Chinese Peril

Grindr Is Owned by a Chinese Firm, and the U.S. Is Trying to Force It to Sell

By David E. Sanger

Grindr, the gay dating app, is owned by a Chinese company.

WASHINGTON — The Trump administration is expanding its efforts to block Chinese acquisitions in the United States, moving to force a Chinese firm that owns Grindr, the gay dating app, to relinquish control over concerns that Beijing could use personal information to blackmail or influence American officials.
The action, which is being driven by the Committee on Foreign Investment in the United States, is unusual given that the panel typically investigates mergers that could result in control of an American business by a foreign individual or company, judging whether deals could threaten national security. This appears to be the first case in which the United States has asserted that foreign control of a social media app could have national security implications.
The administration has not announced the move, which will require that Grindr be sold, or explained it.

But officials familiar with the case, which was first reported by Reuters, say the concern focused on the potential for the blackmail of American officials or contractors, if China threatened to disclose their sexual orientation, or track their movements or dating habits.
Three years ago, a Chinese firm that owns both gaming and credit services businesses, Beijing Kunlun Tech Co. Ltd., a public company listed on the Shenzhen stock exchange, bought a 60 percent stake in Grindr, which is based in West Hollywood, Calif., for $93 million. 

Early last year, it bought the remaining shares for a little over $150 million.
While there were news reports about both transactions, the United States did not take action to block the acquisitions. 

Since then, the United States’ definition of national security threats has expanded, in part over concerns by the Trump administration and lawmakers about China’s ability to gain access to critical American technology.
It is unclear why the panel, known as Cfius, acted now, more than three years after control of the company switched to Chinese hands. 

Senator Ron Wyden, Democrat of Oregon, said he, along with several other senators, asked Cfius to conduct a review.
“Last year, my office met with a top official from the Treasury Department to express my serious concerns about the national security risks associated with a Chinese company buying Grindr,” he said in a statement. 

While he said he could not “confirm specific actions by Cfius,” a highly secretive panel, “it is high time for the administration and Cfius to consider the national security impact of foreign companies acquiring large, sensitive troves of Americans’ private data.”
Congress handed more power to the panel last year, allowing it to examine transactions that fell short of majority control of a company and involved just minority stakes. 

The expansion was an effort to counter Chinese minority investments in Silicon Valley companies that gave investors an early look at emerging technologies.
The Kunlun purchases had never been submitted to Cfius, giving the government the leverage to go back in after the sale to try to force a divestment. 

Calls to Kunlun’s office number were not answered, and emails seeking comment were not returned.
Grindr has already faced questions about its control and use of personal data. 

The company faced a huge backlash for sharing users’ H.I.V. status, sexual tastes and other intimate personal details with outside software vendors. 

After the data sharing was made public by European researchers in 2018, the company said it would stop sharing H.I.V. data with outside companies.
Last year was the first time Cfius appeared to be concerned about the purchase of companies that contained sensitive data. 

The government killed a proposed merger last year between MoneyGram, the money transfer firm, and Ant Financial, a payments company related to the Chinese e-commerce giant Alibaba.
The United States has also embarked on a global campaign to block a big Chinese telecom equipment giant, Huawei, from building the next generation of wireless networks, known as 5G, over concerns that it could divert critical data through China, or turn over data running through its networks to Beijing. 

The White House has essentially accused Huawei of being an arm of the Chinese government that can be used for spying or to sabotage communications networks.
But the administration’s efforts to control what kind of personal data is available to China’s intelligence services may have come too late. 

China’s ministry of state security and other Chinese groups have already been accused of successfully stealing personal data from American databases.
The theft of 22 million security clearance files from the Office of Personnel Management in 2014, along with similar theft of data from the Anthem insurance networks and Marriott hotels, have all been attributed to Chinese actors operating on behalf of the Chinese government.
The files stolen in the 2014 government breach contain far more personal data than the Chinese could probably find on any individual social media site: They include work history on sensitive United States projects, information about bankruptcies, medical conditions, relationship histories, and any contacts with foreigners. 

The loss of the information forced the C.I.A. to reassign personnel headed to China, and was considered among the largest losses of sensitive security information in decades. 

The Obama administration declined to publicly concede that the breach was committed by Chinese intelligence services.
China has taken steps of its own to limit foreign companies’ access to its citizens’ personal information. 

A recently enacted cybersecurity law mandates that user data be stored in the country, where it can be kept under the government’s control. 

Apple said it would open its first data center in China, and formed a partnership with a Chinese company to run the center and handle data requests from the government.
Before the law even came into effect, the Chinese government had pressured foreign technology companies to operate servers only within its borders — meaning the data is available to Chinese authorities. 

