China Flexes Tech Muscles Before a State Visit
PAUL MOZUR and JANE PERLEZ, The New York Times, Sept 8, 2015
accessed Sept 10, 2015
The meeting, which is set to take place Sept. 23 in Seattle, is planned to feature China’s Internet czar, Lu Wei, the overseer of China’s restrictions on foreign technology companies.
A number of Chinese tech executives, including Robin Li of Baidu and Jack Ma of Alibaba, along with executives from top American tech companies including Apple, Facebook, IBM, Google and Uber, have been invited, according to people familiar with the plan who spoke on the condition of anonymity because they were not authorized to speak about the meeting.
Some invitees, including Apple’s chief, Timothy D. Cook, plan to attend, according to one person. The forum is being co-hosted by Microsoft, said another person with knowledge of the matter.
The meeting is rankling the Obama administration by veering off the script agreed to for Mr. Xi’s carefully stage-managed visit, two American officials said. There are also concerns the meeting could undercut President Obama’s stern line on China by portraying its leadership as constructively engaging American companies about doing business in China, even as the administration suggests American companies are hurt by anticompetitive Chinese practices.
For many American tech companies, the invitation is hard to turn down because of the vast opportunities of China’s tech market. Google and Facebook are among those blocked by China’s web filters from doing business in the country, which is the world’s biggest Internet market. While the tech companies have not taken positions opposing American sanctions and some are conflicted about how to approach China, their appearance at the meeting would signal how much leverage China wields.
At the meeting, Mr. Xi could briefly address the gathering, or a selected group of American and Chinese executives, according to an Obama administration official. In Seattle, Mr. Xi is also set to meet the Microsoft co-founder Bill Gates at his nearby lakeside estate for dinner before heading to Washington to meet President Obama.
A Chinese digital security expert, Zuo Xiaodong, the vice president of the China Information Security Research Institute, who plans to attend what is being called the U.S.-China Internet Industry Forum, described it as an “industry meeting,” adding that “the Chinese government has attached great importance” to it.
“The meeting is mostly to discuss the industry cooperation of the two countries, and big companies from China and the U.S., like Google, will all be there,” Mr. Zuo said.
Microsoft, Facebook, IBM, Apple, Uber and Baidu declined to comment, while Alibaba and Google did not respond to requests for comment.
Over the last few years, China and the United States have been engaged in a sort of technological Cold War. American leaders have railed against a series of hackings that they have said emanated from China, and they have called for Beijing to relax the regulations that limit the sale of American hardware and block Internet companies. In turn, China has argued that revelations by Edward J. Snowden, the former contractor who disclosed American government surveillance, show that the United States also hacks Chinese companies and that those attacks justify its restrictive laws against American companies.
At stake is how the global Internet will be managed. While the United States supports an Internet in which companies are allowed to operate worldwide and users are given free online expression, China has said countries should be allowed to force web companies to follow local laws, including censoring content, monitoring users and hosting data about Chinese users within China. By dangling the carrot of market access to American companies that follow its rules, Chinese officials like Mr. Lu want to influence global Internet governance and have its model more widely adopted.
Holding the tech meeting in Seattle can also be cast in Beijing as a sign that the titans of American industry recognize China’s power and give it respect. Abroad, it signals that companies must accommodate Beijing’s wishes to ensure market access.
“This is about putting as much lipstick as possible on the pig in advance of Xi going into Washington where the administration is saying cyberattacks are the problem and the operating environment for U.S. firms is narrowing,” said an industry official with direct knowledge of the planning of Mr. Xi’s trip, who spoke on the condition of anonymity.
The planned meeting also reveals the divides within the American tech industry, and between the government and United States companies about how to deal with China.
On one hand, China’s more than 600 million Internet users and the hundreds of billions of dollars its companies, government and consumers spend on technology are revenue staples for older American hardware and software companies and are viewed by younger companies as areas of huge potential growth. On the other hand, a raft of Chinese policies have emerged in the last two years that are meant to wean the country off foreign technology, and Internet blocks have kept out companies like Facebook, Google and Twitter.
Some American companies are pushing for a harsher United States government stance against restrictive Chinese policies aimed at American companies, while others are wary of what they stand to lose if China reacts by further denying market access.
Uniting most companies, however, is a fear that sanctions imposed by the Obama administration could lead to a Chinese response that would hit bottom lines and growth prospects alike. Administration officials have made clear they are considering imposing economic sanctions against China for breaches by using an executive order under which President Obama has the authority to freeze financial and property assets of foreign companies that engage in commercial digital theft. The order, signed in April, is not specific to China but is meant for use against Chinese entities, among others.
Administration officials have deliberately left open the increasing possibility of such sanctions, but whether they would be imposed before Mr. Xi’s arrival — an act that would poison the visit and conceivably cause its cancellation — has become a matter of intense debate in Washington. Such sanctions would almost certainly result in retaliation by China, American and Western diplomats say.
The administration is in a difficult position, officials say, because Mr. Obama first outlined China’s online transgressions to Mr. Xi at a summit in California in 2013 and asked him to take action, but the situation has since deteriorated.
Washington State might seem an unlikely first stop for Mr. Xi, but it is the largest exporter by dollars to China, and Seattle has a rich history of hosting Chinese leaders. In 1993, Jiang Zemin, the Chinese president, met President Bill Clinton in Seattle in the highest-level contact between the two countries following the 1989 crackdown on the Tiananmen Square protests.
During a 2006 visit, the Chinese president at the time, Hu Jintao, met with Mr. Gates in Seattle. In an exchange during the trip, Mr. Hu said he used Microsoft Windows every day, and Mr. Gates offered personal tech support if he ran into problems.
In the nine years since, things have changed. Beijing is developing its own operating system and has placed government procurement bans on Microsoft’s Windows 8. Other companies, like Qualcomm, have faced antitrust investigations in China. Several American business groups also lashed out this year at a Chinese law they said would prevent tech companies based in the United States from selling hardware and software to China’s banking industry.