WEBVTT - The Birth of the Surveillance State 0:00:00.120 --> 0:00:04.160 This is Bloomberg Business Week with Carol Messer and Bloomberg 0:00:04.200 --> 0:00:08.000 Quick Takes Tim Stinovic on Bloomberg radio. If we talked 0:00:08.039 --> 0:00:10.360 about it yesterday about the Chinese spy who wanted GE 0:00:10.680 --> 0:00:12.720 secrets about the U S got China's instead. It's a 0:00:12.720 --> 0:00:15.680 great read, so check it out. But Chinese espionage, and 0:00:15.680 --> 0:00:20.000 for that matter, usespionage, nothing new. Surveillance of other countries 0:00:20.079 --> 0:00:23.360 also not new. But when it comes to domestic surveillance 0:00:23.400 --> 0:00:25.680 tim a country like China seems to take it to 0:00:25.800 --> 0:00:28.480 a whole other level. Yeah, we got with us this 0:00:28.520 --> 0:00:31.480 afternoon Josh Chin. He's deputy China Bureau chief. He joins 0:00:31.560 --> 0:00:34.199 us on the phone from Park City, Utah, a deputy 0:00:34.360 --> 0:00:36.680 China bear chief for the Wall Street Journal. He's also 0:00:36.760 --> 0:00:40.680 the author, along with Liza Lynn, of surveillance state inside 0:00:40.760 --> 0:00:44.160 China's quest to launch a new era of social control. Josh, 0:00:44.159 --> 0:00:47.240 great to have you this afternoon. How are you? I'm great. 0:00:47.280 --> 0:00:50.120 Thanks for having me on. So give us an overview 0:00:50.680 --> 0:00:53.760 of the power that China has when it comes to 0:00:53.840 --> 0:00:57.760 its surveillance state. Like walking down the street in certain 0:00:57.800 --> 0:01:01.600 areas of the country, how are you being watched? Right, so, 0:01:01.680 --> 0:01:05.959 if you're if you're walking down the street, Um, in China, 0:01:06.440 --> 0:01:09.199 especially these days with Covid, you're being you're being tracked 0:01:09.200 --> 0:01:13.399 in any number of ways. There are cameras with uh, 0:01:13.920 --> 0:01:16.479 you know, facial recognition capabilities that can they can pick 0:01:16.520 --> 0:01:20.120 your face out of a crowd. Cameras can can identify 0:01:20.160 --> 0:01:23.120 you by the way you walk. There are microphones that 0:01:23.160 --> 0:01:26.280 can grab your voice. Um. And these days, you know, 0:01:26.319 --> 0:01:30.240 everyone's walking around with a covid health tracking APP in 0:01:30.240 --> 0:01:32.760 their pocket that tracks where they've been and how they've 0:01:32.760 --> 0:01:35.640 been exposed, whether they're their level of exposure to uh, 0:01:36.280 --> 0:01:40.800 to covid right, and so a lot of things being tracked. 0:01:40.920 --> 0:01:43.959 Um and and Lisa, both you and Josh like kind 0:01:43.959 --> 0:01:47.960 of cover this world and the different aspects of the book. 0:01:48.160 --> 0:01:50.400 Um and I want to get into it with you 0:01:50.440 --> 0:01:54.400 because Laslie Lee's excuse me, you know, I want to 0:01:54.480 --> 0:01:58.520 get into what was the story and the reality that 0:01:58.640 --> 0:02:01.520 you were looking to tell in terms of the area 0:02:01.560 --> 0:02:03.880 that that you really cover, and you cover a lot 0:02:03.960 --> 0:02:07.560 of US business and Chinese topics. You look at Silicon Valley. 0:02:07.640 --> 0:02:09.800 So what is it that you wanted to tell when 0:02:09.840 --> 0:02:12.560 you guys set out to do this book together? Yeah, on, 0:02:12.760 --> 0:02:15.680 on my part. You know, Um, I guess I didn't 0:02:15.680 --> 0:02:17.880 set out to tell this, but in the process of 0:02:17.919 --> 0:02:21.240 research I had some really interesting findings and one of 0:02:21.280 --> 0:02:24.480 the findings was really how, you know, US tech companies, 0:02:25.040 --> 0:02:29.200 particularly those in Silicon Valley, pioneers, such as like Sun 0:02:29.240 --> 0:02:33.160 Microsystems and Cisco. They were one of the first building 0:02:33.200 --> 0:02:37.080 blocks of the Chinese surveillance stage. Um, back back in 0:02:37.240 --> 0:02:40.360 like the year two thousand, when China helped one of 0:02:40.400 --> 0:02:43.959 its first Security Public Security Expos and the police was 0:02:44.080 --> 0:02:47.560 there to basically look at what companies had on offer. 