Amazon and Microsoft have partnered with Chinese firms to offer cloud computing services to Chinese customers.
The United States has also pressed China to allow insurance companies and other American firms that control personal data to enter the Chinese market, a demand that goes back nearly two decades. China has agreed to do so, and that agreement is expected to be part of the larger trade deal being negotiated between American and Chinese negotiators.
But the Grindr case could give the Chinese government an excuse to make its own national security claims if American firms sought to purchase a Chinese insurance company, or any of its social media firms.

Conflict of Interest

Mnuchin’s Hollywood Ties Raise Ethical Questions in China Talks

By Alan Rappeport and Ana Swanson

The Treasury secretary, Steven Mnuchin, and Louise Linton, his wife, at the White House before a state dinner in April honoring President Emmanuel Macron of France.

WASHINGTON — “Wonder Woman,” the 2017 film that Steven Mnuchin helped produce before becoming Treasury secretary, hauled in about $90 million at the box office in China. 

It was the film’s most successful international market and a roaring success for an American superhero export. 

But because of China’s strict laws for foreign films, the studio behind the movie, Warner Bros., received just a small fraction of those revenues.
Now, as Treasury secretary and one of the lead negotiators in trade talks with China, Mnuchin has been personally pushing Beijing to give the American film industry greater access to its markets — a change that could be highly lucrative to his former industry.
While Mnuchin divested from his Hollywood film production company after joining the Trump administration, he maintains ties to the industry through his wife, the actress and filmmaker Louise Linton.
In 2017, Mnuchin sold his interest in the company, StormChaser Partners, to Linton, who at the time was his fiancée.
In his 2018 disclosure, which was obtained from the Treasury Department through a records request by The New York Times, StormChaser is listed as one of Linton’s assets.
Since they are now married, government ethics rules consider the asset to be owned by Mnuchin. And while the documents show that Mnuchin sold his stake to Linton for $1 million to $2 million, he is now owed that same amount, in addition to interest, from StormChaser in 2026, according to the 2018 form.
Mnuchin’s remaining ties to the film industry are raising questions among ethics officials and lawmakers about whether a conflict of interest exists.
At a congressional hearing on Thursday, Mnuchin was questioned by a top Senate Democrat about those continuing financial ties.
The Office of Government Ethics still has not certified his 2018 financial disclosure, which is the first since his marriage to Linton.
Access to China’s film market has not been a primary issue in the trade talks, which have focused largely on Beijing’s treatment of foreign companies, including its requirement that firms hand over valuable technology, its barriers to foreign business and its subsidies to Chinese firms.
But Mnuchin has championed more equitable treatment of American films in China, viewing existing restrictions on foreign entertainment as part of the problematic behavior the Trump administration is trying to correct.
Under the current system, foreign companies must secure Chinese partners to enter China’s market and they are restricted in how much they can earn as part of the arrangements.
China applies a strict quota for the number of Hollywood films it lets into its theaters.
For most box office showings, Chinese companies take in 75 percent of all revenue, leaving the remainder to Hollywood. 
To operate in the tightly managed Chinese entertainment sector, American companies have also had to form a vast network of complicated ties with Chinese state-owned firms.
Since the trade talks began last year, film lobbyists have met with Mnuchin’s top deputies, as well as with officials from the Commerce Department and the office of the United States Trade Representative.
Mnuchin has been especially responsive to lobbying from the film industry, according to people familiar with the discussions, given his background and understanding of the challenges that American moviemakers face in China.
At a congressional hearing last month, Robert Lighthizer, President Trump’s top trade negotiator, said increasing the revenue share earned by American film companies in China was “absolutely” a priority in the talks, and he highlighted Mnuchin’s role.
“Mnuchin has been very much involved,” Lighthizer added.
“He of course knows a great deal about that industry, a lot more than I do.”
On Thursday, Senator Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, raised concerns about Mnuchin’s financial ties to the film industry and asked the Treasury secretary whether he had, in fact, really divested himself of the StormChaser asset listed on his disclosure form.
Mr. Wyden also suggested that the transaction might have been more of a loan to Linton than a true financial separation from StormChaser.
“What we have wondered is if there has been an exchange of an asset for a loan rather than a divestment,” Mr. Wyden said.
Mnuchin declined to discuss details of the transaction, but said that his financial disclosures were certified by career ethics officials in the Treasury Department.
“I am advised by people at Treasury that I am fully in compliance and I have no ethical issues,” Mnuchin said.
When asked by reporters after the hearing why his StormChaser ties did not represent a conflict of interest, Mnuchin said that he would not discuss any specific assets.
Treasury noted separately that Mnuchin’s disclosure was certified internally on June 27, 2018, and that the department was working with the Office of Government Ethics to obtain its certification.

