Techno-nationalism and corporate governance

DECEMBER 2020

Techno-nationalism and corporate governance

BY ALEX CAPRI RESEARCH FELLOW, HINRICH FOUNDATION

SENIOR FELLOW, CENTRE FOR GOVERNANCE AND SUSTAINABILITY NUS BUSINESS SCHOOL

2

HINRICH FOUNDATION REPORT – TECHNO-NATIONALISM AND CORPORATE GOVERNANCECopyright © by Alex Capri and Hinrich Foundation. All Rights Reserved.

2

Contents

INTRODUCTION 4

OVERVIEW OF THIS STUDY 7

I. STATE ACTIVISM AND CORPORATE GOVERNANCE 9

The US government and TikTok 9

Hypothetical espionage scenarios 10

Growing cyber intrusions amplify fears 10

New challenges of joint ownership, acquisitions and 10 corporate governance

Ownership and control 11

Transfer and control of source code, algorithms and key technology 11

China Inc’s influence on corporate boards 11

Communist Party representatives inside tech companies 12

Chinese companies: Corporate relocations and restructuring 12

ByteDance’s move to Singapore 13

Serving the Chinese Communist Party 13

Case study: How state interventionism killed a US$35 billion IPO 15

Case study: Inter-company warfare: Arm UK versus its 16 China subsidiary

II. LOCAL VERSUS GLOBAL CORPORATE GOVERNANCE 20

Can TikTok ignore the Chinese Communist Party? 20

ByteDance in Indonesia 20

Content moderation as a business model 21

The “in-China-for-China” corporate governance dilemma 21

Case study: Apple in China 22

Case study: Microsoft in China 24

In-China-for-China civil society backlash 25

3


Contents

III. NEW FRONTIERS: FINTECH, REGTECH AND 26 CORPORATE GOVERNANCE FinTech and open banking 26

ByteDance, FinTech and privacy standards 26

Spotlight: Sesame social credit system 27

FinTech, localization and the decoupling of global finance 28

New accounting standards aimed at Chinese companies 28

US law banning investment in Chinese companies with military ties 29

Case study: International banks caught between Beijing and Washington: HSBC 30

Techno-nationalism and FinTech decoupling 32

Pulled into techno-nationalist orbits 32

Data privacy and the “splinternet” 33

The European bloc: General Data Protection Regulations 34

Technology as risk mitigation tool 34

Supply chain transparency and traceability 35

TradeTech and RegTech 37

Unique identifier technology and interoperability of systems 38

Corporate diplomacy 38

Legal frameworks and processes 39

Lobbying through NGOs 39

Public-private partnerships 39

Conclusion 40

RESEARCHER BIO: ALEX CAPRI 41

ENDNOTES 42

4


Introduction

The US-China technology cold war has politicized the business environment for multinationals, creating a world of contradictions, uncertainties and hard choices.

For four decades, and despite stark differences between political and economic models, the US-China trading relationship flourished. At the same time, multinationals invested heavily in the development of global value chains and in China in particular. This relocation of manufacturing activities to China invariably led to significant transfer of technology to local firms, which was a key aim of the Chinese state as it sought to upgrade its industrial structure.

Yet growing geopolitical rivalry and trade friction now define the relationship between the world’s two biggest economies. US firms, as well as those from Europe and Japan, are now evaluating how to deal with strategic supply chain decoupling, re-shoring and ring-fencing.

A driving force behind these changes is techno-nationalism: mercantilist-like behavior that links a state’s national security, economic prosperity and social stability directly to the technological prowess of its institutions and actors.

Techno-nationalism is profoundly impacting corporate governance, the internal processes, practices and rules that an organization follows to execute its values and principles, which must now be reoriented and restructured to

cope with a shifting trade landscape. In short, corporate governance must deal with the primacy of geopolitics over business.

Fragmented global value chains

As the effects of techno-nationalism spill over into the commercial landscape, global value chains are splitting into three distinct streams.

