Sick Men of Asia

Chinese staff forced to drink urine and eat roaches
BBC News

If you miss your sales target, bon appétit

Managers at a Chinese firm have been jailed for making staff who failed to reach sales targets drink urine and eat cockroaches, local media report.
Police took action after videos emerged showing workers being whipped with a belt and drinking a yellow liquid.
Social media posts alleged staff were also told to eat cockroaches if they did not meet targets.
Three managers were jailed for five and 10 days over the incident, the South China Morning Post reports.
A widely-shared video posted on Chinese social media site Weibo shows a male employee standing in the middle of a circle, getting whipped with a belt.

The video quickly went viral on Weibo

Other staff, said to be employees of the home renovation company in the city of Guizhou, can be seen drinking yellow liquid from plastic cups while holding their noses.
Screenshots of what were said to be messages from the managers threaten staff that they will have to eat cockroaches for poor performances.
According to media reports, other forms of shaming and punishment at the firm have included drinking toilet water or vinegar and getting their head shaved.

The yellow liquid was urine

The company had failed to pay their employees' salary for the past two months and staff was scared to speak up fearing they would lose the pay if they'd quit.
Police in Zunyi county police arrested three managers and they were later sentenced to jail time.
It's the latest in a string of cases of Chinese firms employing unusual measures to punish, shame or encourage their staff.
Previous reports have alleged cases of employees slapping each other at a company event to boost motivation, and staff forced to crawl on a public road or kiss rubbish bins as a punishment or for team building.

U.S. Tech Quislings

How Qualcomm Is Backing China’s Tech Ambitions
By DAVID BARBOZA

As the Chinese government develops drones, the American technology giant Qualcomm is helping. The same goes for artificial intelligence, mobile technology and supercomputers. 

Qualcomm is also working to help Chinese companies like Huawei break into overseas markets in support of China’s “go global” campaign to develop big multinational brands.
Qualcomm is providing money, expertise and engineering for Beijing’s master plan to create its own technology superpowers.
Big American companies fiercely protect their intellectual property and trade secrets, fearful of giving an edge to rivals. 

But they have little choice in China — and Washington is looking on with alarm.
To gain access to the Chinese market, American companies are being forced to transfer technology, create joint ventures, lower prices and aid homegrown players. 

Those efforts form the backbone of Xi Jinping’s ambitious plan to ensure that China’s companies, military and government dominate core areas of technology like artificial intelligence and semiconductors.
As concerns mount about Beijing’s industrial policy, the Trump administration is preparing a broad investigation into potential violations of American intellectual property, according to people with knowledge of the matter. 

Congress is also considering ways to restrict China’s ability to acquire advanced technology by toughening rules to prevent the purchase of American assets and limit technology transfers.

In this arena, America’s economic interests are aligned with its national security needs. 

The worry is that by teaming up with China, American companies could be sowing the seeds of their own destruction, as well as handing over critical technology that the United States relies on for its military, space and defense programs.
Advanced Micro Devices and Hewlett Packard Enterprise are working with Chinese companies to develop server chips, creating rivals to their own product. 

Intel is working with the Chinese to build high-end mobile chips, in competition with Qualcomm. IBM has agreed to transfer valuable technology that could enable China to break into the lucrative mainframe banking business.
“There’s a great deal of unease in Washington,” said James Lewis, an analyst at the Center for Strategic and International Studies, a Washington-based think tank. 

“The defense, intelligence agencies and others are concerned that advanced chip-making capabilities are going to China.”
Qualcomm declined to comment, as did Intel.
Qualcomm is caught in the middle.
The world’s dominant mobile phone chip maker, Qualcomm ran afoul of the Chinese government, getting hit in 2015 with a record $975 million fine for anticompetitive behavior. 

To get back in Beijing’s good graces, the company agreed to lower its prices in China, promised to shift more of its high-end manufacturing to partners in China, and pledged to upgrade the country’s technology capabilities.
The extent of Qualcomm’s involvement with the Chinese government — and the complications for American tech giants — is seen in a low-slung office building in the southwest part of the country. There, a team of engineers is developing leading-edge microchips to compete with the finest made by Intel. 

