Affichage des articles dont le libellé est Blackstone. Afficher tous les articles
Affichage des articles dont le libellé est Blackstone. Afficher tous les articles

mardi 14 janvier 2020

The Moral Hazard of Dealing With China

Stephen Schwarzman: A Loyal Xi Jinping's Fellow Traveller
By BETHANY ALLEN-EBRAHIMIAN

American Quisling: Chinese Vice Premier Liu Yandong shakes hands with Blackstone Group co-founder Stephen Schwarzman before a ceremony to officially open the Schwarzman Scholars program at Tsinghua University in Beijing.
Shortly before its first-ever applications period was due to close, the Schwarzman Scholars program held an admissions seminar at the Tsinghua University in Beijing.
The China-based graduate program, funded by American businessman Stephen Schwarzman’s personal wealth and fundraising efforts and modeled after Oxford University’s Rhodes Scholarship, had recruited heavily from the world’s top academic institutions, including Harvard, Yale, and Cambridge.
It would kick off its inaugural academic year in fall 2016, and was aiming for a cohort comprising the best students from China and around the world.
To guarantee a “scientific and fair” admissions process, the program invited a group of experts to participate in the seminar.
The meeting, held on September 20, 2015, was attended not just by academics and administrators, but also by top Chinese Communist Party luminaries, including officials from the CCP’s Youth League, Central Party School, and the State Council, as well as a high-ranking member of the United Front Work Department—the party’s political-influence arm.
These participants “conducted an in-depth discussion on how to select China’s future leaders,” according to an article posted to the Tsinghua University website.
The fact that such officials helped guide the Schwarzman Scholars admissions process reflects both the importance China’s leaders ascribe to the program and the party’s desire to leave nothing to chance.
But the program’s relationship with the CCP, while offering non-Chinese participants a rare inside look at the future elite of a one-party state, highlights a growing moral hazard confronting Western universities: As Xi Jinping’s China descends deeper into repression, curtailing personal as well as academic freedoms, at what point do the restrictions placed on American, British, and other institutions seeking to establish campuses and joint programs in China—a lucrative market and crucial subject of study—become too much to bear?
Dozens of Sino-foreign institutes and hundreds of joint educational programs exist in China.
Among them, the Schwarzman Scholars program is particularly vulnerable to pressure from the CCP. That’s because, unlike other U.S.-China education initiatives, it has no American academic institution as a partner.
Its primary institutional tie to the United States is the private education foundation of Stephen Schwarzman, a billionaire with extensive business dealings in China.
In 2007, a year before his private-equity firm, Blackstone, opened an office in Beijing, Schwarzman’s firm announced that China Investment Corporation, China’s state-investment vehicle, would acquire a $3 billion stake in the company. (China sold the stake in 2018.)
Schwarzman Scholars’ institutional home, Tsinghua University, is subject to Chinese laws and owes its continued existence and funding to the Chinese government’s largesse.
Though the program is staffed with highly respected individuals, it isn’t affiliated with any Western-based academic institution that could serve as a moral counterweight, or draw a line in the sand, should the situation in China deteriorate.
The program has particularly close ties to the United Front, which is key to understanding the CCP’s influence both at home and abroad.
The party exercises tight discipline over its 90 million members, and the United Front is responsible for establishing ideological sway over everyone else, including foreigners and Chinese nationals who live overseas. 
Under Xi, the United Front has undergone a restructuring that has amplified its power and strengthened its clout both inside and outside of China.
One of its bureaus focuses specifically on students and professors, and sent a top representative to participate in Schwarzman Scholars’ 2015 admissions seminar.
A United Front magazine, Exchange Student, has also featured the Schwarzman program.
The program and the United Front share personnel ties too. 
The United Front views David Daokui Li, who was the Schwarzman Scholars’ founding dean and is now a finance professor at Tsinghua, as an especially reliable ally.
Beijing Education, a magazine published by the Beijing Municipal Education Commission, dedicated an entire April 2017 article to praising Li as an “outstanding nonparty representative”—a term used by the United Front for people who are not official members of the CCP but who promote its goals and mission, and who “have the willingness and ability to participate in political affairs.” 
Li’s résumé is filled with recent United Front affiliations: He has served as a national representative to the Chinese People’s Political Consultative Conference, a party organization of more than 2,000 delegates that is an important domestic arm of the United Front; has attended numerous conferences hosted by the State Council and the United Front, according to the Beijing Education article; and has “received a high degree of recognition from the Central United Front Work Department and the National Committee of the Chinese People’s Political Consultative Conference.” (Li did not respond to a request for comment.)
Julian Chang, the former Schwarzman Scholars associate dean of student life who joined the program in its inaugural year from the Harvard Kennedy School, also in 2015 became a nonresident senior fellow at the Center for China and Globalization, a Beijing-based think tank that was founded by the Western Returned Scholars Association—itself officially directed by the United Front. CCG’s founder, Wang Huiyao, describes himself in an online biography as a “member of the expert advisory group of the United Front Work Department.”