Gal Gadot in a scene from “Wonder Woman,” which Mnuchin helped produce.

Mnuchin and Linton, who married in 2017, brought Hollywood glitz to Washington, but their continuing links to the film industry have also brought complications.
After working for 17 years at Goldman Sachs, Mnuchin in the last decade became a big name in Hollywood as a film investor.
His companies, Dune Entertainment and later RatPac-Dune, helped produce and finance dozens of films that were box office smashes in China, including “Avatar,” “Gravity,” “Dunkirk,” “Wonder Woman” and “Ready Player One.”
Mnuchin was also a co-chairman of Relativity Media, a fledgling Hollywood studio that had a joint venture in China.
During his confirmation hearing in 2017, Mnuchin said that Relativity’s joint venture in China was “not particularly successful.”
He said that he was not aware of direct Chinese investment in the business but that, in the future, Chinese investments in Hollywood may need to be reviewed by the Committee on Foreign Investment in the United States, which the Treasury secretary oversees.
Mnuchin agreed to divest from dozens of investments in early 2017, after he was nominated by Mr. Trump.
Later that year, he sent a letter of apology to the Office of Government Ethics after appearing to promote one of his movies when he said at an event, “Send all your kids to ‘Lego Batman.’”
This month, the Center for Public Integrity reported that Mnuchin’s most recent financial disclosure, which Treasury approved last June, has yet to be certified by the ethics office.
That has raised questions about the reason for the delay.
Ethics experts have pointed to Mnuchin’s continuing ties to StormChaser Partners as a potential reason for the holdup.
“It certainly creates a significant appearance issue,” said Virginia Canter, a former senior ethics counsel at the Treasury Department.
“Not just because he previously was in the entertainment business, and may in fact go back into it at some point when he leaves Treasury, but because his spouse appears to have holdings in these films and is part of the film industry and may benefit if favorable terms are negotiated with China.”
According to a report in The Hollywood Reporter this year, Linton spends much of her time in Los Angeles, where she has been writing, directing and producing a comedy called “Me, You, Madness.”
She has also been busy reshooting “Serial Daters Anonymous,” a 2014 satire that was never released in which she had a starring role.
She told the magazine that financing for her films comes from “a variety of investors.”
While Mnuchin’s role in pressing for the film industry has raised some concerns, there is broad support in the United States to push for changes to China’s film regulations.
The film industry supports more than two million American jobs, according to industry data, and Hollywood has been a powerful force for exporting American culture around the world.
“Even if concessions are made in trade negotiations there’s a long way to go, because the business environment continues to keep Hollywood from operating on an equal plane,” said Aynne Kokas, an assistant professor of media studies at the University of Virginia and the author of “Hollywood Made in China.”
Still, the China market has been lucrative for Hollywood, offering a rapidly growing box office and a ready source of financing, at a time when the American industry faces pressure from streaming services like Netflix and Amazon Prime and a saturated film market in the United States.
Hollywood has found the lure of the China market irresistible, even though operating in China means enduring censorship and unfair treatment as well as working with state-owned companies.
Hollywood has long been a victim of rampant piracy in China, including from bootleg DVDs distributed in back alley stores and online streaming services.
But China has done a better job of policing these forms of piracy in recent years as its own industry has developed, said Stanley Rosen, a professor at the University of Southern California.
“As their films are being pirated, they are now beginning to enforce copyright protections of their own films,” Mr. Rosen said.
Despite better intellectual property protection, the playing field for foreign companies is far from even.
China still limits the number of Hollywood films that can appear in its movie theaters, the dates those films can appear and the distributors they can use to reach the theaters. 
And Chinese censors only welcome films that show their country in a positive light — censorship that has led American studios to make editorial choices like depicting North Koreans as villains rather than the Chinese, or smashing the Taj Mahal rather than the Great Wall of China.
Even for box office hits, Hollywood studios receive a quarter of ticket proceeds, with the rest going to Chinese partners. 
Increasing that to the global average, which is around 40 percent, is one of the industry’s biggest requests.
Last month, Mr. Lighthizer said that this was a “key issue” that “had not been resolved” in negotiations.
Mr. Lighthizer also described restrictions on distribution as complicated, saying: “There should be some changes there, too, but what we haven’t done is challenge control. It’s not something we want to bring into this, the idea of challenging control in China.”
In another congressional hearing this week, Mr. Lighthizer reiterated that the United States was renegotiating the amount of Chinese box office revenue shared with American firms, saying it was a “very unfair situation.”
Like many other American industries, Hollywood has grown frustrated with China’s pattern of promising to open its film market, only to fail to do so. 
As early as 2001, the World Trade Organization urged China to open up its film market.
An agreement between the two countries governing China’s rules for Hollywood films expired in February 2017, and it has not been renegotiated.
Some lawmakers hope that Mnuchin and Mr. Lighthizer will be able to finally change that.
“This is our opportunity to even the playing field here to some extent,” Representative Judy Chu, Democrat of California and a member of the Ways and Means Committee, said in an interview. “The U.S. film industry clearly has been at a disadvantage.”

