Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg radio. If we talked
Speaker 1: about it yesterday about the Chinese spy who wanted GE
Speaker 1: secrets about the U S got China's instead. It's a
Speaker 1: great read, so check it out. But Chinese espionage, and
Speaker 1: for that matter, usespionage, nothing new. Surveillance of other countries
Speaker 1: also not new. But when it comes to domestic surveillance
Speaker 1: tim a country like China seems to take it to
Speaker 1: a whole other level. Yeah, we got with us this
Speaker 1: afternoon Josh Chin. He's deputy China Bureau chief. He joins
Speaker 1: us on the phone from Park City, Utah, a deputy
Speaker 1: China bear chief for the Wall Street Journal. He's also
Speaker 1: the author, along with Liza Lynn, of surveillance state inside
Speaker 1: China's quest to launch a new era of social control. Josh,
Speaker 1: great to have you this afternoon. How are you? I'm great.
Speaker 1: Thanks for having me on. So give us an overview
Speaker 1: of the power that China has when it comes to
Speaker 1: its surveillance state. Like walking down the street in certain
Speaker 1: areas of the country, how are you being watched? Right, so,
Speaker 1: if you're if you're walking down the street, Um, in China,
Speaker 1: especially these days with Covid, you're being you're being tracked
Speaker 1: in any number of ways. There are cameras with uh,
Speaker 1: you know, facial recognition capabilities that can they can pick
Speaker 1: your face out of a crowd. Cameras can can identify
Speaker 1: you by the way you walk. There are microphones that
Speaker 1: can grab your voice. Um. And these days, you know,
Speaker 1: everyone's walking around with a covid health tracking APP in
Speaker 1: their pocket that tracks where they've been and how they've
Speaker 1: been exposed, whether they're their level of exposure to uh,
Speaker 1: to covid right, and so a lot of things being tracked.
Speaker 1: Um and and Lisa, both you and Josh like kind
Speaker 1: of cover this world and the different aspects of the book.
Speaker 1: Um and I want to get into it with you
Speaker 1: because Laslie Lee's excuse me, you know, I want to
Speaker 1: get into what was the story and the reality that
Speaker 1: you were looking to tell in terms of the area
Speaker 1: that that you really cover, and you cover a lot
Speaker 1: of US business and Chinese topics. You look at Silicon Valley.
Speaker 1: So what is it that you wanted to tell when
Speaker 1: you guys set out to do this book together? Yeah, on,
Speaker 1: on my part. You know, Um, I guess I didn't
Speaker 1: set out to tell this, but in the process of
Speaker 1: research I had some really interesting findings and one of
Speaker 1: the findings was really how, you know, US tech companies,
Speaker 1: particularly those in Silicon Valley, pioneers, such as like Sun
Speaker 1: Microsystems and Cisco. They were one of the first building
Speaker 1: blocks of the Chinese surveillance stage. Um, back back in
Speaker 1: like the year two thousand, when China helped one of
Speaker 1: its first Security Public Security Expos and the police was
Speaker 1: there to basically look at what companies had on offer.
Speaker 1: Like it was mainly Western companies that were selling their
Speaker 1: systems there to them. Um, you know, it didn't and
Speaker 1: I guess to kind of summarize like how impactful, like
Speaker 1: some the U s companies were, like Sun Microsystems, ended
Speaker 1: up selling China it's first fingerprint database, Um, which which
Speaker 1: is a yeah, which is a sizeable project for a
Speaker 1: country the size of China. Fast forward to today, Um,
Speaker 1: what Josh and I did was we poured through several
Speaker 1: Chinese government contracts, particularly those looking at the surveillance systems
Speaker 1: bought by police, and what we realized was US companies
Speaker 1: now weren't selling systems but they were selling components, like
Speaker 1: parts that built the surveillance day. So one example would
Speaker 1: be and there were selling everything from low end hardware
Speaker 1: like hard dis drives, because video surveillance requires a lot
Speaker 1: of storage, to two things like cutting edge chips, you know,
Speaker 1: graphic processing units sold by Nvidia, like gpus, which originally
Speaker 1: were built to power like gaming, but actually we found
Speaker 1: that they're right for deep learning and all the ai applications,
Speaker 1: like facial recognition, for example, that can recognize like readers
Speaker 1: or people interest in China. So ultimately, so the limits
Speaker 1: right that the US has been imposing on the likes
Speaker 1: of Nvidian a m D to prevent them from selling
Speaker 1: into China, Lisa. So this is something that could ultimately
Speaker 1: impact China's ability in terms of surveillance of those folks
Speaker 1: that are in the country. Yes, Um, in theory, you know,
Speaker 1: the supply chain is very opaque. Um, there there are
Speaker 1: all sorts of ways and means that Chinese companies can
Speaker 1: get around like being on a trade black list, for example, or,
Speaker 1: you know, buying restrictions. And I'll probably point you to
Speaker 1: an example of a Chinese company called since time. Since
Speaker 1: time is China's large as AI surveillance company, and since
Speaker 1: time it's both on the entity list, the Commerce Department
Speaker 1: trade blacklist, and it is on the investment blacklist. So
Speaker 1: us and as this cannot legally they're not allowed to
Speaker 1: be trading on investing in sense, time shares. What we know, though,
Speaker 1: from the start of this year, when since time tried
Speaker 1: to list in Hong Kong, they actually told investors like
Speaker 1: they weren't impacted by the entity list at all, and
Speaker 1: that was because since times, when since time was put
Speaker 1: on the entity list, it was one it was one entity.