0:02:48.120 --> 0:02:51.600 Like it was mainly Western companies that were selling their 0:02:51.639 --> 0:02:54.600 systems there to them. Um, you know, it didn't and 0:02:55.480 --> 0:02:59.640 I guess to kind of summarize like how impactful, like 0:02:59.720 --> 0:03:02.960 some the U s companies were, like Sun Microsystems, ended 0:03:03.040 --> 0:03:08.360 up selling China it's first fingerprint database, Um, which which 0:03:08.400 --> 0:03:11.200 is a yeah, which is a sizeable project for a 0:03:11.240 --> 0:03:14.600 country the size of China. Fast forward to today, Um, 0:03:14.639 --> 0:03:17.840 what Josh and I did was we poured through several 0:03:18.760 --> 0:03:23.440 Chinese government contracts, particularly those looking at the surveillance systems 0:03:23.520 --> 0:03:27.840 bought by police, and what we realized was US companies 0:03:27.880 --> 0:03:31.280 now weren't selling systems but they were selling components, like 0:03:31.480 --> 0:03:36.280 parts that built the surveillance day. So one example would 0:03:36.320 --> 0:03:39.920 be and there were selling everything from low end hardware 0:03:40.040 --> 0:03:44.040 like hard dis drives, because video surveillance requires a lot 0:03:44.040 --> 0:03:49.320 of storage, to two things like cutting edge chips, you know, 0:03:49.440 --> 0:03:56.080 graphic processing units sold by Nvidia, like gpus, which originally 0:03:56.160 --> 0:03:59.520 were built to power like gaming, but actually we found 0:03:59.560 --> 0:04:02.760 that they're right for deep learning and all the ai applications, 0:04:02.760 --> 0:04:06.280 like facial recognition, for example, that can recognize like readers 0:04:06.400 --> 0:04:09.800 or people interest in China. So ultimately, so the limits 0:04:09.960 --> 0:04:12.680 right that the US has been imposing on the likes 0:04:12.680 --> 0:04:15.000 of Nvidian a m D to prevent them from selling 0:04:15.000 --> 0:04:18.280 into China, Lisa. So this is something that could ultimately 0:04:18.760 --> 0:04:23.800 impact China's ability in terms of surveillance of those folks 0:04:23.839 --> 0:04:29.560 that are in the country. Yes, Um, in theory, you know, 0:04:29.680 --> 0:04:34.000 the supply chain is very opaque. Um, there there are 0:04:34.040 --> 0:04:36.600 all sorts of ways and means that Chinese companies can 0:04:36.600 --> 0:04:40.960 get around like being on a trade black list, for example, or, 0:04:41.480 --> 0:04:44.880 you know, buying restrictions. And I'll probably point you to 0:04:44.920 --> 0:04:48.279 an example of a Chinese company called since time. Since 0:04:48.279 --> 0:04:52.239 time is China's large as AI surveillance company, and since 0:04:52.240 --> 0:04:55.720 time it's both on the entity list, the Commerce Department 0:04:55.720 --> 0:04:59.200 trade blacklist, and it is on the investment blacklist. So 0:04:59.480 --> 0:05:02.960 us and as this cannot legally they're not allowed to 0:05:03.000 --> 0:05:07.280 be trading on investing in sense, time shares. What we know, though, 0:05:07.680 --> 0:05:09.840 from the start of this year, when since time tried 0:05:09.880 --> 0:05:12.599 to list in Hong Kong, they actually told investors like 0:05:12.720 --> 0:05:15.440 they weren't impacted by the entity list at all, and 0:05:15.480 --> 0:05:18.320 that was because since times, when since time was put 0:05:18.360 --> 0:05:21.480 on the entity list, it was one it was one entity. 