounced the plans. Wall Street Journal
Coronavirus by countries
Pacific Islands
There are at least 12 countries in the world that have zero documented cases of coronavirus, according to Al Jazeera. Two of them are Turkmenistan and North Korea, repressive Asian dictatorships that have likely covered up or ignored cases. The other ten are all small Pacific Island nations off the coast of Australia, small oases that have been able to live free of the virus. The largest among them is the Solomon Islands, which took a proactive approach in declaring a state of emergency in March and shutting its borders. Countries like Vanuatu and Kiribati found success deploying similarly restrictive travel measures. Yet, even as the virus itself is yet to emerge on these islands, the nations have not escaped the fallout of the pandemic. Many of the islands' economies have been pushed into recession through a drop-off in tourism and global trade. Asia & The Pacific Policy Forum
Markets and movers
Xiaomi, Baidu – India has followed its June ban of 59 Chinese apps with a ban of 47 more. The new directive is set to hit apps produced by the Chinese search engine Baidu and the Chinese phone maker Xiaomi, the top smartphone seller in India. Deal Street Asia
Kakao Games – On Monday, the gaming platform of South Korea’s top mobile messaging service Kakao Corp said that it plans to raise over $320 million in its upcoming September debut in Seoul. The Korean Herald
Tencent – The Chinese tech giant is in talks to merge China’s largest game-streaming platforms, Huya and Douyu. Tencent owns close to a 40% stake in each company, and would seek to become the largest shareholder in the combined entity, cementing its position as a leader in China’s gaming industry. Caixin
Harps Holdings Sdn – The Malaysian glove maker is weighing an early 2021 IPO in Kuala Lumpur that could raise $500 million. Malaysia produces 65% of the world's gloves, and companies like Harps have benefited from increased demand for medical gloves amid the pandemic. Bloomberg
Final figure
227
China has 227 unicorns, defined as privately-held startups valued at over $1 billion. Its total is second only to the U.S.'s 233, according to the Hurun Report’s new 2020 global unicorn index. Chinese startups also top the list of most valuable unicorns, capturing four of the top five spots, and eight of the top ten. Ant Group, the financial services arm of Chinese tech giant Alibaba, ranks No. 1, though it will likely be the company's last year on the list since it's set to debut in a blockbuster Hong Kong IPO later this year. In the report, Hurun chief Rupert Hoogewerf pointed to the outsized sway the U.S. And China hold in the global startup landscape. “The USA and China continue to dominate with 80% of the world’s known unicorns, despite representing only 40% of the world’s GDP and a quarter of the world’s population,” Hoogewerf said. “The rest of the world needs to wake up to providing an ecosystem that allows unicorns to flourish.” SCMP