Insane Clown President

U.S. lawmakers push back on Trump talk of helping China's ZTE

By Patricia Zengerle, Richard Cowan

WASHINGTON -- U.S. lawmakers on Tuesday rejected any plan by Donald Trump to ease restrictions on China’s ZTE Corp, calling the telecommunications firm a security threat and vowing not to abandon legislation clamping down on the company.
Trump on Monday had defended his decision to revisit penalties on ZTE for flouting U.S. sanctions on trade with Iran, in part by saying it was reflective of the larger trade deal the United States is negotiating with China.
“I hope the administration does not move forward on this supposed deal I keep reading about,” Republican Senator Marco Rubio said. 

Bilateral talks between the world’s two biggest economies resume in Washington this week.
The Trump administration is considering an arrangement under which the ban on ZTE would be eased in exchange for elimination of new Chinese tariffs on certain U.S. farm products, including pork, fruits, nuts and ginseng, two people familiar with the proposal said. 

The potential arrangement was first reported by the Wall Street Journal.
“They are basically conducting an all-out assault to steal what we’ve already developed and use it as the baseline for their development so they can supplant us as the leader in the most important technologies of the 21st century,” Rubio said at a Foreign Relations Committee hearing on Asia policy.
Trump had taken to Twitter on Sunday with a pledge to help the company, which has suspended its main operations, because the penalties had cost too many jobs in China. 

It was a departure for a president who often touts “America First” policies.
The Commerce Department in April found ZTE had violated a 2017 settlement created after the company violated sanctions on Iran and North Korea, and banned U.S. companies from providing exports to ZTE for seven years.
U.S. companies are estimated to provide 25 percent to 30 percent of components used in ZTE’s equipment, which includes smartphones and gear to build telecommunications networks.

CYBERSNOOPING
The suggestion outraged members of Congress who have been pressing for more restrictions on ZTE. U.S. lawmakers alleged equipment made by ZTE and other Chinese companies could pose a cyber security threat.
“Who makes unilateral concessions on the eve of talks after you’ve spent all this time trying to say, correctly in my view, that the Chinese have ripped off our technology?” Senator Ron Wyden, the senior Democrat on the Senate Finance Committee, which oversees trade policy, told Reuters.
Wyden, who is also on the Intelligence Committee, was one of 32 Senate Democrats who signed a letter on Tuesday accusing Trump of putting China’s interests ahead of U.S. jobs and national security.
Republican Representative Mac Thornberry, chairman of the House Armed Services Committee, said at a Bloomberg event on Tuesday he did not expect lawmakers would seek to remove a ban on ZTE technology from a must-pass annual defense policy bill making its way through Congress.
“I confess I don’t fully understand the administration’s take on this at this point,” Thornberry said. 

“It is not a question to me of economics, it is a question of security.”

In rare bipartisan display, Democrats back Trump on China trade probe

By Ginger Gibson and David Lawder

Senate Minority Leader Chuck Schumer speaks during a press conference for the Democrats' new economic agenda on Capitol Hill in Washington, U.S., August 2, 2017.

WASHINGTON -- Three top Democratic senators, in a rare show of bipartisanship, on Wednesday urged U.S. President Donald Trump to stand up to China as he prepares to launch an inquiry into Beijing's intellectual property and trade practices in coming days.

Senate Democratic leader Chuck Schumer pressed the Republican president to skip the investigation and go straight to trade action against China.
"We should certainly go after them," said Schumer in a statement. 

Senators Ron Wyden of Oregon and Sherrod Brown of Ohio also urged Trump to rein in China.
Tensions between Washington and Beijing have escalated in recent months as Trump has pressed China to cut steel production to ease global oversupply and rein in North Korea's missile program.
Sources familiar with the current discussions said Trump was expected to issue a presidential memorandum in coming days, citing Chinese theft of intellectual property as a problem. 