0:05:21.560 --> 0:05:24.159 It was his paging entity that was put on the list. 0:05:24.640 --> 0:05:28.799 So since time has multiple entities in like Shanghai, Um 0:05:28.800 --> 0:05:32.120 Hong Kong, and these entities were free to buy the 0:05:32.120 --> 0:05:34.919 type of like high end US technology that the entity 0:05:34.960 --> 0:05:37.560 list was supposed to block. And in addition to that, 0:05:37.600 --> 0:05:40.400 when since time tried to I P O, since time 0:05:40.480 --> 0:05:43.160 is a company that has a ton of US investors 0:05:43.240 --> 0:05:46.480 making up its investor base, like people like fidelity capital, 0:05:47.000 --> 0:05:50.760 Silver Lake Um. When the when they were put on 0:05:50.800 --> 0:05:55.320 the investment blacklist again, there was a legal loophole. Essentially, 0:05:55.360 --> 0:05:58.239 the the entity that was put on the investment blacklist 0:05:58.320 --> 0:06:00.920 with the Hong Kong entity and the entity listed in 0:06:00.960 --> 0:06:03.920 Hong Kong was a Cayman Island one. So true. Very 0:06:04.279 --> 0:06:08.560 smart maneuvering of where the entity SA base. They managed 0:06:08.600 --> 0:06:11.880 to get get true. Um, I'll get over and get 0:06:11.920 --> 0:06:14.800 around the restriction. I want to get right back to 0:06:14.839 --> 0:06:17.360 our next guests. They Co wrote the Book Surveillance State, 0:06:17.480 --> 0:06:21.200 inside China's quest to launch a new era of social control. 0:06:21.279 --> 0:06:23.960 The book is out now. It's Lisa Lynn, China correspondent 0:06:24.000 --> 0:06:25.760 for the Wall Street Journal, who joins us on the 0:06:25.760 --> 0:06:28.840 phone from New York, and also Josh Chen, deputy China 0:06:28.839 --> 0:06:31.880 Bureau chief, on the phone from Park City, Utah. Hey, Josh. 0:06:31.880 --> 0:06:34.279 I want to get into how this is all playing 0:06:34.279 --> 0:06:38.119 out in Shinjang, which a remote Asia frontier of course, 0:06:38.800 --> 0:06:43.880 where we know that the country is oppressing the weaker population. 0:06:43.920 --> 0:06:47.120 What does it look like? They're right, so you know. 0:06:47.200 --> 0:06:49.960 Sin Jong is a it's massive, massive area, about twice 0:06:50.000 --> 0:06:52.880 the size of Texas, on the far northwest of China, 0:06:53.440 --> 0:06:57.320 very rich in resources. Um has also long been a 0:06:57.360 --> 0:06:59.960 sort of difficult place for the Communist Party to control. 0:07:00.040 --> 0:07:03.159 That's because it has a large population of leakers and 0:07:03.200 --> 0:07:07.200 other Turkic Muslims who really chafe at Chinese rule and 0:07:07.279 --> 0:07:11.000 so Um. You know, for about the past five years 0:07:11.080 --> 0:07:14.840 or so the Communist Party has been running what you know, 0:07:14.880 --> 0:07:16.600 what is best described as a sort of campaign of 0:07:16.600 --> 0:07:22.400 forcible assimilation, Um, using surveillance technology and a network of 0:07:22.160 --> 0:07:26.280 of internment camps. Um. And I first went there discovered 0:07:26.360 --> 0:07:30.120 some of this in seen Um. At the time, no 0:07:30.160 --> 0:07:34.160 one really knew what was happening there. Um, and you 0:07:34.160 --> 0:07:36.560 know what I mean. That's been a China correspondent at 0:07:36.560 --> 0:07:39.480 that point for for more than a decade. And Uh, 0:07:40.360 --> 0:07:41.520 and what I saw that was just one of the 0:07:41.560 --> 0:07:45.040 most shocking things that I've seen in China. And you know, essentially, 0:07:45.080 --> 0:07:49.000 if you were a weaker Um in Sinjiang, you are 0:07:49.680 --> 0:07:56.800 subject to constant, pervasive, um suffocating surveillance. Right. So, if 0:07:56.840 --> 0:08:00.000 you go to a bank or a market or a hotel, 0:08:00.080 --> 0:08:01.960 any public place, you have to scan your face and 0:08:02.000 --> 0:08:05.440 your ID card. If you want to buy buy gasoline, 0:08:05.800 --> 0:08:07.280 you have to make everyone get out of the car 0:08:08.320 --> 0:08:10.000 again scan your face and I d cards so they 0:08:10.000 --> 0:08:13.360 can track how much gasoline you're buying. Uh, if you 0:08:13.640 --> 0:08:15.440 in in one place, if you want to buy a knife, 0:08:15.480 --> 0:08:17.760 they would they would take your I d information all 0:08:17.800 --> 0:08:20.280 of you, your your home address, and they would laser 