Tag: University administrators

Whoops! Just slipped right past me! …

From the Daily Beast, a wowser of a scoop – Berkeley’s $220M Mistake Exposed in Massive Deal With China
 
from the article – “U.C. Berkeley takes the matter of undue foreign government influence seriously,” he said.
 
That much is quite clear. Berkeley can clearly undercut the businessman in selling CCP the rope. Go Golden Bears!
 
And as with lots of scandals, the flaw may not be in the deal but in the avoidance of reporting. Again and again, whatever happened to avoiding the hint of impropriety?  Answer – when you lose civil society or public morality, all that is left is the finely parsed letter of the law.
 
 

Berkeley’s $220M Mistake Exposed in Massive Deal With China

 
OOPS!

U.C. Berkeley repeatedly neglected to disclose its deal with China to the U.S. government.

Yuichiro Kakutani

Updated May. 22, 2023 7:18AM ET Published May. 22, 2023 4:59AM ET 
 

U.C. Berkeley has failed to disclose to the U.S. government massive Chinese state funding for a highly sensitive $240 million joint tech venture in China that has been running for the last eight years.

The Californian university has not registered with the U.S. government that it received huge financial support from the city of Shenzhen for a tech project inside China, which also included partnerships with Chinese companies that have since been sanctioned by the U.S. or accused of complicity in human rights abuses.

The university has failed to declare a $220 million investment from the municipal government of Shenzhen to build a research campus in China. A Berkeley spokesperson told The Daily Beast that the university had yet to declare the investment—announced in 2018—because the campus is still under construction. However, a former Department of Education official who used to help manage the department’s foreign gifts and contracts disclosure program said that investment agreements must be disclosed within six months of signing, not when they are fully executed.

Berkeley admitted that it had also failed to disclose to the U.S. government a $19 million contract in 2016 with Tsinghua University, which is controlled by the Chinese government’s Ministry of Education.

The project’s Chinese backers promised lavish funding, state-of-the-art equipment, and smart Ph.D. students for Berkeley academics researching national security-sensitive technologies, according to contract documents exclusively obtained by The Daily Beast. After the project got underway, Berkeley researchers granted Chinese officials private tours of their cutting-edge U.S. semiconductor facilities and gave “priority commercialization rights” for intellectual properties (IP) they produced to Chinese government-backed funds.

A Berkeley spokesman said that Berkeley only pursued fundamental research through TBSI, meaning that all research projects were eventually publicly published and accessible to all; it did not conduct any proprietary research that exclusively benefited a Chinese entity.

Still, Berkeley’s ties to the Chinese government and sanctioned Chinese companies are sure to raise eyebrows in Washington, where U.S. policymakers are increasingly concerned about the outflow of U.S. technology to China, especially those with military applications.

Under the radar

The project is called the Tsinghua-Berkeley Shenzhen Institute (TBSI), a joint research initiative backed by Berkeley and Tsinghua University, a top science school often called “China’s MIT.” The institute’s website shows that dozens of Chinese companies, including Huawei and others sanctioned by the U.S. government, also supported the institute as industrial advisers.

Through TBSI, Berkeley built an unusually close partnership with the Chinese government. Berkeley’s then-vice-chancellor, Patrick Schlesinger, said in 2015 that the “active participation of the Shenzhen municipal government” is an “unusual feature” of TBSI that sets it apart from other U.S. universities, according to meeting minutes obtained by The Daily Beast.

And yet, Berkeley never disclosed a single cent of the financial support it received from Chinese sources to the federal government for TBSI, possibly not complying with a U.S. disclosure law that requires universities to report large donations from foreign sources.

“If the facts are as Berkeley’s documents seem to assert, this is exactly what universities must report,” Dan Currell, a former deputy under secretary at the Department of Education—who has also worked on policy related to foreign influence in U.S. universities—told The Daily Beast. He later added that “the school isn’t complying with a clearly applicable federal statute.”

Memorandum of Agreement between China and UC Berkeley.
Photo Illustration by Luis G. Rendon/The Daily Beast

To this day, TBSI remains one of the most fully realized examples of U.S.-China research collaboration. In the 2021 fiscal year, the institute hosted 586 students from across the world and pumped out more than 130 science and engineering articles. According to its website, at least 20 Berkeley academics participated in TBSI, working alongside dozens of Chinese and international colleagues. At its peak, the institute hosted 18 laboratories located within three research centers, each focused on a research area relevant to national security: data science and IT; environmental science and new energy production; and public health and precision medicine.

Since the early days of the institute, the Chinese government has occupied three out of 11 seats on the governing board, according to a 2015 Berkeley document. Shenzhen’s then-mayor, Xu Qin, attended the 2014 signing ceremony that launched the institute. Tsinghua University President Chen Jining, another attendee of the signing ceremony, explicitly positioned TBSI as a “university-government-industry partnership.” TBSI also has a Party committee, which in 2018 held a seminar to study a speech by Xi Jinping.

While both Berkeley and Tsinghua contributed faculties to TBSI, the Shenzhen government was responsible for the lion’s share of the program’s funding, promising to provide the “necessary financial support” for the institute, according to 2014 contracting documents obtained by The Daily Beast. In the documents, the government said it would cover a wide range of initial expenses, including “costs of equipment, settlement allowances for newly recruited [principal investigators], as well as the cost of all day-to-day operations (ie. salaries of staff, research subsidies, and student scholarships, etc.)”

As part of the promised financial support, the Shenzhen municipal government first promised in 2014 to pitch in $52 million to support the “initial phase of work” for TBSI, according to a 2015 Berkeley document. More than half of the funding was to finance the purchase of new equipment in China “in consultation with Berkeley faculty… effectively adding facilities and equipment to Berkeley’s research capacity.”

In 2018, the Shenzhen government drastically scaled up their monetary support for the project, agreeing to spend at least $220 million to build a massive research campus in Shenzhen with nearly 1.7 million square feet of classroom space and cutting-edge research facilities. Tsinghua University also chipped in $19 million to fund TBSI.

Berkeley has repeatedly failed to disclose any of the above donations to the Department of Education. According to Currell, U.S. law requires all annual foreign donations exceeding $250,000 to be reported to the department, which in turn publicizes the donations to the general public.

A Berkeley spokesman acknowledged that it failed to report to the U.S. government the $19 million contract with Tsinghua University, but said the rules at the time were less clear.

“Like many universities across the country, UC Berkeley did not have a reporting process in place… in 2016, thus the initial sponsored research agreement was not reported. In 2018, due to national security concerns with China and countries of interest, the Department of Education’s reporting process was recertified and all universities were required to start reporting,” he said.

The $19 million—which was spread over five years from 2016—was thus never reported.

He said Berkeley also failed to report a renewal of the TBSI agreement in January 2022, an omission that he blamed on “an issue in the query pulling the data.” The spokesman said Berkeley corrected the error on Feb. 14, 2023, five days after The Daily Beast first reached out for comment for this story.

On the $220-million investment from the Chinese municipal government, the spokesman initially said: “UC Berkeley does not have any ownership of property at Tsinghua, therefore, is not required to report investments made in, or for, the Tsinghua University campus.” He later admitted that “the provision of a facility and/or equipment could qualify as an in-kind contribution and thus require disclosure.”

Still, Berkeley has not declared the foreign investment because the campus is still under construction, according to the spokesman.

However, according to a 2019 Department of Education guidance, universities must report foreign contracts “at the time that the institution ‘enters into’” them. Currell, the former official, noted that the universities must in practice disclose the foreign investments within six months of the research partnership being signed, not when it is implemented.

“Under the rule, whenever they signed the contract is when they had a reporting obligation within six months,” Currell said.


Perks
The Chinese government funding directly benefited Berkeley faculty members, according to a 2015 Berkeley document obtained by The Daily Beast. The government funding benefited them as researchers, as they used the construction of the new campus as an opportunity to “procure equipment that is not presently available at Berkeley, thus extending [their] research capabilities.” It also benefited them as private individuals, as faculty members earned “consulting fees” for working as research advisors.

After the donations from the Chinese state, TBSI and Berkeley researchers gave access to their government patrons.

Throughout the late 2010s, Berkeley officials frequently gave exclusive tours of the Marvell nanofabrication laboratory, a cutting-edge facility used for semiconductor research, to Chinese delegations connected to TBSI. According to a press release, the Chinese visitors “hoped to learn information” from the lab to “build a better lab abroad”—they did not explicitly say their knowledge would be deployed back in China.