Schwarzman himself met with Sun Chunlan, the former national head of the United Front, in April 2018 at Zhongnanhai, the party and government headquarters in Beijing.
In July 2018, Schwarzman Scholars co-hosted a conference on Chinese philanthropy with Tsinghua University and the CCG.
One of the highlighted speakers was Tan Tianxing, deputy minister of the United Front.
Of course, when operating inside China, engaging with the CCP and its many departments is to some extent inevitable—these are the mechanisms by which institutions are created and sustained.
It’s also neither surprising nor nefarious that a party ally like Li was offered a founding position at Schwarzman and appears to have been recognized by the party for his overtures.
In a China that is more and more authoritarian, major initiatives such as Schwarzman Scholars are only possible with the assistance of those whom the party trusts—and to create a new program, especially a high-profile one dedicated to a higher calling than profit, its founders must secure the support of the party.
But these kinds of compromises were far easier to accept a decade ago, when a kinder, gentler version of the party ruled.
As Beijing has become more heavy-handed in its approach to academia and civil society, universities have begun applying the brakes to partnerships there. 
In April 2016, the University of Notre Dame canceled plans for a partnership with Zhejiang University amid concerns about academic and religious freedom. 
In October 2018, Cornell University announced that it was severing ties with Renmin University after the Chinese institution punished Chinese students for labor-related activism.
This year, a Cornell faculty member argued for further distancing from China, citing the country’s detention of more than 1 million Muslim ethnic minorities in mass internment camps in the northwest coloy of East Turkestan.
And Wesleyan University, a private liberal-arts college in Middletown, Connecticut, said in October that it would no longer pursue a joint campus in China.
“It became clear that they were less interested in a liberal-arts approach than we initially thought,” a university spokesperson, Lauren Rubenstein, told Wesleyan’s student newspaper.
Several former participants in the Schwarzman Scholars program told me that the academic environment did appear, on the whole, to be free—or as free as one could expect, given that Chinese professors and students at times faced constraints on what they could and could not say.
And party sway over admissions seems to extend only to Chinese participants.
But such a process gives the lie to China’s assurances that it enters into such partnerships based on open exchange, and out of a desire to deepen mutual understanding.
The involvement of party officials in the selection of Chinese students is “part of the program design,” a Schwarzman Scholars spokesperson told me.
“The intention was always for China to identify its future leaders for participation in the program.” The spokesperson said the program’s U.S. office has “had no engagement” with the United Front, but added that Schwarzman Scholars is “about maintaining dialogue through periods of adversity” and that the program had “appropriate dialogue around academic ethics and freedom.”
To be sure, there is great value in observing authoritarianism from the inside.
I once spoke with a young American who told me that she had specifically chosen to pursue a master’s degree in political science from a university in China to get hands-on experience navigating an obstructed information system.
She learned how Chinese academics and researchers operate, what remains possible, and what kind of knowledge is successfully stymied.
That is invaluable for understanding how the party governs, and how Chinese society responds to that governance.
It benefits outsiders to have an intimate understanding of that reality.
But at what point does engagement become complicity? 
Take this year’s commencement ceremony.
The program invited Tang Xiao’ou, the founder of the Chinese artificial-intelligence company SenseTime, to speak.
The New York Times reported in April that SenseTime helped develop facial-recognition technology that can pick ethnic minorities out of a crowd, a capability the Chinese government is deploying against Muslim minorities in East Turkestan.
During his speech, according to a published account by Schwarzman alum Noah Lachs, Tang called reports of SenseTime’s involvement in human-rights violations “fake news.”
While the Chinese students in the audience laughed at this, wrote Lachs, the Western students reacted with “muted fury.”
Upon learning that Schwarzman Scholars had chosen as its commencement speaker one of the architects of East Turkestan’s minority-targeting mass surveillance, dozens of program participants had sent a joint letter to the administration, asking them to choose a different speaker. 
Program staff declined, and after the speech went badly, as Schwarzman participants had feared, they sent another more strongly worded letter to the administration.
“In this instance, we chose as a speaker a recognized global leader in AI, given the relevance and importance of the topic. When a subset of students raised objections, we listened and carefully considered their viewpoints,” the Schwarzman Scholars spokesperson told me.
“We ultimately decided that since the invitation had already been made and accepted, it was inappropriate and rude to disinvite the speaker.”
Four months after the ceremony, the United States placed SenseTime and 27 other Chinese entities deemed complicit in East Turkestan human-rights abuses on the U.S. “entity list,” which prohibits American companies from selling products to them without special approval.
As China becomes more and more locked down, as it carries out cultural genocide against ethnic minorities while trumpeting its governance model to the world, it requires what is approaching a stark choice: to operate fully within the party’s machinery, or to stay away entirely.
At what point does the price of continued ties become too high?
This is the existential question that those who wish to engage with China must now ask themselves.