The chips will help power a huge data and cloud center with the potential to strengthen the country’s computing capabilities. 

No longer content to rely on buying the chips that go into cellphones, computers and cars, China now wants to design and build the brains that drive much of the digital world.
The government is providing land and financing to the start-up formed with Qualcomm, called Huaxintong Semiconductor. 

Qualcomm has provided the technology and about $140 million in initial funding.
“Qualcomm has a balancing act,” said Willy Shih, who teaches at Harvard Business School. 

“Most of the world’s PCs are made in China, and most of the world’s smartphones too, so they have to play along. It’s a fact of life.”
Qualcomm was early to break into China.
In the mid-1990s, as China’s economy began to boom, Bill Clinton pressed the country’s leaders to open to American technology companies.
Members of the Clinton administration, including Charlene Barshefsky, the United States trade representative, and William M. Daley, the secretary of commerce, were dispatched to Beijing to hammer out the details. 

They pushed for one company by name: Qualcomm.
“At the time, they were the only U.S. show in town,” Ms. Barshefsky said.
“Bill Daley and I pushed the Chinese hard on accepting the U.S. standard for wireless technology,” she added, “and that was Qualcomm.”
Mobile phone adoption was taking off globally, largely backed by a European wireless standard called G.S.M., or global system for mobile communications. 

Qualcomm had a competing American standard called C.D.M.A., or Code Division Multiple Access.
Irwin M. Jacobs, a founder of Qualcomm, spearheaded an aggressive lobbying campaign in Washington and Beijing, promoting the technology’s potential to transform wireless communication markets.
“We knew China would be important, and they didn’t have their own system,” said Perry LaForge, a former Qualcomm executive. 

“We also told them this system would give them an opportunity to manufacture their own handsets, and not rely on buying them from other countries.”
When Qualcomm first entered China in the late 1990s, it was slow to gain traction. 

The company struggled to find Chinese partners to produce mobile phones that worked with its network. 

China also tried to develop its own wireless standard.
Qualcomm eventually won out, helping write the standards for next-generation mobile technology, 3G and 4G service. 

The standard championed by European telecom providers faded rapidly. 

And China’s homegrown technology struggled.
By 2013, virtually every wireless device around the world was reliant on either Qualcomm’s chips or its patents — enough to provide some of the technology industry’s fattest profit margins.
With its dominance rising, global brands like Apple and Samsung began complaining to regulators around the world, citing “discriminatory” pricing practices and high royalty fees. 

In China, a trade group made up of the country’s major handset makers complained about patent holders levying “exorbitant licensing fees.”
“These days a smartphone is covered by about 250,000 patents,” said Dieter Ernst, a senior fellow at the East-West Center, a research and educational center based in Honolulu. 

“A Chinese smartphone maker needs to negotiate license agreements with companies like Qualcomm that own the essential patents.”
“The Chinese government was worried about this,” he added. 

“That all these costs could constrain Chinese companies.”
The raids began at dawn, in late November 2013. 

Investigators descended upon Qualcomm’s offices in Beijing and Shanghai, questioning the staff and hauling away laptops and documents.
At the time of the raids, the San Diego-based company’s senior managers were at the Ritz-Carlton Hotel in New York, attending an investor conference. 

The executives were planning to talk about the company’s strategy. 

Instead, they began fielding frantic phone calls from China.
The China business, which accounted for more than half of its global revenue, was in trouble.
A week later, one of the country’s most powerful regulatory agencies, the National Development and Reform Commission (N.D.R.C.), announced that it was looking into whether Qualcomm had abused its power in the sale of mobile phone chips. 

“Qualcomm came to control so much of the chip market in China,” said Louie Ming, a former Qualcomm executive in China. 