Speaker 1: It was his paging entity that was put on the list.
Speaker 1: So since time has multiple entities in like Shanghai, Um
Speaker 1: Hong Kong, and these entities were free to buy the
Speaker 1: type of like high end US technology that the entity
Speaker 1: list was supposed to block. And in addition to that,
Speaker 1: when since time tried to I P O, since time
Speaker 1: is a company that has a ton of US investors
Speaker 1: making up its investor base, like people like fidelity capital,
Speaker 1: Silver Lake Um. When the when they were put on
Speaker 1: the investment blacklist again, there was a legal loophole. Essentially,
Speaker 1: the the entity that was put on the investment blacklist
Speaker 1: with the Hong Kong entity and the entity listed in
Speaker 1: Hong Kong was a Cayman Island one. So true. Very
Speaker 1: smart maneuvering of where the entity SA base. They managed
Speaker 1: to get get true. Um, I'll get over and get
Speaker 1: around the restriction. I want to get right back to
Speaker 1: our next guests. They Co wrote the Book Surveillance State,
Speaker 1: inside China's quest to launch a new era of social control.
Speaker 1: The book is out now. It's Lisa Lynn, China correspondent
Speaker 1: for the Wall Street Journal, who joins us on the
Speaker 1: phone from New York, and also Josh Chen, deputy China
Speaker 1: Bureau chief, on the phone from Park City, Utah. Hey, Josh.
Speaker 1: I want to get into how this is all playing
Speaker 1: out in Shinjang, which a remote Asia frontier of course,
Speaker 1: where we know that the country is oppressing the weaker population.
Speaker 1: What does it look like? They're right, so you know.
Speaker 1: Sin Jong is a it's massive, massive area, about twice
Speaker 1: the size of Texas, on the far northwest of China,
Speaker 1: very rich in resources. Um has also long been a
Speaker 1: sort of difficult place for the Communist Party to control.
Speaker 1: That's because it has a large population of leakers and
Speaker 1: other Turkic Muslims who really chafe at Chinese rule and
Speaker 1: so Um. You know, for about the past five years
Speaker 1: or so the Communist Party has been running what you know,
Speaker 1: what is best described as a sort of campaign of
Speaker 1: forcible assimilation, Um, using surveillance technology and a network of
Speaker 1: of internment camps. Um. And I first went there discovered
Speaker 1: some of this in seen Um. At the time, no
Speaker 1: one really knew what was happening there. Um, and you
Speaker 1: know what I mean. That's been a China correspondent at
Speaker 1: that point for for more than a decade. And Uh,
Speaker 1: and what I saw that was just one of the
Speaker 1: most shocking things that I've seen in China. And you know, essentially,
Speaker 1: if you were a weaker Um in Sinjiang, you are
Speaker 1: subject to constant, pervasive, um suffocating surveillance. Right. So, if
Speaker 1: you go to a bank or a market or a hotel,
Speaker 1: any public place, you have to scan your face and
Speaker 1: your ID card. If you want to buy buy gasoline,
Speaker 1: you have to make everyone get out of the car
Speaker 1: again scan your face and I d cards so they
Speaker 1: can track how much gasoline you're buying. Uh, if you
Speaker 1: in in one place, if you want to buy a knife,
Speaker 1: they would they would take your I d information all
Speaker 1: of you, your your home address, and they would laser
Speaker 1: etch it into the knife in the form of a
Speaker 1: Qr Code. Uh. And then they collect data on things
Speaker 1: like how often you pray, you know, how far you
Speaker 1: go to the Bosque do you own a Kuran? Um,
Speaker 1: what sort of movies and music and Apps do you
Speaker 1: have on your phone? And they sentially collect all of
Speaker 1: this data, uh, to to to track and then sort
Speaker 1: weaders according to how how much of a risk they
Speaker 1: might potentially pose to the Communist Party's rule in the future. Um.
Speaker 1: And then those, you know, those who are considered risky,
Speaker 1: are sent to camps to be subject to re education. Um,
Speaker 1: and so it really is a pervasive Um, Um, just
Speaker 1: sort of unprecedented campaign that they're running out there. You know,
Speaker 1: one thing I wanted to ask you both, because I
Speaker 1: do think we're in it's funny. We were just talking
Speaker 1: with an analyst who follows James Chokmuk, you know, the
Speaker 1: technology world, and talking about we are in this really
Speaker 1: critical phase of major disruption, Innovation, Um, that we don't
Speaker 1: see often in our world, and maybe that's explaining also
Speaker 1: some of the kind of discomfort within the financial markets overall.