These Chinese delegations to the lab went beyond normal academic exchanges between researchers. Multiple senior Chinese officials, including the vice mayor of Shenzhen and the party secretary of Shenzhen, visited the lab, surveying one of the most advanced semiconductor fabrication facilities in the United States.

There is no evidence that Berkeley or its staff broke U.S. export-control laws by organizing private tours to help Chinese individuals build their own cutting-edge semiconductor labs. However, Robert Shaw, an export-control expert at the Middlebury Institute, said the trip would have had to be organized with the utmost care to ensure that China does not get access to controlled U.S. technology.

“That’s a tough thing, a facility tour like that,” Shaw said. “That’s something that has to be organized very carefully. They need to be extremely careful about what’s visible in there [to the visitors].”

The Chinese government also gained access to some IPs created through research at Berkeley. Shenzhen Waranty Asset Management, a state-owned enterprise controlled by the Chinese government, served as an industrial sponsor for the $19 million grant from Tsinghua University, according to Berkeley’s spokesman. In exchange for the financial support, a Waranty-owned angel investment fund received “priority commercialization rights” for intellectual properties produced by TBSI, according to its LinkedIn page.

The Berkeley spokesman explained that Waranty as the industrial sponsor got “first right to negotiate a license to IP arising under the sponsored research agreement,” an arrangement that he said was the same as those given to other industrial sponsors at American universities. The spokesman said that Waranty did not exercise their licensing rights and the three inventions that came out of the sponsored research were “dedicated to the public.”

The Berkeley spokesman emphasized to The Daily Beast that all TBSI-related research projects were “fundamental research that is openly and publicly published for the benefit of the entire scientific community,” rather than proprietary research that exclusively benefited Chinese entities. He also added that the university does not license IPs to foreign entities that are under sanctions or export control by the U.S. government.

“U.C. Berkeley takes the matter of undue foreign government influence seriously,” he said.

Tsinghua Uni prez shakes hand with a Berkeley dean.
Photo Illustration by Luis G. Rendon/The Daily Beast/Berkeley Press Release

 
Shaw said that while it is possible for TBSI to work with Chinese government-backed funds in a legally above-board way, the language about priority commercialization rights is a “red flag in an export-control compliance sense.”

“That sort of language sounds like the purpose of the research is IP generation versus the sharing of knowledge globally in an academic context,” he said.

In addition to its funding from the Chinese government, TBSI also courted support from dozens of Chinese companies. Executives from 21 Chinese companies sat on TBSI’s industrial advisory board, supporting the “creation of joint laboratories, collaborative research projects and visiting industry fellows” at TBSI and enjoying access to Berkeley researchers.

Companies later sanctioned or put under export control by the U.S. government—including telecom giants Huawei and ZTE and the drone company DJI—sat on the industrial advisory board; so too did Chinese firms accused of complicity in human rights abuses, such as internet company Tencent and automobile firm BYD.

Some of these companies that participated in TBSI benefited from Berkeley’s innovation. Take for example Shenzhen Waveguider, a Chinese biotech company that built a joint laboratory with TBSI. Waveguider Chairman and CEO Yu Dongfang reportedly said that by leveraging Berkeley’s “best-in-the-world” biosensor technology, Waveguider was able to achieve multiple innovations in the field of diabetes medicine through its partnership with TBSI.

Berkeley’s comments regarding its Chinese corporate sponsors have also been inconsistent. A Berkeley spokesman initially told The Daily Beast that no Berkeley faculty members ever participated in TBSI’s big data research laboratory. The statement contradicted Berkeley’s own websites, which listed three Berkeley academics as participants in the lab. (The spokesman later acknowledged that one of the researchers conducted some work with the big data research lab, but said that the other two left the project in its early stages.)

For the time being, Berkeley appears intent on continuing the TBSI, albeit on a narrower scale; in 2022, Berkeley administrators announced a “phase II” for the institute, committing to support the partnership for another five years.

However, some Berkeley officials may be having second thoughts about its relationship with China. In 2018, Berkeley submitted a complaint to the U.S. Trade of Representatives, saying that Beijing’s tech regulations unduly restrict the university’s ability to license IPs in China.

And even as far back as in 2015, a member of the U.C. Board of Regents expressed reservations about Berkeley’s participation in TBSI.

“Who would decide what research directions to take or what ethical rights they should follow?” Regent Hadi Makarechian said in 2015 at a board meeting about TBSI. “Because we hear all that stuff that in China, they do all this research that’s not ethical.”
 
 

Soft power? We don’t need no stinking soft power.

Update at August 28 – the affronts to human dignity, scholarship, free speech, trade fairness and personal expression now seem to come on a daily basis.  China under Mr. Xi is really carving a new international image, and it is neither “peaceful rise” nor “responsible stakeholder in the community of nations.” 

You’ve read some of the Hong Kong stories, in the media and below, and the disruptions and violence and threats coming from Chinese students in Australia, New Zealand, Canada and the US  when confronted with others speaking their minds.  You’ve read about the billionaires, activists, lawyers and missionaries who have been disappeared in the mainland.  As described in the Guardian, “China feels emboldened to place literally anyone under arbitrary and secret detention, regardless of citizenship. It is now long overdue for the world to stand up.”  Family members of those the CCP wants, for whatever purposes, are at significant risk, both inside China and outside. I had some fears for my wife and son when they were in China a few weeks ago.  I am unsure of my own potential for detention when I return to China.  In July, the Swedish Supreme Court ruled against extradition to China of a sought-after former official, based on threat of human rights violations if he were to be returned.

These are all on top of the old stories, from the last ten years or more, of American businessmen being kidnapped in China over real or imagined disputes with Chinese businesses.

The government has long pressured western businesses to conform to CCP political thought, at the risk of losing access to the Chinese market.  You remember the demands that hotels and airlines stop referring to Taiwan as a country. Then luxury brands like Versace and Coach faced the same demands, and folded immediately.  Now, we have the government demanding resignation of a Hong Kong airline CEO  – and getting it – over participation by Cathay Pacific employees in the Hong Kong protests.  Cathay Pacific is Hong Kong’s best known local business in international markets.  You can expect more pressure from the government over actions of foreign businesses, and you can expect more compliance. The government has said it will enforce a “social credit score” on foreign companies in China.  Expect the blacklisting to be used when a companies employees or related entities fail to conform – not to government, but to CCP – requirements.  This is despicable behavior by the government, and potentially dangerous to companies and their employees.

About a week ago, in Shenzhen, the government seized a Hong Konger who works for the British consulate in Hong Kong, thus confirming the worst fears of Hong Kongers about the extradition treaty that was the original proximate cause for the protests.  Simon Cheng was returning to Hong Kong when he apparently was seized on the train late at night. 

In the last couple of months, a Hong Kong 2014 umbrella protest leader, Nathan Law, has been singled out by Chinese student groups at Yale, and targeted with death threats. From ChinaFile on the messages sent to Nathan Law –  “I will wait for you at school and you have no escape. Gun shooting will start—American style.”

Let there be no mistake – there is no peaceful rise, CCP expects to dominate international relations as well as business and markets, free speech and rights of assembly are under attack throughout the world, and capitalism is no friend to democracy when profits are at stake.  We tend to ignore the Americans, Canadians, Australians being held in China under any form of false charges, to be used as warnings or bargaining chips. More stories are here and warnings to Americans from the US State Department are here.  The 2017 book The Peoples Republic of the Disappeared documents some of the stories of Chinese and foreigners held for no good reason. 

There seems no good outcome in the current Hong Kong protests.  About the best the world can expect is an updated version of the rallying cry from the War of Texas Independence – Remember Hong Kong.   May it be remembered as a rallying cry for free speech and a free press and free assembly and rule of law in Australia, and New Zealand, and Greece, and all of Africa, and South America, and southeast Asia. 

The old post from August 1 –

 You remember the bandits in Treasure of the Sierra Madre – the bandit horde, pretending to be Federales, descending on Humphrey Bogart and fellow prospectors.  “Badges?  We ain’t got no badges. We don’t need no badges.  I don’t have to show you no stinking badges.” The famous lines were uttered by Gold Hat, head of the bandits, when Fred C. Dobbs (Bogart) asked for their badges.   Hong Kong was the soft power model, the badge of Chinese “peaceful rise.”  Mainland students and Confucius Institutes were supposed to be the badge of Chinese soft power in the world.  But no more, as we see in Hong Kong, in Australian and New Zealand universities, and indeed, universities throughout the world.

