Category: China

Jack Ma Worries that Heavier Chinese Government Regulations Risk “Destroying Innovation”

(p. B3) SHANGHAI–Chinese e-commerce tycoon Jack Ma used a government-sponsored forum to suggest regulators take a lighter touch in dealing with technology companies, saying the market should be allowed to decide how new industries such as artificial intelligence develop.
“I personally think that the government has to do what the government should do, and the companies do what companies should do,” Mr. Ma said at the World Artificial Intelligence Conference in Shanghai on Monday, recalling a conversation he said he had last year with U.S. Secretary of Transportation Elaine Chao about self-driving cars.
“Protecting the backward forces who are crying out loud will be the most important factor in destroying innovation,” Mr. Ma said.

For the full story, see:
Yoko Kubota. “Jack Ma Urges Beijing to Ease Up.” The Wall Street Journal (Tuesday, September 18, 2018): B3.
(Note: the online version of the story has the date Sept. 17, 2018, and has the title “Alibaba’s Jack Ma Says Government Should Stick to Governing.”)

Alibaba’s Jack Ma Retires Early as Chinese Communists Intervene in Ventures

(p. B1) HONG KONG — Alibaba’s co-founder and executive chairman, Jack Ma, said he planned to step down from the Chinese e-commerce giant on Monday to pursue philanthropy in education, a changing of the guard for the $420 billion internet company.
A former English teacher, Mr. Ma started Alibaba in 1999 and built it into one of the world’s most consequential e-commerce and digital payments companies, transforming how Chinese people shop and pay for things. That fueled his net worth to more than $40 billion, making him China’s richest man. He is revered by many Chinese, some of whom have put his portrait in their homes to worship in the same way that they worship the God of Wealth.
Mr. Ma is retiring as China’s business environment has soured, with Beijing and state-owned enterprises increasingly playing more interventionist roles with companies. Under President Xi Jinping, China’s internet industry has grown and become more important, prompting the government to tighten its leash. The Chinese economy is also facing slowing growth and increasing debt, and the country is embroiled in an escalating trade war with the United States.
“He’s a symbol of the health of China’s private sector and how high they can fly whether he likes it or not,” Duncan Clark, author of the book “Alibaba: The House Jack Ma Built,” said of Mr. Ma. “His retirement will be interpreted as frustration or concern whether he likes it or not.”
In an interview, Mr. Ma said his retirement is not the end of an era but “the beginning of an era.” He said he would be spending more of his time and fortune focused on education. “I love education,” he said.
Mr. Ma will remain on Alibaba’s board of directors and continue to mentor the company’s management. Mr. Ma turns 54 on Monday, which is also a holiday in China known as Teacher’s Day.
The retirement makes Mr. Ma one of the first founders among a generation of prominent Chinese internet entrepreneurs to step down from their companies. Firms including Alibaba, Tencent, Baidu and JD.com have flourished in recent years, growing to nearly rival American internet behemoths like Amazon and Google in their size, scope and ambition. For Chinese tycoons to step aside in their 50s is rare; they usually remain at the top of their organizations for many years.

For the full story, see:

Li Yuan. “Founder Sees A ‘Beginning’ As He Retires From Alibaba.” The New York Times (Saturday, Sept. 8, 2018): B1 & B3.
(Note: the online version of the story has the date Sept. 7, 2018, and has the title “Alibaba’s Jack Ma, China’s Richest Man, to Retire From Company He Co-Founded.”)

The book by Duncan Clark, that is mentioned above, is:
Clark, Duncan. Alibaba: The House That Jack Ma Built. New York: Harper-Collins Publishers, 2016.

Chinese Communists Plan to Dominate Memory Chips by Stealing Micron Innovations

(p. B1) JINJIANG, China — With a dragnet closing in, engineers at a Taiwanese chip maker holding American secrets did their best to conceal a daring case of corporate espionage.
As the police raided their offices, human resources workers gave the engineers a warning to scramble and get rid of the evidence. USB drives, laptops and documents were handed to a lower-level employee, who hid them in her locker. Then she walked one engineer’s phone out the front door.
What those devices contained was more valuable than gold or jewels: designs from an American company, Micron Technology, for microchips that have helped power the global digital revolution. According to the Taiwanese authorities, the designs were bound for China, where they would help a new, $5.7 billion microchip factory the size of several airplane hangars rumble into production.
China has ambitious plans to overhaul its economy and compete head to head with the United States and other nations in the technology of tomorrow. The heist of the designs two years ago and the raids last year, which were described by Micron in court filings and the police in Taiwan, represent the dark side of that effort — and explain in part why the United States is starting a trade war with China.
A plan known as Made in China 2025 calls for the country to become a global competitor in an ar-(p. B2)ray of industries, including semiconductors, robotics and electric vehicles. China is spending heavily to both innovate and buy up technology from abroad.
Politicians in Washington and American companies accuse China of veering into intimidation and outright theft to get there. And they see Micron, an Idaho company whose memory chips give phones and computers the critical ability to store and quickly retrieve information, as a prime example of that aggression.