Speaker 1: But I do wonder about, you know, what is the
Speaker 1: next phase for China? Present, G very much out there
Speaker 1: front and center, you know, wants to lead on higher tech.
Speaker 1: Um doesn't seem to care who he maybe ticks off
Speaker 1: in particular, something like the United States and the process.
Speaker 1: But I mean it's a complicated relationship between the two.
Speaker 1: But I do wonder, you know, what is the next
Speaker 1: phase of China, you know, one that obviously will surveil
Speaker 1: its population very closely. I mean, Josh, how do you
Speaker 1: see it? How do we need to think about China
Speaker 1: going forward, when many people, I feel like investors in included,
Speaker 1: will say that's going to be one of the big
Speaker 1: macro themes overall for the world, geo politically, market wise,
Speaker 1: economically right. Well, you know, Um, what's happening in China.
Speaker 1: I think you're already seeing sort of the future of
Speaker 1: China with the with the covid pandemic, Um, you know,
Speaker 1: with essentially you know, in the past kind of that
Speaker 1: that pervasive, Um, just suffocating surveillance was pretty much limited
Speaker 1: to Shinja. Now, with the COVID pandemic, that those systems
Speaker 1: and those those approaches and those technologies of all spreads.
Speaker 1: It basically covered the entirety of China. Right. So now
Speaker 1: you have um just, you know, massive real time surveillance
Speaker 1: of of everyone in the country. Um, and it's clear
Speaker 1: that Jent Ping is is, you know, is willing and
Speaker 1: able to use those technologies to exert a tremendous amount
Speaker 1: of social control, very tight control. Earlier this year you
Speaker 1: had you had the Shanghai lockdown, for example. You know,
Speaker 1: the wealthiest in China not used to not used to
Speaker 1: drinking this sort of thing Um, and they were outraged.
Speaker 1: But you know, the Communist Party has persisted with Zero
Speaker 1: Covid and I think that's partly because they're confident with
Speaker 1: these new tools give them the ability to control the
Speaker 1: situation and the economy of society in China in ways
Speaker 1: that they haven't before. And then there's no signs of
Speaker 1: that's going to change. So visa, come on in and
Speaker 1: and layer on top of what Josh said. I mean,
Speaker 1: how do you think about our audience and the Wall
Speaker 1: Street Journal audience that you guys, you know, work with?
Speaker 1: You know, how how do does the world kind of
Speaker 1: need to think about China in the next I don't know, ten, twenty,
Speaker 1: fifty years? Sure, and and I'll probably talk about it
Speaker 1: from the company perspective. And this is already happening. We're
Speaker 1: not going to have to wait ten or twenty years
Speaker 1: to see this happen. I would put it this way.
Speaker 1: In in the past two decades, US and Western companies
Speaker 1: have had very blind optimism on operating in the Chinese market.
Speaker 1: Right So, ten, twenty years ago, China was seen as
Speaker 1: this easy place or profit. Commercial priorities overshadow any sort
Speaker 1: of deep thinking about the possible human rights abuses that
Speaker 1: could happen. In the boardrooms you'd be hearing people talk
Speaker 1: about how far you could expand in China, you know,
Speaker 1: and and what was the best way to get your
Speaker 1: product out in the market. In the last five years
Speaker 1: we've actually seen more like a paradigm shift in the
Speaker 1: way US companies are approaching China. We're seen in the
Speaker 1: last few years more and more reporting about the atrocities
Speaker 1: and seeing jail and now that the US government is
Speaker 1: actually trying to react to China's human rights issues with
Speaker 1: like trade policy, not just foreign foreign policy, we're definitely
Speaker 1: seeing US companies become more cautious about the risk and less,
Speaker 1: you know, less like Bush mush tailed and starry eyed
Speaker 1: about the potential of China. So now what US companies
Speaker 1: are actually discussing in both rooms would be how do
Speaker 1: we mitigate the risk of being in China? Is there
Speaker 1: a supply chain risk? Would our products go through, you know?
Speaker 1: Would our products be exposed to force Labor in the system? Right, will.
Speaker 1: We'd be potentially working with someone who could be slept
Speaker 1: with a band for example. Right. So we have to
Speaker 1: jump in and unfortunately we're running out of time. But
Speaker 1: you're right, the conversation has gone from mega opportunity to
Speaker 1: a lot more about risks, about your exposure to China.
Speaker 1: We've got to run, Lisa. Thank you so much. LESA Lynd,
Speaker 1: China correspond at the Wall Street Journal, along with Josh Chin,
Speaker 1: deputy China Bureau chief at The Wall Street Journal. Both
Speaker 1: of them the new book surveillance state. Inside China's quest
Speaker 1: to launch a new era of social control.