I kept thinking of that scene as I watched Hong Kongers resist the violence of the banditos, this time in the form of white-shirted thugs from Triad gangs, and the local police.   And then, watching mainland Chinese students attack Hong Kong sympathizers at Queenland University in Australia and Auckland University in New Zealand.

Watch the videos from Hong Kong –

Please stop beating us!

Hong Kong police use violence on protesters, not on thugs

In Australia and New Zealand …

In Australia, a Chinese diplomat applauded patriotic behavior from mainland students in disrupting a peaceful protest at University of Queensland.  As reported, the attack was coordinated, quite possibly by the local CSSA (Chinese Students and Scholars Association).  You can hear the beginning of the Chinese national anthem playing in the background of the Queensland attack.  Watch the video at twitter.

The New York Times reports– The Chinese nationalists disrupting pro-Hong Kong democracy rallies at the University of Queensland arrived 300 strong, with a speaker to blast China’s national anthem. They deferred to a leader in a pink shirt. And their tactics included violence.

Threats to Australian students via social media have continued, including death threats.  Similar violence took place last week at the University of Auckland in New Zealand.

Bill Bishop at Sinocism suggests that expulsion might be beneficial to PRC students who can’t abide exercise of free speech – In the case of PRC students (expulsion) could be quite beneficial, as there are pressures from within the PRC student community, and its CCP minders, to be aggressive in the face of any perceived slights, and if you are not then you run the risk of being seen as insufficiently loyal and patriotic.  

Western universities have though that mainland Chinese students will see freedom at work, and have their lives transformed.  For some that is true.  But now, some mainland Chinese are out to transform their hosts.  The Confucius Institutes were supposed to be the vanguard of Chinese soft power in the world.  Now, they are suspected – in at least some cases, legitimately – of being a conduit for United Front activities.

In 2016, Xi Jinping issued what now seem to be orders to Chinese students abroad to serve their country, and the Chinese Ministry of Education issued a directive calling for a “contact network” connecting “the motherland, embassies and consulates, overseas student groups, and the broad number of students abroad” and ensuring that they will “always follow the Party.”

In Canada and the US …

You remember the death threats earlier this year to the Tibetan-Canadian student elected as student union president at the University of Toronto University of Toronto.   She now has a safety plan with the university police, letting them know where she is, hour by hour.  You remember the uproar  at McMaster University in Canada when a Uighur activist was scheduled to speak.  Mainland Chinese students sought advice from the Chinese consulate about how to proceed in their protests.  You remember the large protests in 2017 at the University of California at San Diego. Mainland students reportedly sought advice from the Chinese Consulate in Los Angeles before condemning the university for naming as commencement speaker the Dalai Lama.  There are many such stories, including demands from the Chinese government that Uighur students return to China immediately, using their parents as potential hostages.

Hong Kong as the new model of Chinese power …

The “peaceful rise” touted by Deng Xiaoping, and the soft power projection from the Confucius Institutes worldwide is no more.  In Tibet, in Xinjiang, on the mainland in prisons where human rights lawyers and activists rot, in Canada, now in Hong Kong, and Australia, and New Zealand, the gloves have come off on soft power.  In Hong Kong, the protests have not yet turned deadly.  But Christy Leung, Hong Kong student at Queensland, made the point –

“People in Hong Kong are risking their lives. The threats we faced last week are nothing compared to them. We have to stand up. With them.”  

For Hong Kongers, it is more than a movie.  They are risking their lives.  They all know about June 4, even if mainland students do not.  

For western students, and teachers, and universities generally, lives are not likely at risk.  But the very concept of the university – let us say, seeking truth from facts, and speaking truth to power- is at risk.  The soft power glove is revealing the clenched fist beneath.

Chinese Officials Threaten Mainland Parents of Student Attending Australian Protest

It is important to remember what we are dealing with.  Let’s review –

From the Sydney Morning Herald, August 7 – Chinese authorities approached the family of an international student who participated in high-profile protests at an Australian university and warned his parents of the potential consequences of political dissent.

It has been clear for years that the Chinese government monitors words and actions of mainland students overseas.  There are various means.  Most prominent is the Chinese Students and Scholars Association (CSSA) which operates as a student-run organization on most university campuses throughout the world.  It is now common for students to record other Chinese students expressing negative feelings toward the mainland government or CCP.  Chinese government officials in the foreign country support such efforts.

A mainland student who attended one of the pro-Hong Kong protest rallies at the University of Queensland in Australia later received a call from his mother.  From the Herald –

But within days of the rally the student received a call from his mother in China to say the family had been approached by “a guest”.  His mother told him the authorities had issued a warning about engaging in “anti-China rhetoric” in Brisbane and warned him not to “join any events where people are gathered together”.  “As long as you do that, we can make sure you’re safe and we’re safe,” his mother told him.  

Chinese officials in Australia praised actions by mainland students to disrupt the protests –

China’s consul-general in Brisbane, Xu Jie, subsequently issued a statement praising “the spontaneous patriotic behaviour of Chinese students” at the university in response to “people with ulterior motives [who] conducted anti-Chinese separatist activities”.

Government threats to families in China, or threats to Chinese abroad, are a despicable practice.  But it has become standard operating practice in the last decade. 

Put this down alongside threats to Yang Shuping the 2017 University of Maryland valedictorian, who praised fresh air and freedom in the US compared with her experiences in Yunnan.  The  former president of the Chinese Students and Scholars Association (CSSA) at the University of Maryland, told the CCP sponsored Global Times  – “Insulting the motherland to grab attention is intolerable. The university’s support to such critical speech is not only ill-considered, but also raises suspicion about other motives.”  The CSSA called on students from China to make videos promoting their hometowns with the scripted words “I have different views from Shuping Yang. I am proud of China.”  Yang received hundreds of negative or threatening social media posts. 

Or the action by the Chinese Education Ministry in 2010 to remove the University of Calgary from its list of approved universities, after Calgary awarded an honorary degree to the Dalai Lama.  That action threatened the ability of Chinese students at Calgary to have recognition of their degree in China.

And the experience of Chemi Lhamo, who by the nature of being Tibetan, and then earlier this year elected as student president at the University of Toronto Scarborough campus, was so threatened by Chinese vitriol, including death threats, that she needed university support;

And threats to Rukiye Turdush, Uighur activist, whose speech earlier this year at McMaster University in Ontario was disrupted in what some claim was activity promoted by the Chinese government.  University students clearly sought Chinese consulate advice on how to proceed with disruption.  Chinese officials in Canada applauded the threats from mainland Chinese students against Turdush;  

And Uighur university students throughout the world asked by the Chinese government to return home immediately, under hostage and harm threats to their parents and relatives in Xinjiang;

And physical destruction of the Lennon Wall at the University of Queensland on August 6.  From the Guardian – The University of Queensland has promised to take action after a pro-Hong Kong Lennon wall on its campus was torn down on Monday night by four masked men. The colourful protest wall – similar to those around Hong Kong and the rest of the world – had attracted hundreds of notes calling for democracy and solidarity with Hong Kong, and opposing the totalitarianism of the Chinese government. Two weeks ago pro-Beijing government protesters clashed violently with Hong Kong international students on the university’s Brisbane campus, punching and shoving.

Four masked men were seen destroying the wall.  Students have since put it up again. 

And, of course, the old standby –

Chinese rights lawyer Chen Jiangang-flees to US to escape persecution

In terms of (legal) human traffic, China still exports far more to the US than we export to China.  No sign of that changing anytime soon.  I reported on that at Let’s remember what we are dealing with.  

SFSU kills Confucius Institute Program

In May, 2019, San Francisco State University (SFSU) announced it was closing its Confucius Institute program that had been in operation since 2005.

Closure was not due to concerns about academic freedom, freedom of speech, or even any suspicion of ulterior motives on the part of the teachers sent from China.  In the SFSU case, the National Defense Authorization Act of 2019 denied federal funds for an intensive Chinese language programs if a university also hosted a Confucius Institute, and SFSU has an excellent DOD funded language program.

Sure, DOD can kill Confucius Institutes.  But DOD has nothing on me. I helped kill another SFSU Chinese program ten years earlier.  That was not on the basis of politics, but solely academic rigor.

In 2010, Chinese and American universities were near their peak desire for joint exchange and degree granting programs.  Many of the best US schools – Harvard, Yale, Stanford – had programs in China, for both American and Chinese students.  Second tier American schools were eagerly establishing joint programs or 2×2 programs (two years in school in China, two years in the US, perhaps resulting in a highly valuable American degree). 

