This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg radio. If we talked about it yesterday about the Chinese spy who wanted GE secrets about the U S got China's instead. It's a great read, so check it out. But Chinese espionage, and for that matter, usespionage, nothing new. Surveillance of other countries also not new. But when it comes to domestic surveillance tim a country like China seems to take it to
a whole other level. Yeah, we got with us this afternoon Josh Chin. He's deputy China Bureau chief. He joins us on the phone from Park City, Utah, a deputy China bear chief for the Wall Street Journal. He's also the author, along with Liza Lynn, of surveillance state inside China's quest to launch a new era of social control. Josh, great to have you this afternoon. How are you? I'm great. Thanks for having me on. So give us an overview of the power that China has when it comes to
its surveillance state. Like walking down the street in certain areas of the country, how are you being watched? Right, so, if you're if you're walking down the street, Um, in China, especially these days with Covid, you're being you're being tracked in any number of ways. There are cameras with uh, you know, facial recognition capabilities that can they can pick your face out of a crowd. Cameras can can identify you by the way you walk. There are microphones that
can grab your voice. Um. And these days, you know, everyone's walking around with a covid health tracking APP in their pocket that tracks where they've been and how they've been exposed, whether they're their level of exposure to uh, to covid right, and so a lot of things being tracked. Um and and Lisa, both you and Josh like kind of cover this world and the different aspects of the book.
Um and I want to get into it with you because Laslie Lee's excuse me, you know, I want to get into what was the story and the reality that you were looking to tell in terms of the area that that you really cover, and you cover a lot of US business and Chinese topics. You look at Silicon Valley. So what is it that you wanted to tell when you guys set out to do this book together? Yeah, on,
on my part. You know, Um, I guess I didn't set out to tell this, but in the process of research I had some really interesting findings and one of the findings was really how, you know, US tech companies, particularly those in Silicon Valley, pioneers, such as like Sun Microsystems and Cisco. They were one of the first building
blocks of the Chinese surveillance stage. Um, back back in like the year two thousand, when China helped one of its first Security Public Security Expos and the police was there to basically look at what companies had on offer. Like it was mainly Western companies that were selling their
systems there to them. Um, you know, it didn't and I guess to kind of summarize like how impactful, like some the U s companies were, like Sun Microsystems, ended up selling China it's first fingerprint database, Um, which which is a yeah, which is a sizeable project for a
country the size of China. Fast forward to today, Um, what Josh and I did was we poured through several Chinese government contracts, particularly those looking at the surveillance systems bought by police, and what we realized was US companies now weren't selling systems but they were selling components, like
parts that built the surveillance day. So one example would be and there were selling everything from low end hardware like hard dis drives, because video surveillance requires a lot of storage, to two things like cutting edge chips, you know, graphic processing units sold by Nvidia, like gpus, which originally were built to power like gaming, but actually we found that they're right for deep learning and all the ai applications,
like facial recognition, for example, that can recognize like readers or people interest in China. So ultimately, so the limits right that the US has been imposing on the likes of Nvidian a m D to prevent them from selling into China, Lisa. So this is something that could ultimately impact China's ability in terms of surveillance of those folks that are in the country. Yes, Um, in theory, you know,
the supply chain is very opaque. Um, there there are all sorts of ways and means that Chinese companies can get around like being on a trade black list, for example, or, you know, buying restrictions. And I'll probably point you to an example of a Chinese company called since time. Since time is China's large as AI surveillance company, and since time it's both on the entity list, the Commerce Department
trade blacklist, and it is on the investment blacklist. So us and as this cannot legally they're not allowed to be trading on investing in sense, time shares. What we know, though, from the start of this year, when since time tried to list in Hong Kong, they actually told investors like they weren't impacted by the entity list at all, and that was because since times, when since time was put on the entity list, it was one it was one entity. It was his paging entity that was put on the list.
So since time has multiple entities in like Shanghai, Um Hong Kong, and these entities were free to buy the type of like high end US technology that the entity list was supposed to block. And in addition to that, when since time tried to I P O, since time is a company that has a ton of US investors making up its investor base, like people like fidelity capital, Silver Lake Um. When the when they were put on
the investment blacklist again, there was a legal loophole. Essentially, the the entity that was put on the investment blacklist with the Hong Kong entity and the entity listed in Hong Kong was a Cayman Island one. So true. Very smart maneuvering of where the entity SA base. They managed to get get true. Um, I'll get over and get around the restriction. I want to get right back to
our next guests. They Co wrote the Book Surveillance State, inside China's quest to launch a new era of social control. The book is out now. It's Lisa Lynn, China correspondent for the Wall Street Journal, who joins us on the phone from New York, and also Josh Chen, deputy China Bureau chief, on the phone from Park City, Utah. Hey, Josh.
I want to get into how this is all playing out in Shinjang, which a remote Asia frontier of course, where we know that the country is oppressing the weaker population. What does it look like? They're right, so you know. Sin Jong is a it's massive, massive area, about twice the size of Texas, on the far northwest of China, very rich in resources. Um has also long been a sort of difficult place for the Communist Party to control.