The first stream includes “strategic” or controlled goods and data which require export licenses and are subject to trade restrictions and sanctions.

The second stream spans a much larger “cautionary zone,” where virtually all of the Fourth Industrial Revolution1 technologies – artificial intelligence (AI), robotics, the Internet of Things (IoT), etc. – exist as “dual use” technologies, which could, with little warning, become off-limits.2

The third stream is comprised of non-strategic, innocuous goods and is generally unaffected by techno-nationalism.

Regarding the first category of strategic goods, Washington has been famously “weaponizing” semiconductor value chains to choke off technology to Huawei and other Chinese technology companies. Beijing, meanwhile, recently announced updates to its own export controls lists, which include, for example, algorithms and rare earth elements.3

Techno-nationalism is profoundly impacting the internal processes, practices and rules of organizations.

Beijing recently announced updates to its own export control lists, which include algorithms and rare earth elements.

Global value chains are splitting into three distinct streams.

5


Figure 1 – Splintered global value chains

Source: Semiconductors at the heart of the US-China tech war, Alex Capri, Hinrich Foundation; Alphabetical Index to the Commerce Control List (Supplement no. 1 to part 774), Bureau of Industry and Security; Category 2 – Materials processing, Commerce Control List (Supplement no. 1 to part 774), Bureau of Industry and Security

Restricted

Restricted Entity Lists

Sanctions

Specially Designated Nationals

Data privacy laws

Data localization laws

Censorship laws

Defense & military

Non-proliferation

Non-strategicOther consumer goods

(Food & beverage, soaps, toys, shoes, clothing etc.)

Zone of caution

Dual use goods Next generation IT (AI, IoT)

Semiconductors

Aerospace and aeronautical equipment

Automated machine tools and robotics

(AI, machine learning)

Algorithms

New materials

Maritime equipment and high-tech shipping

Advanced railway equipment

Power equipment

New energy vehicles (AV, EV)

Biopharma and advanced medical products

Agricultural equipment

Navigation

Rare earths

INTRODUCTION

Underlying issues requiring the attention of a company’s corporate governance have emerged. These reflect the broader dynamics of techno-nationalism as well as more specific themes that are repeating from one country to the next.

Increased state activism in boardrooms and markets

Governments are becoming more intrusive in corporate boardrooms and markets. When it comes to partnerships, foreign ownership, acquisitions and corporate behavior involving deployment or control of technologies, policy makers are looking to become involved in corporate outcomes.

This trend is increasing in China, as the Chinese Communist Party (CCP) exerts more control over the economy and business sector, in general. But state

activism is on the rise in the US, Europe and other traditional open market, laissez-faire trading systems, which are experiencing a paradigm shift toward a more techno-nationalist zeitgeist.

Local versus global: Contradictions and tensions for multinational companies

Global value chains are fragmenting and the internet is splintering as states look to ring-fence data, technology and markets. Multinational companies are localizing production and ring-fencing in-country operations.

Increasingly, multinational companies are having to adhere to local laws that contradict with their global values and principles. This creates corporate governance conflicts for many American and European companies doing business in China, for example. In other instances, there is the risk that a

Multinational companies are having to adhere to local laws that contradict with their global values.

6


local subsidiary affiliate may “go rogue” on its foreign parent company because of influence from the host government and local laws.

Local versus global tensions are also impacting Chinese technology companies as they relocate to places like Singapore to set up regional operations. Here, from a corporate governance standpoint, the question is: Can Chinese companies operating abroad escape control of the CCP, and if so, what does this kind of corporate governance look like? Is such an outcome even realistic?

Banking, FinTech and techno-nationalism

Some sectors will experience higher degrees of state activism and government interference than others because, in a growing digital economy, the stakes are higher. The banking sector, which is being transformed by FinTech, is one such area.

From a techno-nationalist perspective, FinTech combines economic, national security and social stability issues all at once – areas that, increasingly,

governments are looking to control. Recent developments such as the CCP blocking the IPO of a major FinTech company (Ant Group) and threatening to sanction a major bank (HSBC) demonstrate that all of these factors are interconnected by techno-nationalism.