vendredi 13 décembre 2019

English Quisling

Pro-Beijing Refinitiv created filter to block Reuters stories amid Hong Kong protests
By Steve Stecklow

LONDON -- As anti-government demonstrations engulfed Hong Kong in August, Reuters broke a sensitive story: Beijing had rejected a secret proposal by city leader Carrie Lam to meet several of the protesters’ demands in a bid to defuse the unrest.
The story buttressed a main claim of the protesters, that Beijing is intervening deeply in the affairs of the semi-autonomous city. 
A state-run newspaper denounced the story as “fake” and “shameful.” 
The article soon became unavailable in mainland China.
It wasn’t the Chinese government that blocked the story. 
The article was removed by Refinitiv, the financial information provider that distributes Reuters news to investors around the world on Eikon, a trading and analytics platform. 
The article was one of a growing number of stories that Refinitiv – which until last year was owned by Reuters’ parent company, Thomson Reuters Corp – has censored in mainland China under order from Beijing.
Since August, Refinitiv has blocked more than 200 stories about the Hong Kong protests plus numerous other Reuters articles that could cast Beijing in an unfavorable light. 
Internal Refinitiv documents show that over the summer, the company installed an automated filtering system to facilitate the censoring. 
The system included the creation of a new code to attach to some China stories, called “Restricted News.”
As a result, Refinitiv’s customers in China have been denied access to coverage of one of the biggest news events of the year, including two Reuters reports on downgrades of Hong Kong by credit-rating agencies. 
Nearly 100 other news providers available on Eikon in China have also been affected by the filtering.
Censorship in China has been intensifying in recent years under Xi Jinping, and Western businesses have come under rising pressure to block news, speech and products that Beijing sees as politically dangerous. 
Refinitiv generates tens of millions of dollars of annual revenue in China. 
As Reuters reported in June, citing three people familiar with the matter, Refinitiv began the censorship effort earlier this year after a regulator threatened to suspend its Chinese operation.
Refinitiv has joined a lengthening list of greedy companies complying with Chinese demands. 
They include hotel giant Marriott International Inc, which last year temporarily shut down its Chinese websites and apologized for, among other things, listing Taiwan as a separate country in a customer questionnaire. 
Several U.S. airlines also stopped describing Taiwan as non-Chinese territory on their websites. 
The censorship has angered the top news and business executives of Reuters and the directors of the Thomson Reuters Founders Share Co Ltd, an independent body tasked with preserving the news agency’s independence.
Speaking to Reuters journalists on a visit to the Singapore newsroom in October, Kim Williams, the Australian media executive who chairs the body, lashed out at Refinitiv, calling its actions “reprehensible” and a capitulation to “naked political aggression” from Beijing. 
Editor-in-Chief Stephen J. Adler told Reuters journalists in London in November that the censorship was “damaging” the brand. 
“I don’t approve of it,” he said.