In this frenetic academic lovefest, San Francisco State University (SFSU) approached Zhejiang University of Science and Technology (ZUST) about a joint undergraduate civil engineering program.  An administrative official from SFSU – I don’t remember who – came to ZUST to promote the as-yet not completely defined program. He spoke in Chinese to our students – “Two years at ZUST, two years at SFSU, possibly a joint degree, possibly a SFSU degree.  A valuable exchange program in any case.”  He made a convincing case.

The fit was pretty good on paper.  ZUST had a new undergrad civil engineering program taught all in English, for both Chinese and foreign students.  There were about 35 students in the first year, with more to come.

SFSU had a large Asian student population, so it was accustomed to dealing with foreign students.  Foreign students paid full tuition.  There were a number of Chinese civil engineering faculty, so language problems could be minimized.  The SFSU civil engineering program was internationally accredited by ABET (Accreditation Bureau for Engineering and Technology).  No Chinese undergrad program in civil engineering was internationally accredited, so a joint degree would look mighty fine for a ZUST graduate looking to work outside China.

Even in 2010, there was extensive reporting of academic problems with Chinese students in exchange programs.  Yale cancelled its ecology and evolutionary biology program with Tsinghua in Beijing, after extensive plagiarism by Chinese students.  Everyone understood that Chinese learning, even in the best schools, was dominated by repetition and attention only to the book.

SFSU wanted to make sure ZUST students could do the work.   An SFSU core requirement was – still is – a course in American history.  I was a foreigner, so I was tapped to teach.

The ZUST administrators told me I should teach the course “American style”- to me, that meant quizzes and homework and writing and, above all, no cheating. I told the civil engineering dean that was a mistake.  I knew the quality of the students from prior courses, and cheating was rampant.  The school reiterated – “yes, just like you would in America.”  Reluctantly, I said yes.

There is a saying in China about universities in China compared with those in the US – “in China, it is difficult to get into the university, but once there, everyone graduates; in the US, it is easy to get into the university, and easy to flunk out.”

No need to belabor the details.  We had a standard textbook, the Eric Foner Give Me Liberty! with quizzes and very short – five page – writing requirements.  The English listening, speaking, and writing abilities of the Chinese students were adequate.  Their cultural preparation was not.

First off, no more than one or two of the eighteen Chinese students purchased the textbook.  It was expensive by Chinese standards – about $40 – but in the US, students would be buying six or eight of those each semester.  The twenty or so Chinese students were also roommates – they probably occupied a total of four or five dorm rooms – so joint studying would be possible, although tough.  But not possible for two students to read the book at one time.  They were unaccustomed to homework, written short answer questions from the chapter covered that week.  Most tried to copy the homework in class or right before class.  We had a quiz every week on the chapter – ten or fifteen minutes, to see if they had read – anything.  Most had read something, probably just looked at the powerpoints, but the cheating in the quizzes was blatant.  I tore up some quiz papers when students were looking at their phones and writing answers.  There were a lot of low grades on quizzes.

Paper submittals were very disappointing.  I spent more than one entire class – 135 minutes – on how to write – five paragraph essay, formatting and references, APA style. References and citations were a … let us say, foreign … concept. Students had powerpoint notes, other notes from me, and examples.  I emphasized the importance of good references and avoiding plagiarism.  This was not a completely wasted effort.  But mostly.  Papers came back in two or three different color fonts, with different size fonts, with the plagiarized sections often in one of the unique colors or sizes so there was no need to do any checking.  I didn’t know whether to feel discouraged or insulted that the plagiarism was so poorly done. 

References were often simply to “Baidu” the popular online source in China.  This was like using “Google” as a reference.  To be fair, Baidu did not provide good citations for its published materials, and there were few other sources for the students to use. The library was useless as a source for materials in any language.  Students had no access whatsoever to academic journals.  All blocked.

But they needed to know how to write an acceptable five page paper, even as engineering students.  A couple of the Chinese students got the idea.  A few more of the foreign students did.  I allowed students to rewrite papers after my comments.  Some did so.  Most did not.

I point out again that these were not problems with English language. These were cultural differences, and unwillingness to make the changes necessary if they were to venture, as is said in China, outside.  

With the plagiarism, refusal to correct the plagiarism, cheating, and general mopery, we had a lot of failures in the course.  About two-thirds of the class.

I had earnest meetings with several levels of faculty and administrators and deans.  They had warnings before and during the course.  But I had given them what they wanted.

The civil engineering students learned the wisdom of the second part of the saying about universities in the US, without having to actually attend school in the US and spend thousands of dollars for nothing.  No civil engineering student applied for the 2+2 program with SFSU.   The program died a natural death before it ever went live.

I think I did good work on the SFSU program.  Curiously though, no one ever thanked me.  Sometimes, teaching is a thankless job.

Give Me Liberty! in Hangzhou

There is a saying – with guanxi, you can do anything.  Without guanxi, you can do nothing.  Sometimes, with guanxi, you can get Liberty! in China.  A story about ordering textbooks in China.

In 2009, I began teaching fulltime at Zhejiang University of Science and Technology (ZUST) in Hangzhou. I had a joint appointment with the business school and the engineering school.  For the business students, I was to teach micro and macro economics; for the engineers, courses in urban and environmental planning.  My students were a mix of Chinese and foreign students, mostly from Africa, a few from the middle east and Indonesia.

This was the era when Chinese schools were looking to form cooperative relationships with school in the US, England, Germany. In the fall of 2010, the president of San Francisco State University came to ZUST and delivered a promotional talk – in Chinese – to my engineering students.   The proposal that had been worked out was a 2+2 deal – two successful years of study at ZUST could lead to two, possibly three, years at SFSU and a joint bachelor’s degree in engineering.

This was an excellent opportunity for ZUST students, since a bachelor’s degree in civil engineering in China was not worth much outside of China.  With the possible exception of one program at Tsinghua, no Chinese engineering bachelor’s degree programs were internationally accredited.  This meant that a graduate could not apply to take the professional engineering exam in most of the world without substantial additional study or years of practice.  There was no guarantee that the SFSU joint program would receive accreditation, but there was certainly a chance.  Basic courses in math and science would be taught in China. The more substantive courses would be in the US.  This was not unlike a junior college transfer program into a major American university.

SFSU wanted a couple of core courses taught at ZUST – an American history course and an American politics course. My background is in civil engineering, urban planning and policy, economics and organization.  But I spoke English and looked American, so I was tabbed at the instructor. As they say, what could possibly go wrong?

No other teacher at ZUST had ever taken, much less taught, American history.  It might be fair to say that this was the first time such a course had ever been taught in Zhejiang Province.  It was a historical first.

These were still heady days of openness in the second half of the Hu Jintao administration.  I was at ZUST because I had just finished six years of teaching midlevel CCP officials in a graduate program in public administration at IIT in Chicago.  I wanted to see what teaching in China would be like, so I went.  The director of the international program at ZUST was a student of mine in Chicago.  She was smart, open, and interested in making deals with foreign schools and foreign teachers.  It is fair to say that I was the face of the foreign program at ZUST at a time when such programs were much desired.

Textbook selection was going to be a challenge.  In the US, book ordering need not be more complicated than an instructor sending book details to the ordering department of the school, and a few days or weeks later the book shows up in the school bookstore.  Students buy the book, and the course is in business.

I knew that would not be the process at ZUST.  There was a book ordering department, but of course that was mostly for Chinese books.  There were a few American books used – most notably, the Greg Mankiw Fundamentals of Economics books, but those were published legally in China, so the Mankiw books had already been vetted for content.

The course was to be American history since 1865.  No other details provided to me.  There were many book from which to choose, and Eric Foner had written more than twenty of them.  His Give Me Liberty! is still the most used American history survey course text in the US.  For the instructor, the teacher’s edition provided powerpoints, which would save me dozens of hours of work (no one teaches in China without powerpoints). The book was also used at SFSU.  I chose the Foner book.

I emailed my book choice to my former IIT student, the head of the international program at ZUST, now my colleague.  If she had been drinking tea when she saw my email order, she probably would have done a spit-take.  Give Me What?

These were heady days of openness, but come on, there are limits.  Give Me History would have been ok. 

My former student was the head of the international program, but she was not the No. 1 – that was the Party leader, who was ultimately responsible for all my actions.  She could not speak much English, and could certainly not read the book, so vetting fell to my former student.

This is where the guanxi worked.  We were teacher and student in Chicago, and we had many chances to talk.  She saw me as at least reasonably trustworthy – I was not going to be running down China in the classroom.  Give Me Liberty! was the SFSU book.  The whole point of the course was to expose these Chinese students to American style courses and teaching so they had a chance to go to the US in their third year.

