Trade War

Newsletter 122 - July 9, 2022

Welcome to the 122nd edition of Trade War.

In a first-ever joint address the directors of the FBI and the UK’s MI5 call the China espionage threat ‘game-changing,’ ‘immense,’ & ‘breath-taking.’ On same day, American business and policy leaders publish letter calling for talks to rebuild trust in the US-China relationship.

US Senate committee calls for TikTok investigation. China’s BYD bests Tesla to become world’s largest electric vehicle maker. And struggling real estate developers take garlic and watermelon for apartment purchases.

Manufacturing starts reshoring from China. Beijing issues new rules controlling cross-border data flow. Shanghai police database containing a vast trove of Chinese personal data stolen.

China threat ‘game-changing,’ ‘immense,’ & ‘breath-taking‘

In an unprecedented joint address, the heads of the FBI and UK’s MI5 warned of a serious threat from China espionage, reports BBC News’ Gordon Corera.

China is the "biggest long-term threat to our economic and national security" said FBI director Christopher Wray. Meanwhile, MI5 has more than doubled its efforts to counter spying over the last three years, according to MI5 director Ken McCallum. Both were speaking from MI5 headquarters in London.

McCallum said the threat from China was “game-changing,” while Wray called it “immense” and “breath-taking.”

Speaking before a group of senior representatives from business and academia, Wray warned that the Chinese government was “set on stealing your technology” and was “an even more serious threat to western businesses than even many sophisticated businesspeople realized.”

Wray also said that Beijing had interfered in U.S. elections earlier this year citing a congressional election in New York with a candidate who had been a Tiananmen Square protester.

“They had done so, [Wray] said, by hiring a private investigator to dig up derogatory information. When they could not find anything, he said there had been an effort to manufacture a controversy using a sex worker before even suggesting staging a car accident,” reports the BBC.

“China has for far too long counted on being everybody's second-highest priority,” Wray said. “They are not flying under the radar anymore.”

Theresa Fallon @TheresaAFallon

Heads of UK and US security services have made an unprecedented joint appearance to warn of the threat from China. What a change from the UK’s “Golden Era” when Xi Jinping rode in a ceremonial coach w/ the Queen. Are these efforts now too little too late?

bbc.co.ukChina: MI5 and FBI heads warn of ‘immense’ threatThe UK and US security service heads make an unprecedented joint appearance to warn about China.

China studying how to evade Taiwan crisis sanctions

According to FBI director Christopher Wray China is studying how to evade future sanctions in a Taiwan crisis, reports the New York Times’ Julian E. Barnes.

“China is looking for ways to protect its economy from the threat of international sanctions should a confrontation over Taiwan occur,” reported Barnes, citing comments by the FBI director.

China is “trying to cushion themselves from harm if they do anything to draw the ire of the international community,” Wray said. “In our world, we call that kind of behavior a clue.”

With multinationals far more linked to the Chinese economy than to Russia’s, compliance with any future international sanctions on China will be more complicated, the FBI chief said.

“Just as in Russia, Western investments built over years could become hostages, capital stranded, supply chains and relationships disrupted,” with, in addition, “companies caught between sanctions and Chinese law forbidding compliance with those sanctions,” Wray said.

“I don’t have any reason to think their interest in Taiwan has abated in any fashion,” Wray added when asked about the likelihood of a Chinese invasion. ”We certainly hope that they are learning valuable lessons of what happens when you overplay your hand in a way that the Russians clearly have in Ukraine.”

New York Times World @nytimesworld

China is learning from Russia’s experience, and pre-emptively trying to shield itself from the sanctions that would result from a clash over Taiwan, the FBI says.

nyti.msChina Seeks to Pre-Empt Sanctions in Case of Taiwan Clash, F.B.I. Chief SaysLooking ahead to a possible conflict, Beijing wants to shield itself from the kind of economic penalties levied against Russia over its invasion of Ukraine, the F.B.I. director says.

Exploiting state and local leaders

U.S. intelligence warned Wednesday that China’s government is trying to exploit longstanding relationships with local city and state governments to further its