0:08:20.320 --> 0:08:22.680 etch it into the knife in the form of a 0:08:22.760 --> 0:08:25.600 Qr Code. Uh. And then they collect data on things 0:08:25.600 --> 0:08:27.360 like how often you pray, you know, how far you 0:08:27.520 --> 0:08:30.000 go to the Bosque do you own a Kuran? Um, 0:08:30.000 --> 0:08:33.200 what sort of movies and music and Apps do you 0:08:33.200 --> 0:08:35.720 have on your phone? And they sentially collect all of 0:08:35.720 --> 0:08:39.679 this data, uh, to to to track and then sort 0:08:39.679 --> 0:08:44.440 weaders according to how how much of a risk they 0:08:44.520 --> 0:08:49.440 might potentially pose to the Communist Party's rule in the future. Um. 0:08:49.520 --> 0:08:51.880 And then those, you know, those who are considered risky, 0:08:52.000 --> 0:08:55.439 are sent to camps to be subject to re education. Um, 0:08:55.520 --> 0:08:59.000 and so it really is a pervasive Um, Um, just 0:08:59.040 --> 0:09:02.680 sort of unprecedented campaign that they're running out there. You know, 0:09:02.720 --> 0:09:04.440 one thing I wanted to ask you both, because I 0:09:04.480 --> 0:09:06.760 do think we're in it's funny. We were just talking 0:09:06.800 --> 0:09:10.320 with an analyst who follows James Chokmuk, you know, the 0:09:10.360 --> 0:09:12.960 technology world, and talking about we are in this really 0:09:13.000 --> 0:09:16.840 critical phase of major disruption, Innovation, Um, that we don't 0:09:16.920 --> 0:09:19.640 see often in our world, and maybe that's explaining also 0:09:19.720 --> 0:09:22.960 some of the kind of discomfort within the financial markets overall. 0:09:23.000 --> 0:09:25.360 But I do wonder about, you know, what is the 0:09:25.400 --> 0:09:28.600 next phase for China? Present, G very much out there 0:09:28.640 --> 0:09:31.640 front and center, you know, wants to lead on higher tech. 0:09:31.960 --> 0:09:36.800 Um doesn't seem to care who he maybe ticks off 0:09:36.840 --> 0:09:39.480 in particular, something like the United States and the process. 0:09:39.520 --> 0:09:42.440 But I mean it's a complicated relationship between the two. 0:09:42.440 --> 0:09:45.240 But I do wonder, you know, what is the next 0:09:45.360 --> 0:09:50.160 phase of China, you know, one that obviously will surveil 0:09:50.280 --> 0:09:52.960 its population very closely. I mean, Josh, how do you 0:09:53.040 --> 0:09:56.360 see it? How do we need to think about China 0:09:56.520 --> 0:10:00.360 going forward, when many people, I feel like investors in included, 0:10:00.400 --> 0:10:02.600 will say that's going to be one of the big 0:10:02.600 --> 0:10:07.880 macro themes overall for the world, geo politically, market wise, 0:10:08.040 --> 0:10:12.920 economically right. Well, you know, Um, what's happening in China. 0:10:13.200 --> 0:10:15.440 I think you're already seeing sort of the future of 0:10:15.480 --> 0:10:18.760 China with the with the covid pandemic, Um, you know, 0:10:18.800 --> 0:10:21.520 with essentially you know, in the past kind of that 0:10:21.600 --> 0:10:26.520 that pervasive, Um, just suffocating surveillance was pretty much limited 0:10:26.520 --> 0:10:29.880 to Shinja. Now, with the COVID pandemic, that those systems 0:10:29.920 --> 0:10:32.319 and those those approaches and those technologies of all spreads. 0:10:32.360 --> 0:10:35.400 It basically covered the entirety of China. Right. So now 0:10:35.440 --> 0:10:40.560 you have um just, you know, massive real time surveillance 0:10:40.559 --> 0:10:43.559 of of everyone in the country. Um, and it's clear 0:10:43.559 --> 0:10:47.280 that Jent Ping is is, you know, is willing and 0:10:47.320 --> 0:10:50.440 able to use those technologies to exert a tremendous amount 0:10:50.440 --> 0:10:53.800 of social control, very tight control. Earlier this year you 0:10:53.880 --> 0:10:56.360 had you had the Shanghai lockdown, for example. You know, 0:10:56.400 --> 0:10:59.920 the wealthiest in China not used to not used to 0:11:00.040 --> 0:11:02.679 drinking this sort of thing Um, and they were outraged. 