Technology as a corporate governance enabler

As multinational enterprises strive to meet data privacy and security standards throughout their businesses, and as they seek end-to-end value chain transparency and traceability, they are looking to leverage technology as a corporate governance tool.

“TradeTech” and “RegTech” are examples of new applications of technology that will facilitate more effective corporate governance.

These new types of technologies will, paradoxically, enhance compliance and risk management in some areas but, in other instances (such as when microscopic RFID tracing technology is used), create cybersecurity risks.

Some sectors will experience higher degree of state activism and government interference than others.

Can Chinese companies operating abroad escape control of the CCP, and if so, what does this kind of corporate governance look like?

INTRODUCTION

7


This study is the fourth in a series of Hinrich Foundation essays on techno-nationalism, authored by Research Fellow, Alex Capri.

The first essay in the series – which followed a ground-breaking study on semiconductors – covered US-China strategic decoupling and focused on the re-shoring and ring-fencing of critical supply chains as well as “in-China-for-China” planning and risk scenarios.

The second essay focused on the US-China techno-nationalist competition and the pursuit of “innovation advantage.” It also examined the underlying dynamics and tensions between markets, non-state actors, academia and governments.

The third essay in the series focused on the phenomenon of techno-diplomacy, and how governments are pursuing strategic alliances and partnerships based on inherent ideological differences between techno-authoritarianism and digital democracy. It looked at the evolving US-EU-China geopolitical relationship and how techno-diplomacy was influencing multilateral frameworks and institutions.

This study builds upon these previous reports by investigating the corporate governance issues. It is intended to contextualize the landscape from a risk management and business operations perspective.

Starting at a high level, the study explains the overarching impact of techno-nationalism on corporate

governance and how different dynamics are all inter-related. The paper then provides a number of examples and cases involving current events, companies and markets.

This report is comprised of three sections:

I. State activism and corporate governance

In this first section, we analyze the different ways that governments have been exerting state power and influencing the way corporate governance is conducted. We start by examining the US government’s attempt to force the sale of the social media app, TikTok, to American buyers, and the lessons learned from this exercise.

Throughout this section, we provide insights into the growing power that the CCP wields over national tech giants including Alibaba and Ant Group. We also examine the CCP’s expanding influence and representation on corporate boards and committees at Chinese companies. This is viewed through a corporate governance lens from the perspective of both non-Chinese and Chinese companies.

Next, we do a deep dive into the Chinese company, ByteDance, and explore the issues it and other Chinese companies face when they relocate to other countries; in this case, Singapore.

Finally we delve into the case of Arm Ltd., the British tech firm, versus its subsidiary, Arm China, which serves as a microcosm of the gamut of issues

Overview of this study

China’s Communist Party is expanding its influence on corporate boards and committees at Chinese companies.

https://www.hinrichfoundation.com/research/wp/tech/semiconductors-at-the-heart-of-the-us-china-tech-war/

https://www.hinrichfoundation.com/research/wp/tech/us-china-decoupling-tech/

https://www.hinrichfoundation.com/research/wp/tech/us-china-tech-innovation-race/

https://www.hinrichfoundation.com/research/wp/tech/techno-nationalism-and-diplomacy/

8


confronting companies in the US-China techno-nationalist landscape.

II. Local versus global corporate governance

In this section, we examine the tensions that multinational companies must grapple with as they function in local markets and deal with local laws and regulations that often contradict or undermine their company’s global policies and governance frameworks.

We return to ByteDance’s Southeast Asia operations and examine its local content modification (censorship) governance issues, and how these practices adhered to China’s national laws in precedence over local Indonesian laws.

Staying with the theme of local versus global governance contradictions, we examine both Apple and Microsoft’s “in-China-for-China” practices regarding content and product modification, and how those practices clash with their global operating principles.