The European Union, Japan, Germany and Canada have all expressed concern over China's behavior on intellectual property theft.
U.S. Trade Representative Robert Lighthizer would then initiate an investigation under the Trade Act of 1974's Section 301, which allows the president to unilaterally impose tariffs or other trade restrictions to protect U.S. industries, the sources said.
It is unclear whether such a probe would result in trade sanctions against China, which Beijing would almost certainly challenge before the World Trade Organization.
U.S. Section 301 investigations have not led to trade sanctions since the WTO was launched in 1995. In the 1980s, Section 301 tariffs were levied against Japanese motorcycles, steel and other products.
"This could merely be leverage for bilateral negotiations," James Bacchus, a former WTO chief judge and USTR official, said of a China intellectual property probe.

Senator Ron Wyden (D-OR) speaks to reporters ahead of the weekly party luncheons on Capitol Hill in Washington, U.S., August 1, 2017.

Some trade lawyers said that WTO does not have jurisdiction over investment rules such as China's requirements that foreign companies transfer technology to their joint venture partners, allowing sanctions to proceed outside the WTO's dispute settlement system.
But Bacchus argued the United States has an obligation to turn first to the Geneva-based institution to resolve trade disputes, adding: "There is an obligation in WTO to enforce intellectual property rights that is not fully explored."
Lighthizer and Trump's Commerce Secretary, Wilbur Ross, have complained the WTO is slow to resolve disputes and biased against the United States.

Sen. Sherrod Brown (D-OH) speaks with the media following the weekly policy luncheons on Capitol Hill in Washington, D.C., U.S., June 6, 2017.
The threat comes at a time when Trump has become increasingly frustrated with the level of support from Beijing to pressure Pyongyang to give up its nuclear and missile program.
Trump has said in the past that China would get better treatment on trade with the United States if it acted more forcefully against Pyongyang. 

Beijing has said its influence on North Korea is limited.
China counters that trade between the two nations benefits both sides, and that Beijing is willing to improve trade ties.
A senior Chinese official said on Monday there was no link between North Korea's nuclear program and China-U.S. trade.
Wyden, the top Democrat on the Senate Finance Committee, wrote to Lighthizer urging action to stop China from pressuring U.S. tech companies into giving up intellectual property rights.
Wyden's state of Oregon is home to several companies that could make a case regarding intellectual property rights and China, including Nike Inc and FLIR Systems Inc.

Why 12 Senators Want This Chinese Deal Rejected

The senators asked a review panel to “ultimately reject” the deal.

Reuters 

Twelve U.S. senators urged on Wednesday that a national security review panel reject Chinese aluminum giant Zhongwang International Group proposed $2.3 billion purchase of U.S. aluminum products maker Aleris.
The senators asked Treasury Secretary Jack Lew in a letter to launch a review of the deal by the Committee on Foreign Investments in the United States and “ultimately reject it” on grounds that it would damage the U.S. defense industrial base.
“Zhongwang’s purchase of Aleris would directly undermine our national security, including by jeopardizing the U.S. manufacturing base for sensitive technologies in an industry already devastated by the effects of China’s market distorting policies, and creating serious risk that sensitive technologies and knowhow will be transferred to China, further imperiling U.S. defense interests,” the senators wrote.
The deal, announced just over two months ago, would give one of the world’s largest makers of extruded aluminum products access to U.S. technology and customers, which include Boeing Co and U.S. and European automakers that are increasingly turning to aluminum.
It comes as another Zhongwang subsidiary is embroiled in a dispute over U.S. import duties amid broader trade tensions between the U.S. aluminum industry and China.
The U.S. Commerce Department is currently investigating China Zhongwang Holdings over allegations that it has been evading U.S. import duties on extruded products by shipping them through third countries.
The letter to Lew was signed by Republican Rob Portman of Ohio, where Aleris is based, and Democrats Ron Wyden, Charles Schumer, Bob Casey, Joe Manchin, Kirsten Gillibrand, Joe Donnelly, Debbie Stabenow, Jeff Merkley, Amy Klobuchar, Tammy Baldwin and Al Franken.
They said the review committee needed to be cautious about the potential for sensitive research data to be transferred to China, including data with military applications such as advanced modeling techniques, high-strength alloys and the design of light armor material.
“Despite the national security importance of our nation’s aluminum sector, the industry continues to be decimated by China’s market distorting policies that contribute to vast overcapacity,” the senators wrote.
“China’s overcapacity in aluminum has directly contributed to severe reductions in U.S. domestic production as smelters unable to compete have been forced to close. Each such closure further imperils our nation’s ability to ensure a reliable supply of strategic materials in times of crisis,” they wrote.
A Treasury spokeswoman declined to comment on the letter, adding that information filed with CFIUS by law cannot be disclosed to the public and that Treasury does not comment on specific CFIUS cases.