0:11:02.760 --> 0:11:04.880 But you know, the Communist Party has persisted with Zero 0:11:04.920 --> 0:11:07.040 Covid and I think that's partly because they're confident with 0:11:07.120 --> 0:11:12.200 these new tools give them the ability to control the 0:11:12.280 --> 0:11:15.000 situation and the economy of society in China in ways 0:11:15.000 --> 0:11:17.599 that they haven't before. And then there's no signs of 0:11:17.640 --> 0:11:19.680 that's going to change. So visa, come on in and 0:11:19.679 --> 0:11:21.760 and layer on top of what Josh said. I mean, 0:11:21.800 --> 0:11:24.440 how do you think about our audience and the Wall 0:11:24.480 --> 0:11:27.920 Street Journal audience that you guys, you know, work with? 0:11:28.200 --> 0:11:32.400 You know, how how do does the world kind of 0:11:32.400 --> 0:11:34.960 need to think about China in the next I don't know, ten, twenty, 0:11:35.280 --> 0:11:38.679 fifty years? Sure, and and I'll probably talk about it 0:11:38.720 --> 0:11:43.199 from the company perspective. And this is already happening. We're 0:11:43.200 --> 0:11:44.880 not going to have to wait ten or twenty years 0:11:45.000 --> 0:11:47.240 to see this happen. I would put it this way. 0:11:47.400 --> 0:11:51.640 In in the past two decades, US and Western companies 0:11:52.200 --> 0:11:58.199 have had very blind optimism on operating in the Chinese market. 0:11:58.440 --> 0:12:01.080 Right So, ten, twenty years ago, China was seen as 0:12:01.080 --> 0:12:05.080 this easy place or profit. Commercial priorities overshadow any sort 0:12:05.080 --> 0:12:07.920 of deep thinking about the possible human rights abuses that 0:12:07.960 --> 0:12:11.000 could happen. In the boardrooms you'd be hearing people talk 0:12:11.040 --> 0:12:13.760 about how far you could expand in China, you know, 0:12:13.880 --> 0:12:16.080 and and what was the best way to get your 0:12:16.120 --> 0:12:19.000 product out in the market. In the last five years 0:12:19.040 --> 0:12:22.520 we've actually seen more like a paradigm shift in the 0:12:22.520 --> 0:12:26.800 way US companies are approaching China. We're seen in the 0:12:26.880 --> 0:12:29.239 last few years more and more reporting about the atrocities 0:12:29.280 --> 0:12:32.160 and seeing jail and now that the US government is 0:12:32.200 --> 0:12:34.959 actually trying to react to China's human rights issues with 0:12:35.040 --> 0:12:39.280 like trade policy, not just foreign foreign policy, we're definitely 0:12:39.320 --> 0:12:43.480 seeing US companies become more cautious about the risk and less, 0:12:43.559 --> 0:12:48.040 you know, less like Bush mush tailed and starry eyed 0:12:48.080 --> 0:12:52.319 about the potential of China. So now what US companies 0:12:52.320 --> 0:12:54.440 are actually discussing in both rooms would be how do 0:12:54.480 --> 0:12:57.040 we mitigate the risk of being in China? Is there 0:12:57.080 --> 0:13:00.480 a supply chain risk? Would our products go through, you know? 0:13:00.760 --> 0:13:04.440 Would our products be exposed to force Labor in the system? Right, will. 0:13:04.480 --> 0:13:07.319 We'd be potentially working with someone who could be slept 0:13:07.400 --> 0:13:10.160 with a band for example. Right. So we have to 0:13:10.200 --> 0:13:12.360 jump in and unfortunately we're running out of time. But 0:13:12.400 --> 0:13:16.720 you're right, the conversation has gone from mega opportunity to 0:13:17.120 --> 0:13:19.760 a lot more about risks, about your exposure to China. 0:13:19.920 --> 0:13:22.160 We've got to run, Lisa. Thank you so much. LESA Lynd, 0:13:22.280 --> 0:13:24.560 China correspond at the Wall Street Journal, along with Josh Chin, 0:13:24.920 --> 0:13:27.959 deputy China Bureau chief at The Wall Street Journal. Both 0:13:27.960 --> 0:13:31.000 of them the new book surveillance state. Inside China's quest 0:13:31.040 --> 0:13:33.120 to launch a new era of social control.