For the full story, see:

Paul Mozur. “Darker Side Of Tech Bid By China.” The New York Times (Saturday, June 23, 2018): B1-B2.
(Note: the online version of the story has the date June 22, 2018, and has the title “Inside a Heist of American Chip Designs, as China Bids for Tech Power.”)

Regulations Support Car Incumbents and Undermine Tesla Profitability

(p. A13) . . . governments everywhere have decided, perversely, that electric cars will not be profitable. In every major market–the U.S., Europe, China–the same political dispensation now applies: Established auto makers effectively will be required to make and sell electric cars at a loss in order to continue profiting from gas-powered vehicles.
This has rapidly become the institutional structure of the electric-car industry world-wide, for the benefit of the incumbents, whether GM in the U.S. or Daimler in Germany. Let’s face it, the political class always had a bigger investment in these incumbents than it ever did in Tesla.
Tesla has a great brand, great technology and great vehicles. To survive, it also needs to mate itself to a nonelectric pickup truck business. . . .
We’ll save for another day the relating of this phenomenon to Mr. Musk’s recently erratic behavior and pronouncements. . . . Keep your eye on the bigger picture–the bigger picture is the global regulatory capture of the electric car moment by the status quo. And note the irony that Tesla’s home state of California was the original pioneer of this insiders’ regulatory bargain with its so-called zero-emissions-vehicle mandate.
Electric cars were going to remain a niche in any case, but public policy is quickly ruling out the possibility (which Tesla needed) of them at least being a profitable niche.

For the full commentary, see:
Holman W. Jenkins, Jr. “BUSINESS WORLD; A Tesla Crackup Foretold; The real problem is that governments everywhere have ordained that electric cars will be sold at a loss.” The Wall Street Journal (Saturday, June 23, 2018): A13.
(Note: ellipses added.)
(Note: the online version of the commentary has the date June 22, 2018.)

Libertarian Peter Thiel Predicts Communist China’s Tech Success (What?)

(p. B1) The Trump administration gave ZTE, which employs 75,000 people and is the world’s No. 4 maker of telecom gear, a stay of execution on Thursday. ZTE, which had violated American sanctions, agreed to pay a $1 billion fine and to allow monitors to set up shop in its headquarters. In return, the company — once a symbol of China’s progress and engineering know-how — will be allowed to buy the American-made microchips, software and other tools it needs to survive.
China’s technology boom, it turns out, has been largely built on top of Western technology.
The ZTE incident, as it is called in China, may be the country’s Sputnik moment. Like the United States in 1957, watching helplessly as the Soviet Union launched the first human-made satellite, many people in China now see how far the country still has to go.
“We realized,” said Dong Jielin, an adjunct professor at the Research Center for Technological Innovation at Tsinghua University in Beijing, “that China’s prosperity was built on sand.”
. . .
(p. B3) . . . many in China — and many cheerleaders of the Chinese tech scene — . . . found themselves in a feedback loop of their own making. The powerful propaganda machine flooded out rational voices, said Ms. Dong of Tsinghua University. The tech boom fits perfectly into Beijing’s grand narrative of a national rejuvenation. Innovation and entrepreneurship are top national policies, with enormous financial backing from the government. Even now, some articles critical of China’s lagging semiconductor industry have disappeared from the internet there.
And it wasn’t just Chinese people. Michael Moritz, the American venture capital investor, warned that China “is leaving Donald Trump’s America behind.” Peter Thiel, a PayPal co-founder, wondered how long it would take for China to overtake the United States. Three to four years, he concluded.
The boom kept many from asking hard questions. They promoted China’s surge in patent filings without looking at whether the patents were any good. They didn’t ask why China still imports 90 percent of its semiconductor components even though the industry became a national priority in 2000.

For the full commentary, see:
Li Yuan. “China’s Sputnik Moment.” The New York Times (Monday, June 11, 2018): B1 & B3.
(Note: ellipses added.)
(Note: the online version of the commentary has the date June 10, 2018, and has the title “THE NEW NEW WORLD; ZTE’s Near-Collapse May Be China’s Sputnik Moment.”)