III. New frontiers: FinTech, RegTech and corporate governance

The third section looks to the future of techno-nationalism and corporate governance. FinTech is featured as a hotbed of clashing governance models around privacy and as a microcosm of the competition between techno-authoritarianism and liberal democracy.

We examine ByteDance’s growing operations in Singapore and Southeast Asia4, and whether the company can execute privacy and free speech standards that are independent from the CCP’s mandates in China. This includes a look into Alipay’s government-mandated “social credit” rating system, known as “Sesame Credit” or “Zhima Credit” in China.

Sesame compiles a user’s online data and assigns a “trustworthiness” score, which can be used by the government to control and punish an individual based on his or her online activities. This system clashes with privacy, freedom of expression and surveillance standards that exist in other regions. We explore the question of if (and how) Chinese FinTech companies can refrain from this kind of data sharing with the CCP, when operating outside of China.

Next, we examine the blocked 2020 Ant Group IPO in Hong Kong and how this event reflects the convergence of technology, finance and geopolitics under the banner of techno-nationalism.

We then turn to an in-depth case study of HSBC, the world’s sixth largest bank, and how the banking sector and FinTech in general have become increasingly vulnerable to export controls and sanctions from both Washington and Beijing. In short, depending on which geopolitical orbit a bank and FinTech company finds itself in, it could face retaliation and punitive measures from both China and America.

Finally, we look ahead to the ways that multinationals can leverage technology (“RegTech” and “TradeTech”) to enforce governance standards around data privacy laws such as the EU’s GDPR, and how companies might use technology to trace products that are subject to export controls throughout global value chains.

All of this then leads to new ways to improve corporate governance and corporate diplomacy through legal frameworks, partnerships and alliances.

Multinational companies must grapple with local laws that contradict or undermine their global policies.

The banking sector and FinTech will become increasingly vulnerable to export controls and sanctions from both Washington and Beijing.

OVERVIEW OF THIS STUDY

9


The US government and TikTok

Governments are becoming increasingly activist and interventionist in the affairs of multinational companies. This is impacting a broad range of business activities, from market access to what kind of standards regarding transparency, data security and privacy must be followed. Social media and digital platform companies have recently found themselves under a techno-nationalist onslaught.

In August 2020, US president Donald Trump signed an executive order5 to ban TikTok, the popular social media short-video app, on the grounds that it constituted a threat to US national security. The underlying reason: TikTok was owned by ByteDance, a Chinese company.

Because of strict requirements laid out in China’s Cybersecurity and National Security laws, which require Chinese companies and citizens to provide the Chinese Communist Party with user data, TikTok was perceived to be a proxy of the Chinese state and, consequently, a malign actor.

To many, this seemed ridiculous. How could a streaming video platform popular with teenagers constitute a threat to one of the world’s most powerful nations?

To others in the public and private sectors, however, TikTok was part of a wider digital battleground of data that could be weaponized by Chinese intelligence.

I. State activism and corporate governance

How could a streaming video platform popular with teenagers constitute a threat to one of the world’s most powerful nations?

Because of strict requirements laid out in China’s Cyber Security and National Security laws, TikTok was perceived by the US government to be a proxy of the Chinese state (Image source: solenfeyissa/Pixabay).

10


Hypothetical espionage scenarios

Given the vast amounts of data already in circulation linking the online activities of Americans, China’s advanced AI capabilities – hypothetically – could leverage TikTok’s growing American subscriber base of more than 100 million users6 and connect their private data to other relevant data points. According to research done by MIT, anyone can be identified by extrapolating from just a few of their data points.7

Sophisticated algorithms, super-computing and cognitive AI could link a teenager’s age, postal code, ethnicity and phone number to a treasure trove of tangentially related data points that, ultimately, with extrapolation, could lead to the identification of government employees or reveal medical records of targeted individuals.

Much of this raw data is already a by-product of data capitalism. Today, an individual’s data has been sold and resold8 by the likes of Google, Facebook, Twitter, Instagram and others – all of which are part of a broader ecosystem that thrives on a secondary market for data commoditization.