But still.  We had meetings.  My former student had to look up the book online, and read what she could from the W.W. Norton website. She had to convince herself that the book was ok, just an unfortunate title. I had to promise her that there were no passages suggesting that China or CCP were implicated in the bombing at Pearl Harbor or responsible for the Great Depression, and that destruction of CCP was not an integral part of American history since 1865.  She took me at my word.

There was a more serious vetting process on the ZUST side than I know.  My former student was putting herself on the line, and her Party leader, in ordering such a book.  She could not order the book herself – that had to be done by someone in the civil engineering department, and that woman was putting her reputation and that of her dean on the line as well.  I had more than half a dozen meetings with various of the parties.  I sent long emails, with text of my discussions with the WW Norton rep in the US.  I don’t know if there were provincial education bureau discussions before the book order could be placed, but I would not be surprised. Liberty was not a censored word, but it wasn’t on everyone’s lips, either. If something went south with the book or me or the course, the jobs of several people could be on the line. 

Then there was the money.  Students are supposed to pay for books. In the US, the book sold for about $46 at the time, about 300 yuan.   Three hundred yuan was the book allowance for one ZUST student for an entire semester. We could not order CD copies – those would have been illegal to ship and WW Norton would not send them anyway- as the rep told me, they didn’t have good IP protection in China.  We could not order used copies – Chinese only wanted new, and could only order from the publisher in any case. Illegal copying was still common in China, but the school did not want to engage in that itself, so ordering one copy was out.  A real world example – the Mankiw Fundamentals book was about 790 pages.  The book printed legally in China was sold for 79 yuan (about $12).  In the US, the book cost over $100.  But photocopying in China cost 0.1 yuan per page.  You do the math.   The school was going to have to buy the books, about 9000 yuan, and eat the cost.  That was a couple of months salary for some teachers.

I could have put together notes, and taught without a book.  But Chinese teachers are expected to use a book (presumably so it can be vetted, and so the school has some assurance that the teacher is at minimum reading something to the students).  For my course, a book was most certainly going to be necessary.

There were time constraints.  Shipping on a boat would take about six weeks to get to ZUST, and this was after whatever approvals and vetting were needed outside of ZUST.  WW Norton did have a relationship with one of the required Chinese book importing companies, so paper copies of the book could be sent to China. But time was getting short. We had been having the meetings and email discussions all through the spring, the school closes down in the summer, and I needed the books by about August 1.

I thought perhaps I could just order the books myself from W.W. Norton in the US – thirty or so copies, wrap them up, put them on a boat, they would arrive in six weeks or so.  But that wouldn’t work. The Chinese government still controlled book ordering.  Books could only be ordered through one of the designated import agents.  If my thirty books had just shown up at Shanghai port, they would have been seized and tossed.

I gave the school a deadline – I needed the books ordered by July 10.  My guanxi with my former student worked.  Give Me Liberty! was ordered by ZUST.  The books got delivered, and we used them – or I should say, the books were in the bookstore.  Only a few students purchased the book.

ZUST did not repeat the course.  Very few – perhaps none – of the Chinese students wanted to pay the American tuition to SFSU, and they did not respond well to an “American-style” course, with quizzes and exams and papers to write.  The students got a taste of liberty, taught American style, and judged it wanting.

I ordered other books from America for other courses.  None of those were the existential crisis of ordering Give Me Liberty! in English, for use with Chinese students, with such a provocative title.  When the course was over, the unsold books were delivered to me in my apartment.  Perhaps they are still there. Anyone interested, contact me.  I’m at liberty to make a deal.

浙江科技学院教材预订表

院、部、(盖章)   建筑工程学院                院教学主管（签名）：           教研所所长（签名）：        联系电话：           填表日期：  2011  年  6 月    日  

序号

课程名称

Course name

教材名称

Textbook name

主编姓名

author

出版社

Press name

版次

version

书号

ISBN

价格

price

使用对象

预订数(册)

Order volume

库存

合计

征订人

签名

使用

时间

备注

 

学生

student

教师

teacher

1

American

History Since 1865

Give Me Liberty!

Foner

WW Norton

2nd Edition Volume 2 Paper

ISBN 978-0-393-93256-0

$37.00

William D. Markle

20

2

     

2

     “

Norton Media Library

WW Norton

WW Norton

CD-Rom

 

free

William D. Markle

  0

1

     

3

      “

Instructors Manual and Test Bank

Valerie Adams

WW Norton

CD-Rom

  

William D. Markle

  0

1

     

4

       “

Studentt Study Guide

WW Norton

WW Norton

       pdf

 

free

William D. Markle

  0

1

     

注：一份送教务处教材中心，，一份系部留存.                                                           

What Chinese cannot not talk about …

In a previous post, I mentioned the heavy hand of CCP coming down on internet access each year in the weeks leading up to date of the Tian’anmen Massacre in 1989.

What CCP sincerely wants is for Chinese netizens to model the three monkeys – see, hear, speak no evil – evil, of course, being in the eye of the CCP beholder and specifically any sight, sound, voice or thought related to the events leading up to and during June 4, 1989. 


But netizens are tenacious.  They are inventive in devising terms to get around blocking of all sorts, but particularly the blocking of 6-4 remembrance.

China Digital Times maintains a list of terms, indicating the extraordinary lengths to which Chinese netizens go to communicate about 6-4, or May 35, or any of dozens of other made up ways to refer to the date.  My current favorite is 82 = 64.

In spite of netizen tenacity, the government crackdown on public knowledge about Tian’anmen has worked very well.  While the “tank man” photo is recognized worldwide, it is nearly unknown in China.  My undergraduate students did not know what it was – or would not admit to knowing.  In 2014, the Onion had a headline – Chinese Citizens Observe 25-year Moment of Silence for Tian’anmen Square Massacre.  In 2013, Louisa Lim, author of Republic of Amnesia, found that 85% of Beijing  college students could not identify the picture.

And in truth, 1989 was a long time ago for young Chinese.  That was then, this is now.  In June, 2014 Robert Hariman noted how complete the erasure of history has been for most Chinese – a public act of protest against the authoritarian state has been replaced with political quiescence on behalf of commercial consumption. 


Michela Buttignol/New York Times

Also in 2014, China Law & Policy published a moving short biography of Wang Nan, originally published in People’s Republic of Amnesia.  (Video at Louisa Lim at Google).  In 2014, Wang Nan was a 45 year old photojournalist with a wife and family – except that he never made it to 45.  He was killed at Tian’anmen as a 19 year old student. 

China Law and Policy

His mother remembers her son.  Along with others, she is monitored heavily around this time each year.  She is one of the Tian’anmen mothers.

http://api.pictures.reuters.com/archive/CHINA-TIANANMEN-MOTHER-GM1EA640E8X01

Helen Gao, writing Tian’anmen, Forgotten in the New York Times in 2014 –

I do remember the first time the topic came up in conversation with my Chinese peers. On June 4, 2009, the 20th anniversary of the crackdown, I was shopping with a friend at a convenience store near Tsinghua University, when she, a junior at the university, turned to me, next to a shelf of colorful shampoos and conditioners. “Some people have been talking about this incident, liu si,” she said. “What was it all about?”

One of my minor subversive acts teaching in China was to accommodate Chinese undergrads who talked with me after class – “We want to know what happened.”   I gave them a three hour video documentary in Chinese about the events of the days.  The Gate of Heavenly Peace – part 1 and Part 2 was produced in 1995 with compiled videos and interviews with students, teachers, and observers of the events.  This is an extraordinary documentary.  There are some English subtitles.

No doubt that video has been shared.  I felt a bit like Sun Wukong, the Monkey King, retrieving truth from the west.

Outside the mainland, remembrance persists – in Hong Kong, in Taiwan, in the Chinese diaspora. The date is remembered each year in Hong Kong, to the worry and dismay of mainland officials.  The commemoration is one way that young people in Hong Kong express themselves as HongKongers, not Chinese. Typical of the response in Hong Kong is this from China Digital Times – Hong Kong Marks June 4 Anniversary.  Some of my mainland Chinese undergraduates expressed some anger at students in Hong Kong, deriding them as bad Chinese – disloyal and “stirring up trouble” – a common arrest charge on the mainland.