Fewer Regulations Allow Faster Chinese Cancer Innovation

(p. A1) HANGZHOU, China–In a hospital west of Shanghai, Wu Shixiu since March has been trying to treat cancer patients using a promising new gene-editing tool.
U.S. scientists helped devise the tool, known as Crispr-Cas9, which has captured global attention since a 2012 report said it can be used to edit DNA. Doctors haven’t been allowed to use it in human trials in America. That isn’t the case for Dr. Wu and others in China.
In a quirk of the globalized technology arena, Dr. Wu can forge ahead with the tool because he faces few regulatory hurdles to testing it on humans. His hospital’s review board took just an afternoon to sign off on his trial. He didn’t need national regulators’ approval and has few reporting requirements.
Dr. Wu’s team at Hangzhou Cancer Hospital has been drawing blood from esophageal-cancer patients, shipping it by high-speed rail to a lab that modifies disease-fighting cells using Crispr-Cas9 by deleting a gene that interferes with the immune system’s ability to fight cancer. His team then infuses the cells (p. A10) back into the patients, hoping the reprogrammed DNA will destroy the disease.
In contrast, what’s expected to be the first human Crispr trial outside China has yet to begin. The University of Pennsylvania has spent nearly two years addressing federal and other requirements, including numerous safety checks designed to minimize risks to patients. While Penn hasn’t received final federal clearance to proceed, “we hope to get clearance soon,” a Penn spokeswoman said.
“China shouldn’t have been the first one to do it,” says Dr. Wu, 53, an oncologist and president of Hangzhou Cancer Hospital. “But there are fewer restrictions.”

For the full story, see:
Rana, Preetika, Amy Dockser Marcus and Wenxin Fan. “China Races Ahead In Gene Editing.” The Wall Street Journal (Monday, January 22, 2018): A1 & A10.
(Note: the online version of the story has the date Jan. 21, 2018, and has the title “China, Unhampered by Rules, Races Ahead in Gene-Editing Trials.”)

China Fears It Can Only Walk Forward by Using Keynes

(p. B1) HONG KONG — Wang Shidong and his two partners were still finishing graduate school two years ago when they raised $45 million in less than two months to start a venture capital fund. His wife, an elementary-school teacher in their home village, was “terrified” that he got to manage so much money, Mr. Wang said.
Things are different this year. After three months and visits with more than 90 potential investors all over China, Mr. Wang and his partners raised only $3 million for a second fund. In June, they shut down the firm.
Their fund, East Zhang Hangzhou Investment Management Ltd., was one of nearly 10,000 founded over the past three years amid a technology gold rush powered in part by China’s government-guided economic growth engine. Now they have become the latest sign (p. B2) that China’s engine is slowing down.
“All industries, institutions and individuals are running short of cash,” said Zhang Kaixing, founder and chief executive of an online asset management company in Shenzhen called Jinfuzi, which means “golden ax.” Jinfuzi, which manages over $4.5 billion in assets, is the type of investor that technology funds court.
“Many investors in private equity and venture capital funds want to take their money back,” Mr. Zhang said.
. . .
“In China we believe in Keynesian economics,” said Mr. Zhang, the Jinfuzi chief executive, referring to the economic theory that favors a bigger role for government. “If what’s going on in China were happening in the U.S., it would have been called a recession. But in China, the government will step in to interfere in significant ways.”
Under President Xi, even economics has become a delicate topic. Many people in China are not willing to speak publicly because even economists aren’t allowed to make downward forecasts.
Yet in private conversations, investors, entrepreneurs and economists admit that with the high debt level and a trade war with the United States, the room for government maneuvering is shrinking. The degrees of pessimism vary, but many of them are bracing for a tough ride ahead.
. . .
Venture funds like East Zhang came into existence in part because, starting in 2014, Beijing made innovation and entrepreneurship top priorities. Leaders hoped that start-ups would help elevate China from a manufacturing power to a technology power. Corporations, banks and wealthy individuals fought to give money to venture funds to invest in start-ups.
“We ended up with a lot of dumb money, managed by inexperienced investors,” said Ran Wang, chief executive of the investment bank CEC Capital Group in Beijing.

For the full story, see:
Li Yuan. “Latest Sign of China’s Slowdown: A Technology Cash Crunch.” The New York Times (Tuesday, July 17, 2018): B1 & B2.
(Note: ellipses added.)
(Note: the online version of the story has the date July 16, 2018.)