That's because it has a large population of leakers and other Turkic Muslims who really chafe at Chinese rule and so Um. You know, for about the past five years or so the Communist Party has been running what you know, what is best described as a sort of campaign of forcible assimilation, Um, using surveillance technology and a network of of internment camps. Um. And I first went there discovered some of this in seen Um. At the time, no one really knew what was happening there. Um, and you
know what I mean. That's been a China correspondent at that point for for more than a decade. And Uh, and what I saw that was just one of the most shocking things that I've seen in China. And you know, essentially, if you were a weaker Um in Sinjiang, you are subject to constant, pervasive, um suffocating surveillance. Right. So, if you go to a bank or a market or a hotel, any public place, you have to scan your face and
your ID card. If you want to buy buy gasoline, you have to make everyone get out of the car again scan your face and I d cards so they can track how much gasoline you're buying. Uh, if you in in one place, if you want to buy a knife, they would they would take your I d information all of you, your your home address, and they would laser etch it into the knife in the form of a Qr Code. Uh. And then they collect data on things like how often you pray, you know, how far you
go to the Bosque do you own a Kuran? Um, what sort of movies and music and Apps do you have on your phone? And they sentially collect all of this data, uh, to to to track and then sort weaders according to how how much of a risk they might potentially pose to the Communist Party's rule in the future. Um. And then those, you know, those who are considered risky, are sent to camps to be subject to re education. Um, and so it really is a pervasive Um, Um, just
sort of unprecedented campaign that they're running out there. You know, one thing I wanted to ask you both, because I do think we're in it's funny. We were just talking with an analyst who follows James Chokmuk, you know, the technology world, and talking about we are in this really critical phase of major disruption, Innovation, Um, that we don't see often in our world, and maybe that's explaining also some of the kind of discomfort within the financial markets overall.
But I do wonder about, you know, what is the next phase for China? Present, G very much out there front and center, you know, wants to lead on higher tech. Um doesn't seem to care who he maybe ticks off in particular, something like the United States and the process. But I mean it's a complicated relationship between the two. But I do wonder, you know, what is the next phase of China, you know, one that obviously will surveil its population very closely. I mean, Josh, how do you
see it? How do we need to think about China going forward, when many people, I feel like investors in included, will say that's going to be one of the big macro themes overall for the world, geo politically, market wise, economically right. Well, you know, Um, what's happening in China.
I think you're already seeing sort of the future of China with the with the covid pandemic, Um, you know, with essentially you know, in the past kind of that that pervasive, Um, just suffocating surveillance was pretty much limited to Shinja. Now, with the COVID pandemic, that those systems and those those approaches and those technologies of all spreads. It basically covered the entirety of China. Right. So now you have um just, you know, massive real time surveillance
of of everyone in the country. Um, and it's clear that Jent Ping is is, you know, is willing and able to use those technologies to exert a tremendous amount of social control, very tight control. Earlier this year you had you had the Shanghai lockdown, for example. You know, the wealthiest in China not used to not used to drinking this sort of thing Um, and they were outraged.
But you know, the Communist Party has persisted with Zero Covid and I think that's partly because they're confident with these new tools give them the ability to control the situation and the economy of society in China in ways that they haven't before. And then there's no signs of that's going to change. So visa, come on in and and layer on top of what Josh said. I mean, how do you think about our audience and the Wall Street Journal audience that you guys, you know, work with?
You know, how how do does the world kind of need to think about China in the next I don't know, ten, twenty, fifty years? Sure, and and I'll probably talk about it from the company perspective. And this is already happening. We're not going to have to wait ten or twenty years to see this happen. I would put it this way. In in the past two decades, US and Western companies have had very blind optimism on operating in the Chinese market. Right So, ten, twenty years ago, China was seen as
this easy place or profit. Commercial priorities overshadow any sort of deep thinking about the possible human rights abuses that could happen. In the boardrooms you'd be hearing people talk about how far you could expand in China, you know, and and what was the best way to get your product out in the market. In the last five years we've actually seen more like a paradigm shift in the
way US companies are approaching China. We're seen in the last few years more and more reporting about the atrocities and seeing jail and now that the US government is actually trying to react to China's human rights issues with like trade policy, not just foreign foreign policy, we're definitely seeing US companies become more cautious about the risk and less, you know, less like Bush mush tailed and starry eyed
about the potential of China. So now what US companies are actually discussing in both rooms would be how do we mitigate the risk of being in China? Is there a supply chain risk? Would our products go through, you know? Would our products be exposed to force Labor in the system? Right, will. We'd be potentially working with someone who could be slept with a band for example. Right. So we have to
jump in and unfortunately we're running out of time. But you're right, the conversation has gone from mega opportunity to a lot more about risks, about your exposure to China. We've got to run, Lisa. Thank you so much. LESA Lynd, China correspond at the Wall Street Journal, along with Josh Chin, deputy China Bureau chief at The Wall Street Journal. Both of them the new book surveillance state. Inside China's quest to launch a new era of social control.