CCP likes to use Confucian chapter and verse to support its policies.  There is a paragraph in the Analects that would seem to recommend the stance of the three monkeys to all Chinese –  “Look not at what is contrary to propriety; listen not to what is contrary to propriety; speak not what is contrary to propriety; make no movement which is contrary to propriety” (Analects Book 12 (Yan Yuan) para 1)

But this is not a recommendation to self censorship. Confucius is speaking of a man in control of his emotions, assured of his correctness, the Junzi– without anxiety or fear, as is pointed out in the same book, paragraph 4.  Censorship is the action of a man anxious or afraid, suppressing citizens’ lack of confidence in rule. In paragraph 7, the Master said that military equipment and even food sufficiency may be given up in extremis, if the people have confidence in their rulers.  Otherwise, the Master said, there is no standing for the state.

Censorship betrays the anxiety and fear in CCP.  In a far different context, Bill Clinton reminded us that a strong grip is the sign of a weak hand.  Netizens constantly remind CCP that the Chinese people are as Sun Yat-sen said in 1924 – a handful of sand, without a strong commitment to the CCP variety of nationalism and unmoldable to the model of a good communist soldier – willing to sacrifice all, even memory and moral freedom, for the benefit of the state.

CCP must walk a fine line – Xi Jinping just got through extolling the actions of student protesters of the May Fourth Movement in 1919, a foundational time for CCP. For CCP, also, that was then, this is now.  Student protesters in 1989, and since, are subject to arrest, jail, or murder.  See The Ideology of Occupation on arrest and disappearance of Peking U students trying to be good Marxists. 

This year, 30 years later, the heavier than usual blocking should be starting about now.  CCP must be always on guard against thinking that will pollute minds of Chinese.  Otherwise, as the Master said, there may be no standing for the state.

Huawei – Taking a Fall, Hoping for a Call

Pardon the soccer reference.  But to my mind, that is the Huawei move.  But Huawei has the support of the fans, at least in China, and they are vocal.

Don Clarke, professor of law at George Washington University, has penned this response to the declaration of the Zhong Lun law firm in Beijing, in support of Huawei as an innocent private company caught in a nasty trade spat.  According to the declaration, no company in China is ever required to comply with demands from the central government to install spyware or backdoors in any communication equipment.   Clarke points out that this is misleading and inaccurate.  Chinese law says nothing about what provincial and local governments might demand from a company, and in any case, law is not a constraint. 

“There’s a whole variety of pressures that the government can bring to bear on a company or individual, and they are not at all limited to criminal prosecution Clarke says.  “China is a Leninist state that does not recognize any limits to government power.”

From Clarke’s China Collection  blog –

Last May, two attorneys from the Zhong Lun law firm submitted a declaration to the FCC in support of Huawei’s position that it could not be compelled by the Chinese authorities to install backdoors, eavesdropping facilities, or other spyware in telecommunications equipment it manufactured or sold. I finally had the time to look at the declaration in detail. I don’t find it convincing. I have written up a pretty full analysis (over 10 single-spaced pages) and posted it here on SSRN. Enjoy.

Incidentally, my colleague Jacques deLisle of the University of Pennsylvania Law School also submitted a statement of his views, which largely support Huawei’s position. (I hope I have not characterized his statement unfairly.) Needless to say, I don’t agree, but the paper here is an analysis of the arguments of the Zhong Lun submission, not Jacques’. Those who are interested can read Jacques’ statement for themselves.

 Even we non-lawyers can read.  I wrote about this previously in Lie Down with Dogs, Get Up with Fleas

 Don Clarke’s analysis –

The Zhong Lun Declaration on the Obligations of Huawei and Other Chinese Companies Under Chinese Law (March 17, 2019)

Added March 22:  Steve Dickinson at China Law Blog on the new foreign investment law, which has been touted as an improvement in business conditions and a response to forced technology transfer – https://www.chinalawblog.com/2019/03/chinas-new-foreign-investment-law-and-forced-technology-transfer-same-as-it-ever-was.html      Steve’s conclusion – 

Article 22 of China’s new Foreign Investment Law is not relevant to the issue of forced technology transfer. On that front absolutely nothing has changed and nobody should expect it to either.

Added May 25: Christopher Balding and Donald Clarke on Who Owns Huawei?  Huawei claims to be employee-owned.  But their shares are not ownership, but contract rights in a profit-sharing plan.  To the extent ownership is vested in a trade union, Chinese law does not grant ownership rights to employees if the company or trade union go bust.  It appears that ultimately Huawei could be state-owned, since all trade unions are part of the state.

Huawei responds

Don Clarke’s rebuttal.  Huawei makes no case for employee-ownership and does not refute any facts in the Balding-Clarke paper. 

What Chinese are talking about … fake news

You know that China is increasing pressure on every state it can bully.  The bullying is easiest when the victim state has a substantial share of its GDP connected to China, whether as exports or as Chinese FDI coming in.  Now come fake news stories published in China, quoting New Zealand politicians approving of Chinese policies on the Belt and Road initiative.  New Zealand is in a tough spot. 
 
It is one of the “five eyes” countries, those English speaking countries that share some cultural backgrounds and concepts of law and government.  Others are the US, England, Canada, and Australia.  These five share intelligence efforts in some detail.  The US agencies involved include the FBI and the National Security Agency (NSA).  Security issues – now, the Huawei 5G business, and related Chinese hacking and theft – are top priorities among the five eyes countries.  Even more than Australia, New Zealand is a western country in Asia. 
 
New Zealand is isolated.  It is more than 1300 miles from Sydney to Auckland and it cannot develop much stronger markets for agricultural goods elsewhere in the world.  China is its largest trading partner, followed by Australia.  Agricultural exports are about 27% of GDP, and food exports are about half of that. New Zealand signed a free trade agreement with China in 2008.
 
A good example of the position in which New Zealand finds itself is the relative lack of police response to the attacks on the home and office of Anne Marie Brady, a scholar at the University of Canterbury, who has written in detail about the means by which China is infecting media and politics and public opinion outside China.  I wrote about these attacks in two places in the last couple of months. It is suspected that the intruders, who have also left threatening phone messages, are some local version of chengguan, the Chinese hired thugs who terrorize street vendors, old ladies who don’t want to leave their homes in the way of demolition, and anyone in the way of growth and development.  A substantial contingent of chengguan were responsible for watching Chen Guangcheng for years before he escaped in 2012.   New Zealand police have found no evidence, it seems, and do not seem too alarmed by the attacks.  There seems no doubt that these despicable attacks are politically motivated.  Brady’s recent article is Magic Weapons: China’s political influence activities under Xi Jinping. 
 
What is New Zealand to do? 
 
 
4. Chinese pressure on New Zealand increasing
Fake OpEd on People’s Daily English site by former Prime Minister Dame Jenny Shipley – Foreign Minister Winston Peters slams former Prime Minister Jenny Shipley after China Daily article appears – NZ Herald:
Foreign Minister Winston Peters has launched a stinging attack on former Prime Minister Dame Jenny Shipley after an article appeared in China’s “People’s Daily” under her byline complimenting China on its reforms and the Belt and Road Initiative.
But Shipley did not write the piece, which appears under the Online opinion section. It is headlined “We need to listen to China” and carries Dame Jenny’s byline and on Tuesday night was the fourth best read piece on the website.
She was interviewed by the state-run newspaper in December for a feature article which has run already and was surprised to learn a new piece had been published under her name.

Some economic development issues are similar around the world.   An American local government, faced with declining tax base, ageing population, loss of markets, and little ability to change the course of history is faced with  tough choices.  New Zealand is in a similar spot, with respect to China and the English-speaking west.   But American local governments usually don’t have to deal with fake news stories planted by enemies in the town next door.

Url for the New Zealand Herald article –

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12205347&ref=clavis

A Note on the Middle Income Trap

In the last couple of years, a number of China political observers have commented on the dangers to China of the middle income trap.  The fear is that the Chinese economy will fall into the trap. Since economic growth is the remaining claim to legitimacy for CCP, a substantial slowdown from real growth rates of 6 to 15 per cent per year, which obtained in the last forty years, will be disturbing to the harmony that keeps CCP in power. 

In what follows I am not making direct claims for or against the middle income trap in China, only describing the concept. 

What does the middle income trap mean? 

Most models of national development posit a growth track that demands –

– increased savings, so savings can be used for investment;

– an abundant low wage population;

– transfer of low wage, low productivity workers into higher productivity jobs in factories;

– promotion of exports; and

– a progression to higher levels of productivity, eventually approaching the GDP per person levels of the most developed countries. 