Growing cyber intrusions amplify fears

The high degree of mistrust of TikTok is, in part, fueled by an increase in corporate cyber intrusions. CrowdStrike, the Silicon Valley-based cybersecurity and technology company, has reported that since 2018, cyber-attacks and intrusions have been increasing and intensifying.9 This was a contributing factor towards the Trump administration’s Section 301 investigation that led to tariffs which went into effect against Chinese imported goods and, also,

when regulatory agencies such as the Department of Commerce’s Bureau of Industry and Security (BIS) and Committee on Foreign Investment in the United States (CFIUS), began ramping up export controls, sanctions and the blockage of acquisitions of US technology companies and assets.

The US Department of Justice has named individuals and hacker groups suspected of being linked to the Chinese state, which, over time, are known to have stolen data from more than 100 key US tech and telecommunications companies, defense contractors, government agencies and social media groups, including IBM and Hewlett Packard, Boeing, Facebook, and NASA’s Goddard Space Flight Center.10

These developments have stoked fears that massive amounts of new consumer information from TikTok, WeChat and other Chinese social media platforms could be combined with data that has been stolen through state-sponsored hybrid warfare operations.

New challenges of joint ownership, acquisitions and corporate governance

Based on these factors, President Trump gave an ultimatum to TikTok and its Chinese parent company ByteDance: sell the company to American buyers or face being shut down in the US.

The ensuing developments have provided a living case study on the vagaries and difficulties of operating under these kinds of techno-nationalist pressures.

TikTok, therefore, represents a ground-zero event regarding corporate governance in the tech sector. After US executive order 13942 was issued11, which banned TikTok from operating

The high degree of mistrust of TikTok is, in part, fueled by an increase in corporate cyber intrusions and hybrid warfare.

TikTok in America represents a ground-zero event regarding corporate governance in the digital economy.

I . STATE ACTIVISM AND CORPORATE GOVERNANCE

https://www.hinrichfoundation.com/research/wp/tech/techno-nationalism-and-diplomacy/

11


in the US, a series of events transpired that highlight the complexity of compliance and risk management challenges facing multinational companies.

From a techno-nationalist perspective, the following questions emerged:

– What constitutes “ownership” of data, algorithms and technologies?

– What defines “control” of data, algorithms, source code and other technologies?

– Can ownership and control of data, source code and technology be split between Chinese and American (or other) techno-nationalist interests?

– How will new Chinese export controls on algorithms and AI complicate business interactions and accelerate decoupling in the platform economy?

Two American companies, Oracle, the technology company, and Walmart, the world’s largest retailer, made a move to purchase ByteDance. Because of the overarching constraints of US and Chinese techno-nationalism, however, the challenges of such a deal quickly became apparent.

Ownership and control

From an ownership and control perspective, it was reported that Walmart and Oracle would take a 20% combined ownership of TikTok, while ByteDance, the Chinese parent, would maintain 80% ownership.12

However, President Trump’s demand for “total control” by US companies was interpreted differently by all parties, revealing what the future of deal-making in a techno-nationalist landscape will look like: complex, uncertain and contentious.

ByteDance took the position that it would retain majority ownership but would distribute TikTok Global’s shares to its existing American investors including Sequoia Capital, General Atlantic and Coatue Management. This would give “American” interests a majority position, at least in terms of equity.13 But the problem was that there were also Chinese investors involved, which, once again, raised the specter of those entities being proxies for the CCP.

Transfer and control of source code, algorithms and key technology

Even as fundamental questions of ownership muddle attempts to combine US and Chinese digital platforms and data pools, there are other challenges when it comes to controlling IP and key technologies.

In the case of TikTok, ByteDance did not want to transfer its source code for its “recommendation” algorithms, which constituted technology used to funnel video content to its users.

Instead, ByteDance was said to have proposed an arrangement where Oracle could “audit” the source code without actually possessing it in its entirety. Here, again, challenges emerge regarding trust and control, which serve to perpetuate concerns about cybersecurity and data privacy and the activities of the Chinese state.