Chinese Communists Subsidize Ghost Town Construction

(p. C3) In China’s Inner Mongolia province, in the middle of the Gobi desert, row upon row of largely vacant apartment towers line the streets of Kangbashi, a new district of the city of Ordos. Earlier this month, Xu Yongfen and his family moved into one 28-story building. In the hallways there are a few signs of life–tricycles, slippers and pink children’s shoes in front of some doors. But most apartments remain unoccupied, their doors still covered in plastic wrap, and at street level, barren storefronts are visible in all directions. “This area is nearly totally empty,” Mr. Xu says, tapping a cigarette into a bowl of ashes at his dining room table.
The city has spent 14 years planning, erecting and maintaining Kangbashi, which has the distinction of being one of China’s best-known “ghost towns”–gleaming but sparsely populated new urban centers adjacent to older metropolises. Built by the dozen across the country, the new areas reflect–and were meant to accelerate–China’s economic boom. As the country’s growth has slowed, many of them have become serious liabilities, deep in debt, with little prospect of full occupancy anytime soon.
. . .
Many of China’s other ghost towns have yet to figure out how to jumpstart their economies without slipping back into the old pattern of borrowing and building. To become economically viable, some may take 20 or 30 years, or “maybe even forever,” said Zhou Jiangping, a professor of urban planning at the University of Hong Kong. In some cases, Mr. Zhou said, local officials encouraged ambitious plans to advance their own careers: “You see all these empty towns, these areas at the edge of cities. They may symbolize the power of some officials.” Because many of them then move on to other jobs, he said, they didn’t think about ensuring long-term growth.
. . .
Ordos City Investment Real Estate Development Co. recently resumed work on two housing projects that it had set aside five years ago, including Mr. Xu’s complex. “Kangbashi’s real-estate sales improved, so our company decided to restart construction,” said Wang Tianyong, a branch manager, noting that the government’s subsidy program favors new projects.

For the full story, see:
Dominique Fong. “China’s Ghost Towns Haunt Its Economy.” The Wall Street Journal (Saturday, June 16, 2018): C3.
(Note: ellipses added.)
(Note: the online version of the story has the date June 15, 2018.)

It No Longer Pays to Recycle

(p. B1) Oregon is serious about recycling. Its residents are accustomed to dutifully separating milk cartons, yogurt containers, cereal boxes and kombucha bottles from their trash to divert them from the landfill. But this year, because of a far-reaching rule change in China, some of the recyclables are ending up in the local dump anyway.
In recent months, in fact, thousands of tons of material left curbside for recycling in dozens of American cities and towns — including several in Oregon — have gone to landfills.
. . .
(p. B5) Recycling companies “used to get paid” by selling off recyclable materials, said Peter Spendelow, a policy analyst for the Department of Environmental Quality in Oregon. “Now they’re paying to have someone take it away.”
In some places, including parts of Idaho, Maine and Pennsylvania, waste managers are continuing to recycle but are passing higher costs on to customers, or are considering doing so.
“There are some states and some markets where mixed paper is at a negative value,” said Brent Bell, vice president of recycling at Waste Management, which handles 10 million tons of recycling per year. “We’ll let our customers make that decision, if they’d like to pay more and continue to recycle or to pay less and have it go to landfill.”
Mr. Spendelow said companies in rural areas, which tend to have higher expenses to get their materials to market, were being hit particularly hard. “They’re literally taking trucks straight to the landfill,” he said.

For the full story, see:
Livia Albeck-Ripka. “Your Recycling Gets Recycled, Right? Maybe, or Maybe Not?” The New York Times (Thursday, May 31, 2018): B1 & B5.
(Note: ellipsis added.)
(Note: the online version of the story has the date May 29, 2018.)

China Will Fail to Corner the Lithium Market

(p. B12) Since emerging as an industrial superpower in the 2000s, China has repeatedly tried to lock up essential resources like iron ore and so-called rare earths. The latest example is lithium, a key battery element: . . . .
. . .
The reality is more mundane.
. . .
. . . it will take just $13 billion in investment to satisfy annual lithium consumption as of 2030, against more $100 billion for nickel and copper.
Even if only a relatively small amount of mining capital spending migrates from mainstays like iron ore into lithium over the next decade, supply probably won’t be a huge problem.

For the full story, see:
Nathaniel Taplin. “China Won’t Be Able to Dominate Lithium Mining Forever.” The Wall Street Journal (Friday, May 18, 2018): B12.
(Note: ellipses added.)
(Note: the online version of the story has the date May 17, 2018, and has the title “China Won’t Dominate Lithium Forever.” The last sentence quoted above appeared in the online, but not in the print, version of the article.)