“It was clear they were eventually going to run into antitrust problems.”
While Qualcomm agreed to fully cooperate with the investigation, some senior executives appealed to the Obama administration, pressing the White House to raise the issue with China’s senior leaders, according to a former administration official.
Qualcomm’s troubles went beyond China. 

The company was also under scrutiny by antitrust regulators in the European Union and South Korea, as well as by the United States Federal Trade Commission.
China didn’t back down. 

The head of the N.D.R.C. branded Qualcomm a monopoly.
In February 2015, after a 15-month-long investigation, Qualcomm settled allegations in China that it had charged unfairly high prices for its chips and patents. 

The company agreed to pay the $975 million fine — about 8 percent of its annual revenue in China — and to lower the prices for chips sold in the country.
“We are pleased that the resolution has removed the uncertainty surrounding our business in China, and we will now focus our full attention and resources on supporting our customers and partners in China,” said Steve Mollenkopf, the company’s chief executive, said at the time.
Qualcomm then went into business with the Chinese government.
There was a $150 million investment fund to help Chinese start-ups; new research and design facilities set up with Chinese companies such as Huawei and Tencent; and a partnership with a Beijing-based company called Thundersoft to develop drones, virtual reality goggles and internet-connected devices.
Qualcomm is also helping the Chinese government develop supercomputers, a technology the United States government has discouraged American companies from supporting overseas. 

In May, Qualcomm agreed to form a joint venture with other state-backed firms to design and sell mass-market smartphone chips. 

And to help make Chinese chip manufacturing more competitive, Qualcomm has pledged to shift more of its high-end production — long done by outside contractors in Taiwan and South Korea — to China.Continue reading the main story

Continue reading the main story

The Price of Access to a Big Market

Beijing is pressing American technology giants to form joint ventures or partnerships with Chinese companies and transfer advanced technology. The enterprises, in which American companies usually take a minority stake, are backed by the government.

Company	Partner	Date	Product	Investment
AMD	Tianjin Haiguang Advanced Technology Investment Company	2016	Server chips	$293 million
Qualcomm	Guizhou government	2016	High-end server chips	$280 million
Brocade	Guizhou government	2016	Data center networking solutions	unknown
VMWare	Sugon Information	2016	Cloud computing and virtualization software	$50 million
Hewlett Packard Enterprise	Tsinghua Holdings Unisplendour Group	2016	Networking servers and storage systems	$4.5 billion
Microsoft	C.E.T.C. Group	2015	Software	$40 million
Western Digital	Tsinghua Holdings Unisplendour Group	2016	Data center storage systems	$300 million
Cisco Systems	Inspur Group	2016	Networking systems	$100 million
Intel	Spreadtrum/ RDA Microelectronics	2014	Mobile phone chips	$1.5 billion

The investment figure is either the initial investment in the venture or the U.S. company's investment in it. | By THE NEW YORK TIMES

“This is what China does better than anyone else,” said Robert D. Atkinson, president of the Information Technology and Innovation Foundation, a think tank focused on technology policy that has conducted studies detailing the Chinese government’s pressure on technology companies.
“They have a large carrot and a large stick,” he said. 

“And they have a market no C.E.O. can walk away from.”
Qualcomm’s biggest new venture is taking shape in southwest China’s Guizhou Province. Determined to leap into advanced technology, China has designated a large parcel of land in the provincial capital of Guiyang as the home of a new industrial park for supercomputing, data centers and cloud computing. 

The country’s large state-run telecom operators and its internet behemoths, including Alibaba and Tencent, are moving in, to build massive server farms. 

The region offers lower energy costs and abundant supplies of water, necessary to cool server farms.
A year ago, Qualcomm set up a joint venture with the Guizhou government and pledged to invest about $140 million for a minority stake in the business, situated in a development zone that has also attracted the interest of Microsoft and Dell. 

Qualcomm says it received American government approval for the deal.
The new Qualcomm joint venture, Huaxintong Semiconductor, broke ground on the site in 2016, and now operates in a 46,000-square-foot design and engineering center. 