China Inc.’s influence on corporate boards

There were also questions about basic corporate governance when it came to the composition of TikTok Global’s board of directors. Oracle and Walmart stated that Americans would constitute the majority of the board, while ByteDance said the board would include all of its current board members, which included not only

ByteDance was said to have proposed an arrangement where Oracle could “audit” the source code without actually possessing it in its entirety.

In a techno-nationalist corporate environment, ownership and control of data, algorithms and source code have become contentious issues.


12


Chinese investors but, presumably, appointments of Communist Party officials or people directly involved with the party’s central planners.

According to the Financial Times, China’s largest tech companies have implemented so-called “party committees” which are charged with ensuring that their firms remain aligned with Communist Party dogma and objectives.14

Under Chinese President Xi Jinping, the CCP has increased its reach into the economy, not only by doubling down on its support and control of state owned enterprises (SOEs) but by mandating that other parts of the business sector fall in line with the CCP’s objectives.

Communist Party representatives inside tech companies

The CCP has dispatched “government affairs representatives” to more than 100 of China’s most strategically important companies, including e-commerce, social media and technology giants such as Alibaba, Ant Group, Tencent, Baidu, HikVision, Huawei and Dahua.15

In September 2020, the CCP published guidelines aimed at other sectors of the Chinese business landscape with the intention to “educate private businesspeople to weaponize their minds with socialism ideology.”16

These are not encouraging developments for foreign companies looking to manage independence and conflict of interest issues. In November 2020, President Trump signed an executive order17 that required US investors to divest their shares in Chinese companies linked to China’s

military, which, under China’s “military-civil fusion”18 initiative, could involve a broad swath of companies. China’s military-civil fusion initiative will be discussed later in this study.

In general, as Beijing pursues an increasingly autocratic, state-controlled business sector, the task of corporate governance by American, European and other non-Chinese companies will need to adjust to this reality.

More specifically, when it comes to populating corporate boards in merger and acquisition scenarios involving Chinese entities, the TikTok example has brought to light how state activism is likely to become a showstopper for future acquisitions, mergers and joint ventures.

Chinese companies: Corporate relocations and restructuring

The question facing Chinese companies wishing to expand offshore, first and foremost, is whether they can circumvent their ties to the Chinese state to the point that foreign companies and governments view them as independent actors. ByteDance and other Chinese technology companies are responding to this challenge through a combination of:

– Relocating corporate headquarters out of China

– Hiring foreign executive management and talent

– Ring-fencing on a per-country basis

– Vertically integrating sensitive value chains.

If any of these maneuvers are to be successful, value chains involving both “hard” technologies (such as materials, equipment and components) and

China’s largest tech companies have implemented so-called “party committees” which ensure alignment with Communist Party dogma and objectives.

A new law requires US investors to divest their shares in Chinese companies linked to Beijing’s military-civil-fusion initiative.

The question facing Chinese companies is whether they can be viewed as independent actors.


13


“soft” technologies (such as data, platforms and apps) will be held up to new transparency and traceability standards.

ByteDance’s move to Singapore

In 2020, even as ByteDance was grappling with negotiations regarding the sale of TikTok in the US to Oracle, Walmart and others, it was spending billions on a new data center and a base of operations in Singapore.19

The company also filed for a virtual banking license with the Monetary Authority of Singapore (MAS) and has partnered with other financial institutions to provide FinTech solutions around digital payments and e-commerce.20

Alibaba and Tencent, China’s biggest digital giants, have also invested heavily to make Singapore a major base of operations outside of China, not only because of its centralized location in Southeast Asia – a large “mobile-first” digital market place with a population

of more than 600 million – but also because they are betting on receiving more accommodating treatment from Singapore’s government than in the US, the EU and elsewhere.

However, such an arrangement will test both the Singaporean authorities and Chinese firms, particularly as Singapore strives to brand itself as the technology sector’s “Switzerland” of Asia by implementing best practices around corporate governance frameworks.21

Should ByteDance, Tencent, Alibaba and others fail to adjust to new standards concerning, for example, data privacy, they will not convince others of their independence from the CCP.