Only a few countries – notably, the Asian Tigers – Singapore, South Korea, Taiwan, Hong Kong – have made that transition.  More countries have begun the transition and after a couple of decades, found themselves stuck – unable to significantly increase GDP per person.  That list is longer – Mexico, Philippines, Malaysia, Indonesia, Turkey. The World Bank has identified 37 countries that are prisoners of the middle income trap.  These countries have achieved middle-income country status, but seem unable to pass that barrier, or trap. 

It is important to note that the middle income trap does not mean people are starving, or in poor health.  It does not mean that economies are failing, only that GDP/person is failing to grow much.  National economies are stuck, not declining.   But notably, economic performance is the remaining claim to legitimacy for CCP, now that Marxism-Leninism is discredited (except for Mr. Xi) and nationalism is a dangerous ally.  If nothing else, the middle income trap may be just reversion to the mean of GDP growth.  But that alone is scary for a government whose claim to legitimacy is growth. 

Reasons for the middle income trap include the need to transition institutional arrangements, from those that worked well when the country was emerging from poverty to those needed for higher quality growth – one can imagine changes in rules about finance, banking, savings, property ownership, transfers of ownership, control of bribery and corruption.  With increasing sophistication of work come demands for increasing sophistication of education – workers in finance need different training than workers on factory assembly lines.   Also, changes in cultural features – attitudes to education, health care, family connectedness.   Acemoglu and Robinson in Why Nations Fail boil most of the necessary changes down to institutional change – rules, regulations, laws, customs built in to culture. 

Is there evidence for the middle income trap in China?  Here are some things that keep Chinese macroeconomists up at night.

 Scott Rozelle, education and health researcher in rural China, defines part of the problem, not mentioned in glowing reviews of Chinese economic power.  In decades of research across many Chinese provinces, he finds that iron deficiency anemia was present in 40% of students in fourth and fifth grade in at least four rural provinces; in Guizhou and other southern provinces, 50% of children suffered from at least one type of intestinal parasite; and nearsightedly was common in schoolchildren, but went unaddressed in many rural areas.   Health care and education in rural areas is now significantly better than twenty years ago, but problems persist for much of the rural population.   The health problems are definitely treatable; but they persist, nevertheless.   Rozelle has found that 15% to 20% of rural kids do not do not complete middle high school.  That is a fearful statistic for future growth.   Many of those same kids are affected by poor quality or poisonous drinking water, or rice laden with heavy metals, or air that is even more poisonous.  China has been a leader in flashy environmental projects – wind, solar, dam construction.  Not so much in the unflashy, dirty job of cleaning air, water, land, or ensuring food quality.  Spending on those items will make no contribution to exports or factory technology or even short term health.  For local officials, what’s the point?

For those rural kids, China now has much less ability to build on exports to fuel internal growth.  The rural school children who don’t go to high school are not going to swing investment deals in London, and other countries in Asia and Africa are now lower cost producers of commodity and low-end  products.  That part of the growth path is now less available in China for the 800,000,000 or so who are not middle class and living in Beijing or Shanghai or Hangzhou.  How will they flourish?

That is one side of the problem.  Another side is the ability of superior Chinese scientists and engineers to continue with indigenous innovation.   In one sense, this is not a problem – what is not invented can be stolen, as in the past.  But innovation is no longer an individual working in his garage, but coordinated lab work and bench work and computer work, and collaboration with people outside China is vital.  The Great Firewall, in all its manifestations, inhibits that.  On a project basis, that may not be much of a problem.  In addition to theft, direct internet access to western journals and scientific reports in readily available within scientific and engineering schools and labs.  The firewall, which is eminently adjustable locally, does not affect them.  On another level, however, those same scientists and engineers can find themselves unable to participate in the events of the world in which they have an interest – conferences and symposia and simply news of family and friends outside China.  Sometimes, these sophisticated workers find the daily restrictions and requirements – writing paeans to Xi Jinping Thought, as is a current requirement –  to be just too stupid, and they leave.  They don’t want their kids to write such paeans, either.

When we look at the macroeconomic picture of China is all its glory and warts, we come down to the Acemoglu and Robinson prescription – institutional change.  The change required is not small.  It is systemic, and at the heart of the Chinese model for the last forty years – financial repression and investment in infrastructure and real estate.  Interest on savings in banks was held low, so loans to SOE and other factories and real estate developers could be held low as well.  The hukou kept peasants out of cities, keeping social overhead capital for poor people – primary and secondary education, health care, low income housing, pensions – mostly out of government budgets.  But changing the model means changing the relative shares of income in the economy – poor people and farmers and ordinary savers need to get a larger share of total income, and lots of vested interests in government and SOE and banks need to get a smaller share.  The reluctance to share in China is no less than it is on Wall Street, hence the political conundrum.  Social spending in China on education and health care and pensions needs to go up significantly, as China ages and education needs are greater and pensions, long a source of misspent and stolen funds and poor accounting, become a bigger factor in people’s lives. 

Truthfully, when reform began in 1978, China did need every piece of infrastructure that it could build – trains, planes, airports, ports, expressways, housing, factories, offices.  Now, what was needed is built, and far more.  The return to GDP from more construction is less and less.  That contributor to GDP growth is no more.  But building more stuff is the only lever that officials have right now to goose short term GDP. 

Finally, the world is no longer cooperating with China.  For forty years, in the US and Europe, policy makers were willing to accept some job losses in return for low priced consumer goods.  Now, in 2019, governments are less willing to trade jobs and technology for low priced shirts and televisions.   That is one threat facing China.  Another is the economic construct of a secular stagnation, a  general slowdown in all the advanced economies attributable to ageing populations (which don’t buy as much), greater income disparities (since the wealthy don’t simply buy more food or shirts or televisions), greater savings in advanced economies (due to risks of recession or simple job loss), and even greater flexibility in wages and prices, which we normally think of as a good economic outcome (flexibility can increase savings and decrease spending because incomes can now fall as well as rise).  In general, there is more savings than the world can profitably use, and investment levels remain anemic.  This is certainly not good for China exports or profitable Chinese infrastructure investments overseas. 

There is no guarantee that GDP/person will fail to grow in China.  But the threat is there, as evidenced by the paper by Barry Eichengreen, Donghyun Park, Kwanho Shin in 2013 – Growth Slowdowns Redux: New Evidence on the Middle-Income Trap.  Their conclusion – We also find that slowdowns are less likely in countries where the population has a relatively high level of secondary and tertiary education and where high-technology products account for a relatively large share of exports, consistent with our earlier emphasis of the importance of moving up the technology ladder in order to avoid the middle-income trap.

That is what CCP theoreticians and macroeconomists are thinking about. 

Huawei – Lie down with dogs, get up with fleas

You know the meme – when you work with bad guys, you should expect to be labeled a bad guy. I mean no disrespect to the thousands of Chinese companies doing business across the world that manage to be profitable without intimate Chinese government relations.  But in our globalized, internet era, it is impossible for a high tech company, particularly one as fundamentally important to internet networks, to not be tarnished with the specter of theft of intellectual property and CCP internet control and monitoring of Chinese businesspeople, students, even foreigners.

Probably no one outside a small group of analysts has the actual evidence of real dirt on Huawei.  But that is the risk of being a national champion in China.  If the government is promoting you, then there must be a government interest in promoting you, beyond just “go team.”  This is simply Chinese practical reasoning.

But it seems that lying down with dogs is more than just a saying here.  In his extraordinary Sinocism news blog, Bill Bishop continues the Huawei stories.  From the February 9 edition, with no repetition in the stories (all should be clickable) –

1.  Huawei’s bad start to the Year of the Pig

Trump likely to sign executive order banning Chinese telecom equipment next week – POLITICO:

President Donald Trump is expected to sign an executive order, banning Chinese telecom equipment from U.S. wireless networks before a major industry conference at the end of February, three sources told POLITICO.

The administration plans to release the directive, part of its broader effort to protect the U.S. from cyber threats, before MWC Barcelona, formerly known as Mobile World Congress, which takes place Feb. 25 to Feb. 28.

Mobile network operator’s body GSMA considers crisis meeting over Huawei | Reuters:

Mobile communications industry body GSMA has proposed its members discuss the possibility that Chinese network vendor Huawei [HWT.UL] is excluded from key markets, amid concerns such a development could set operators back by years…

GSMA Director General Mats Granryd has written to members proposing to put the debate around Huawei onto the agenda of its next board meeting, a spokesman for the federation told Reuters on Saturday.

The meeting will be held in late February on the sidelines of the Mobile World Congress, the industry’s biggest annual gathering, in Barcelona.