A major test of the partnership will come when the joint venture’s first server chips are released — helping Qualcomm and the Chinese government stake out new ground. 

The Chinese government will control the chips and reap most of the profits.
In late March, Qualcomm’s president, Derek K. Aberle, flew to Guizhou to meet a powerful local government leader, Chen Min'er, a confidant of the Chinese president. 

Seated in a government hall, before an enormous landscape painting, Mr. Aberle pledged to “continually cooperate” with the Chinese government.

Rotten Apple

Apple’s Dangerous Kowtow
By DIPAYAN GHOSH

Apple announced last week that it will open a data center in Guizhou, China. 

This is a first-of-its-kind action by a major United States tech company since the passage last month of strict new Chinese digital commerce regulations that require foreign companies with operations in China to store users’ data in the country. 

These events could threaten to disrupt the free flow of information over the internet.
The Chinese government claims its new rules will enhance domestic security efforts, providing privacy protections for Chinese nationals while also safeguarding “national cyberspace sovereignty and security.” 

It would be naïve, however, to think of these new regulations as anything but a severe restriction on the right to free information.
China’s claim that the regulation is meant to enhance individual privacy rights is a facade. 

The government wants to quell international competition by raising the barrier to entry for outside players. 

In turn, China hopes to monopolize the market for technology services for its huge domestic consumer market. 

Consider the numbers: China’s 1.4 billion people, many of whom are just now getting access to smartphones and the internet, present a major commercial opportunity for the digital sector. 

Twitter, Google and Facebook together have billions of daily active users, and a hypothetical expansion into China could bring hundreds of millions more users to those platforms, raising their market values by many billions of dollars. 

But these and many other services are already blocked in China, and this new security regulation will only create further hurdles for foreign entry into the Chinese market.
Requiring that any “sensitive data” — a heretofore undefined term — has to be stored on servers that are physically located in China is known as “data localization.” 

China’s localization efforts are hugely problematic for two main reasons. 

First, localization is a tremendously expensive exercise for companies that deal in data, so much so that only the world’s richest firms can afford it. 

Second, a history of snooping by Chinese entities means not only that firms should be wary of the potential for industrial espionage, but also that the Chinese people should be worried about their right to privacy, because the Chinese government may now be able to gain access to their data whenever it desires. 

This is especially true because China has pronounced that if firms wish to transmit data out of China — for example, to other people, governments or overseas data headquarters — the transmittal must clear a security review by Chinese authorities, directly implicating individual privacy and free speech.
China may hope to replace its flailing manufacturing-based economy with one focused more on technology services to bring jobs and business to the nation’s many struggling metropolises, but this is not the way to do it. 

First, as colossal as they may be, data centers rarely result in as many new jobs as locals might expect. 

But perhaps even more critically, this kind of digital protectionism is unfair to the international community and to the people of China. 

The government’s argument that the regulation will protect privacy is invalid. 

In the world of privacy, there are two threats: corporations and government. 

This regulation will create a system by which firms will try to serve China’s regulators as efficiently as they can. 

The firms that rise to the top in such a system will necessarily have to be close to the Chinese government.
Why, then, was Apple so quick to announce the new Guizhou data center, in effect signaling its compliance with the aggressive new rules? 

It’s simple: Apple hopes to protect its market share in China. 

Many internet companies — like Facebook — stand to be shut out forever under these rules, and smaller companies will avoid the market altogether because they lack the capital to stomach the compliance costs.

The internet is all about openness and seamless sharing. 

Restricting Chinese citizens’ access to online information through arbitrary regulations is an attack on human rights and innovation, and it will disrupt digital commerce around the world. 

The people of China should take note and push for fairer standards. 

But placing a check on China’s industrial policy will require more than just the outcry of Chinese activists.

Indeed, the international community, and particularly the corporate sector, must stand up and hold China accountable. 

Unless we do so now, the government will continue to consolidate and centralize industry, jeopardizing the future of the global economy.