David "Quisling" Craig
Refinitiv chief executive David Craig and Thomson Reuters CEO Jim Smith have held multiple talks, as recently as this week, in an effort to resolve the issue, said people familiar with the matter. Smith “was very concerned” upon learning about Craig’s decision to impose the filtering, said a senior Thomson Reuters official. 
It is not clear how close the two are to reaching a solution both sides find agreeable, one of the people said.
“We recognize that the processes that were put in place earlier this year need to be improved and are actively working on enhancements,” Refinitiv spokesman Patrick Meyer said of the filtering system in a statement. 
Refinitiv was formed last year when a consortium led by private equity giant Blackstone purchased a 55% stake in Thomson Reuters’ Financial & Risk business, which included the Eikon terminal business, for about $20 billion and rebranded it.
Refinitiv and Thomson Reuters remain close: Reuters sells news to Eikon, and Thomson Reuters retains a 45% stake in Refinitiv. 
Refinitiv is by far Reuters’ largest client, providing nearly half its revenue. 
As part of the spin-off deal, Refinitiv agreed to make inflation-adjusted annual payments of $325 million to Reuters over 30 years for news – a reliable income stream that is rare in the media business.
The Founders Share directors are particularly incensed. 
They have complained to Thomson Reuters CEO Smith that by suppressing stories, Refinitiv is violating the terms of the deal. 
They also say they fear that Refinitiv, having given in to China’s demands, might start blocking stories in other countries.
Prior to the Blackstone deal, when Thomson Reuters controlled the Eikon business, Reuters stories were not blocked in China on Eikon. 
The Chinese government itself has been blocking access in China to the Reuters website for general readers, Reuters.com, for years, as well as the sites of many other foreign news organizations.
“Let the Chinese decide if they ban something,” said Pascal Lamy, a Founders Share director and former head of the World Trade Organization. 
“But this is not Refinitiv’s or Reuters’ decision.” 
Lamy said the directors believe the terms of the deal require Refinitiv to adhere to Reuters ethical rules on editorial integrity and independence, known as the Trust Principles, which “prevent you from accepting self-censorship.”
In response, Refinitiv said it is “complying with our obligations with respect to the Trust Principles.” It argues that in filtering out political stories for its own customers in China, it is following local laws and regulations as required by its operating license.
Smith, who sits on the boards of both Thomson Reuters and Refinitiv, did not respond to requests for comment.
The London Stock Exchange has agreed to buy Refinitiv for $27 billion in a deal that’s expected to close in the second half of next year. 
It declined to comment.

TIANANMEN TABOO
Reuters reported in June that Refinitiv had blocked several Reuters stories under government pressure. 
The articles were about the 30th anniversary of the bloody suppression of pro-democracy demonstrations in Beijing’s Tiananmen Square. 
According to the people with knowledge of the matter, Refinitiv acted after the Cyberspace Administration of China, or CAC, which controls online speech, threatened to suspend the company’s service in China if it didn’t comply.
The CAC did not respond to questions about this article. 
China’s Foreign Ministry had no immediate comment.
On June 3, Reuters editor Adler and Michael Friedenberg, president of Reuters, emailed the staff saying they’d expressed concern to Refinitiv.
Refinitiv promised it would alert the newsroom when it came under pressure from Chinese regulators about Reuters coverage. 
The news agency, as it does when it receives any complaint from individuals and institutions it covers, then would determine if there was any reason to correct a published story.
In late July, Refinitiv asked Reuters to review an article that detailed how a Chinese government representative in Hong Kong had urged local residents to drive off protesters, just a week before a violent clash broke out between pro- and anti-government crowds in the area. 
That story, too, was touchy because it showed Beijing intervening in the internal affairs of Hong Kong.
Despite assurances from Reuters that the story was accurate, Refinitiv removed the headline of the story from Eikon in China, making the item difficult for users to find and view. 
On Aug. 2, Reuters published a story about the blocking of this article as well.

‘STRATEGIC CHINA FILTER’
Refinitiv began ramping up its efforts to purge offending China coverage. 
Internal Refinitiv documents and emails describe how the company over the summer created an automated filtering system -- referred to as the “Strategic China filter” -- to block stories to Eikon users in mainland China.
In July, Refinitiv’s news platform architecture director requested that a new code be created, called “Restricted News,” that could be added to articles. 
He asked that it “should be hidden for all users (internal and external),” according to notes of a conference call on July 17 where the code was discussed. 
One reason was that Refinitiv didn’t want to give its mainland China customers the ability to disable the filtering.
In an email to colleagues, the platform director explained the code: “The flag is to highlight news that requires additional processing, prior to consumption in China.”