Trump envoy urges Europe to ‘link arms’ against China – POLITICO:

Describing China’s influence as “malign,” Gordon Sondland, the U.S. ambassador to the European Union, told POLITICO that his country and the EU should overcome their current trade tensions and join forces against the Chinese.

“We should … combine our mutual energies — we have a $40 trillion combined GDP, there is nothing on the planet that is more powerful than that — to meet China and check China in multiple respects: economically, from an intelligence standpoint, militarily,” he said in an interview.

“That’s where the EU and U.S. really should be linking arms,” Sondland continued, advocating for “a quick resolution that would move our trade relationship in the right direction so that we can both turn toward China, which is really the future problem in multiple respects.”

Huawei Deals for Tech Will Have Consequences, U.S. Warns EU – Bloomberg:

“There are no compelling reasons that I can see to do business with the Chinese, so long as they have the structure in place to reach in and manipulate or spy on their customers,” Ambassador Gordon Sondland, Trump’s envoy in Brussels, said Thursday in an interview. “Those who are charging ahead blindly and embracing the Chinese technology without regard to these concerns may find themselves in a disadvantage in dealing with us.”

Huawei representative rebukes US ambassador’s accusation, defends integrity and safety – China Daily:

“Recently, Huawei has been under constant attack by some countries and politicians. We are shocked, or sometimes feel amused, by those ungrounded and senseless allegations,” said Abraham Liu, Huawei’s vice-president for the European region and chief representative to the EU institutions.

“For example, yesterday, the US ambassador to the European Union, Mr (Gordon) Sondland, said (that) someone in Beijing (could) remotely run a certain car off the road on 5G network and kill the person that’s in it. This is an insult to people’s intelligence, let alone the technological experts across the world,” Liu said.

Chinese firm Huawei blocked from ‘sensitive state projects’ and 5G amid security concerns-The Sun:

New laws on foreign investment in the UK will block Chinese firm Huawei from sensitive state projects, The Sun can reveal… senior Cabinet ministers and Britain’s most senior civil servant Mark Sedwill fear Huawei’s involvement in such critical infrastructure could jeopardise national security.

They are planning reforms to allow the Government to ban Chinese firms like Huawei from future involvement in “strategically significant” UK tech projects.

Huawei Says U.K. Software Issues Will Take Years to Fix – WSJ $$:

The telecom giant also said in a letter to the U.K. Parliament that its board of directors has signed off on a companywide overhaul of its software engineering, budgeting $2 billion over five years for the effort..

German ministers meeting to discuss how to deal with Huawei in 5G auction: source | Reuters:

Chancellor Angela Merkel said on Tuesday that Germany needed guarantees that Huawei would not hand over data to the Chinese state before the telecoms equipment supplier can participate in building its 5G network.

German newspaper Handelsblatt said Wednesday’s meeting would focus on whether a security catalog, prepared by the Federal Network Agency and the cyber defense agency (BSI), along with certification rules and a no-spy agreement with China, would be enough to ensure future 5G mobile networks are safe.

Norway’s PST warns against Huawei – Newsinenglish.no:

Justice Minister Tor Mikkel Wara of the Progress Party, who joined Bjørnland at Monday’s PST briefing, later announced that measures would be introduced to reduce the vulnerability of the Norwegian network. The goal is to hinder Norway’s large mobile operators Telenor, Telia and Ice from choosing equipment suppliers that could threaten the nation’s and their users’ security. Huawei is the prime target.

China hacked Norway’s Visma to steal client secrets: investigators | Reuters:

Hackers working on behalf of Chinese intelligence breached the network of Norwegian software firm Visma to steal secrets from its clients, cyber security researchers said, in what a company executive described as a potentially catastrophic attack.

The attack was part of what Western countries said in December is a global hacking campaign by China’s Ministry of State Security to steal intellectual property and corporate secrets, according to investigators at cyber security firm Recorded Future.

China says it is not a threat to Norway, denies cyber espionage | Reuters:

“China poses no threat to Norway’s security. It’s very ridiculous for the intelligence service of a country to make security assessment and attack China with pure hypothetical language,” the Chinese Embassy in Oslo said in a statement on its website.

Huawei Threatens Lawsuit Against Czech Republic After Security Warning – The New York Times:

The warning, which carries the force of law, requires all companies in the Czech Republic that are deemed critical to the nation’s health to perform a risk analysis that takes security concerns into account.

China denies ‘ridiculous’ spying allegations by Lithuania | AFP:

Earlier in the week, two Lithuanian intelligence agencies condemned China for an “increasingly aggressive” spy campaign, which they said included “attempts to recruit Lithuanian citizens”.

Darius Jauniskis, head of Lithuania’s State Security Department, said his agency was analysing the potential “threat” posed by Huawei, whose technology is being used to build the EU and Nato state’s new 5G telecommunications infrastructure.

Huawei offers to build cyber security center in Poland | Reuters:

Italy denies it will ban Huawei, ZTE from its 5G plans | Reuters:

Thailand launches Huawei 5G test bed, even as U.S. urges allies to bar Chinese gear | Reuters:

University of California Berkeley bans new research projects with Huawei after US indicts Chinese telecoms giant | South China Morning Post

Stanford halts research ties with Huawei amid surveillance controversy – The Stanford Daily

Vermont phone carriers in dispute over concerns about Chinese firm Huawei – VTDigger

 

2.  FBI raids Huawei’s San Diego offices

This is a damning story. One argument some defenders of Huawei have used is that the firm’s culture has changed since inception and while it committed an “original sin” of IP theft in its early years now that it is a global tech firm its behavior has changed. This story destroys that argument.

Huawei Sting Offers Rare Glimpse of U.S. Targeting Chinese Giant – Bloomberg:

Diamond glass could make your phone’s screen nearly unbreakable—and its inventor says the FBI enlisted him after Huawei tried to steal his secrets…

The first sign of trouble came two months later, in May, when Huawei missed the deadline to return the sample. Shurboff says his emails to Han requesting its immediate return were ignored. The following month, Han wrote that Huawei had been performing “standard” tests on the sample and included a photo showing a big scratch on its surface. Finally, a package from Huawei showed up at Gurnee on Aug. 2. ..

Shurboff says he knew there was no way the sample could have been damaged in shipping—all the pieces would still be there in the case. Instead, he believed that Huawei had tried to cut through the sample to gauge the thickness of its diamond film and to figure out how Akhan had engineered it. “My heart sank,” he says. “I thought, ‘Great, this multibillion-dollar company is coming after our technology. What are we going to do now?’”..

The FBI raided Huawei’s San Diego facility on the morning of Jan. 28. That evening, the two special agents and Assistant U.S. Attorney Kessler briefed Khan and Shurboff by phone. The agents described the scope of the search warrant in vague terms and instructed Khan and Shurboff to have no further contact with Huawei.

 ———-

It is an old truism that China tends to be tone deaf in dealing with foreigners, particularly on foreign policy issues.  So we find no small sense of irony in the story from Reuters last week Huawei Offers to Build Cyber-security Center in Poland – “China’s Huawei has offered to build a cyber security center in Poland where last month authorities arrested a Chinese employee of the telecommunications firm along with a former Polish security official on spying charges.”

One of the stories circulating in the past couple of years is that Huawei might have stolen some technology early in its life, but those days are over now, all is in the past, now we are in a new era.  Stories from the bad old days –  In 2002, Cisco Systems Inc. accused (Huawei) company of stealing source code for its routers. Motorola said in a 2010 lawsuit that Huawei had successfully turned some of its Chinese-born employees into informants. And in 2012 the U.S. House Intelligence Committee labeled Huawei a national security threat and urged the government and American businesses not to buy its products. Huawei denied all the claims. The Cisco and Motorola lawsuits ended with settlements.

For anyone still unsure of the extent of Huawei espionage or theft, there is this Bloomberg story – Huawei Sting Offers Rare Glimpse of the US Targeting a Chinese Giant.  This story is about a small American company creating a “diamond glass” computer screen that would be stronger than anything now on the market.  The diamond glass story is about an IP theft from last August.

The detention of Meng Wanzhou, originally on charges of violating economic sanctions against Iran by using a shell company to get around restrictions, now seems less of a political stunt.  From the Chinese foreign ministry – “For a long time, the U.S. has used state power to smear and attack certain Chinese companies in an attempt to stifle legitimate business operations … Behind that, there is strong political motivation and manipulation. We strongly urge the U.S. to stop unreasonable suppression of Chinese companies, including Huawei, and treat Chinese enterprises fairly and objectively.”

Un huh.  One can only hope that Huawei is not treated as “fairly and objectively” as Trump treated ZTE.