The filtering system is designed to block stories for readers in mainland China but allow them to be accessed in other markets. 
It looks for restricted keywords in headlines, such as “Hong Kong” and “protest,” according to a person familiar with the matter.Refinitiv employees also discussed by email whether the “Restricted News” code should be China-specific or “generic,” so it could be used to block stories in other countries in the future. 
The email exchange indicates they opted for a generic code. 
Refinitiv didn’t comment on whether it plans to use the restriction code elsewhere.
Eikon users outside mainland China can retrieve stories about the Hong Kong protests by clicking on headlines, or by searching for keywords or codes. 
For users inside China, however, articles that are blocked bring up this message: “You do not have access to this story.”
Refinitiv’s blocking of protest stories intensified after Aug. 30, when Reuters reported that Beijing had rejected a bid by Hong Kong leader Lam to compromise with the protesters. 
Before that date, all but five of 246 Reuters articles that had run in 2019 containing the words “Hong Kong” and “protest” in the headline were accessible on the mainland. 
By contrast, between Aug. 30 and Nov. 20, Refinitiv blocked nearly four out of five such articles that Reuters filed – 196 out of 251.
The censorship was especially severe between Sept. 4 and Oct. 7, when all 104 Reuters articles containing those words in the headline were blocked. 
At the time, demonstrators were rampaging across the city and police were responding with water cannons and rubber bullets.
Refinitiv also censored potentially market-moving stories that would have been of interest to Refinitiv’s core clientele of financial professionals. 
These included a Sept. 6 report that Fitch Ratings had downgraded Hong Kong’s long-term foreign currency issuer default rating. 
Also blocked were stories on the effect of the protests on stock prices and initial public offerings.
Refinitiv eventually began having employees get involved in the filtering process to prevent the blocking of financial stories, according to a person familiar with the matter. 
Yet the filtering remains inconsistent.
It lets through some stories that China might consider politically taboo, including some articles about the Chinese government’s mass incarceration of Uighurs, a Muslim ethnic minority in western China. Many other articles on the Uighurs have been blocked.
Besides Reuters articles, the filtering has also blocked one or more stories from 97 other news providers that are available inside China on the Eikon system – including Xinhua, China’s official state-run news agency.
And news relevant to investors is still being censored. 
Eikon users in mainland China couldn’t read this story shortly after it was published. 
It was blocked.

vendredi 20 septembre 2019

The Trump Syndrome

Wall Street is starting ‘to get religion’ on China trade like President Trump
  • Steve Bannon says China’s attempts to forge a two-tier deal to end the yearlong trade war with the U.S. is “wishful thinking.”
  • “Wall Street is starting to get religion like Trump.” Bannon refers to the tough talk earlier this week from Blackstone co-founder Stephen Schwarzman, who has extensive ties to China.
By Matthew J. Belvedere

Steve Bannon on the US-China trade war: ‘We have all the cards’

Wall Street is coming around to President Donald Trump’s view on how China has been unfairly protecting its economy to the detriment of the rest of the world, former White House chief strategist Steve Bannon told CNBC on Thursday.
“Wall Street is starting to get religion like Trump,” said Mr. Bannon, a longtime critic of China. “Schwarzman now has religion on CNBC.”
Mr. Bannon was referring to comments earlier this week by Stephen Schwarzman, the billionaire co-founder and chief of private equity powerhouse Blackstone who has extensive ties to China.
In an interview on “Squawk Box on Tuesday, Schwartzman said that Beijing knows it must change its trade and business practices. 
But he added that China is reluctant to do so because it would slow the robust growth it’s been able to achieve over decades by putting up economic barriers.
“The upper Midwest, this is why Donald Trump is president,” Mr. Bannon said said on “Squawk Box.” 
“People know that the factories and the jobs all went to China and the fentanyl an opioids came in, into this despair of not having jobs.”
Mr. Bannon also said China’s attempt to forge a two-tier deal to end the yearlong trade war with the U.S. is “wishful thinking.” 
Last week, Trump signaled he would consider an interim trade deal with China, even though he would prefer a full agreement.
“What they’re trying to do to a large extent is trying to game the system,” Mr. Bannon said.
“They are trying to box in Donald Trump. And I think Trump has been the force of stability here,” he added. 
“This is about shifting the supply chain back to the U.S.”
As U.S. and Chinese deputy trade negotiators get ready to resume face-to-face talks in Washington on Thursday, there’s a thought that Chinese officials want to address the trade disputes first, leaving tougher national security issues for later.
Mr. Bannon said a key focus in the 2020 presidential election will be China. 
Candidates who pressure Beijing and show they can navigate a trade deal will do better, he said.
In goodwill gestures ahead of higher-level trade talks next month, the U.S. delayed by two weeks tariff rate hikes that had been set to go into effect Oct. 1 and China exempted some U.S. products from additional levies. 
Both sides have imposed billions of dollars import tariffs on each other’s goods.