Serving the Chinese Communist Party

Under President Xi, the CCP has tightened its grip over tech companies and doubled down on its techno-nationalist initiatives. In addition to placing party officials within prominent companies, it continues to neuter high

Alibaba and Tencent, China’s biggest digital giants, have also invested heavily to make Singapore a major base of operations outside of China.

ByteDance is investing billions in a new data center in Singapore, which will serve other markets in Southeast Asia.


Jack Ma, co-founder and former executive chairman of the Alibaba Group, speaking at the UNCTAD eCommerce Week Conference, 25 April 2017 (Image source: ITU Pictures/Flickr).

14


profile corporate executives where there is the perception that they were operating independently from party directive or becoming too influential.

This scenario played out with Jack Ma, the founder of Alibaba, the Chinese multinational technology company specializing in e-commerce, retail, Internet, and technology, which, in 2020, at one point, had a market capitalization of over US$850 billion.22

Since founding Alibaba in 1999 in Hangzhou, Jack Ma had become a national figure in China and a world famous business personality. In 2016, for example, he travelled to the US and proposed to then President-elect Donald Trump that Alibaba could create thousands of jobs in the US and bolster the US economy.23

In 2019, at the age of 55, however, Mr. Ma unexpectedly stepped down from his role as executive chairman, claiming he wanted to retire while he was at the top of his professional game. But, taken in the broader context of the CCP’s clampdown on the private sector, to many observers, the nuanced message was that Mr. Ma was pre-empting a scenario where the CCP would view both him and his company as having acquired too much prestige and influence, and therefore, would be a threat to the party.

The Chinese government had already crushed other rising business stars and companies in China’s private sector, such as HNA Group’s Wang Jian, Anbang Insurance Group’s Wu Xiaohui, and movie business celebrity, Fan Bingbing.24

The latter two were taken into custody and were not heard from for several months. When they reappeared, they

made public announcements affirming loyalty to the party and stressed the importance of handing over control and ownership of their businesses to the government, when the national imperative required.

Jack Ma made similar public announcements after resigning as Alibaba’s executive chairman. In what made international headlines, he affirmed his membership of the Communist Party25, and, shortly afterwards, announced that Alipay – Alibaba’s online payment platform – was partnering with UnionPay, a state-owned entity, to develop next generation digital payment technology for the CCP. This would have major ramifications for Hong Kong’s FinTech and financial clusters, to be discussed later.

The partnership with UnionPay was significant because one of Beijing’s top techno-nationalist priorities is to roll out a fully digitized national and even international monetary system, with the e-RMB at its core.26 This suggests that Alipay will eventually be nationalized.

Given Alipay’s prominent role in developing the CCP’s social credit system, Zhima Credit, discussed later, it could be argued that Alipay is a quasi-state enterprise, as are others such as Tencent, which has partnered with UnionPay to create QR code and blockchain technology for China’s international roll out of the digitized Renminbi.27

The subsequent blocking of the IPO of Ant Group – owner of Alipay – further reinforced the CCP’s requirement that Chinese companies must serve the Party’s purposes above all other goals.

Alipay, Alibaba’s online payment platform, partnered with state-owned UnionPay, to develop digital payment technology for the Chinese government.

One of Beijing’s top techno-nationalist priorities is to roll out a fully digitized national monetary system, with the e-RMB at its core.


15


CASE STUDY

How state interventionism killed a US$35 billion IPO

Any doubt that Beijing’s central planners intended to assert more control over China’s technology companies – and by extension their global sphere of operations – was removed when the party blocked the Ant Group’s initial public offering (IPO) in November 2020.

In October of 2020, the Ant Group, the world’s largest FinTech company, was set for a US$34.5 billion listing plan for its IPO on both the Shanghai and Hong Kong stock exchanges, with a possible valuation of over US$300 billion.28

But, at the time of the scheduled IPO, there were two prevailing issues facing the Ant Group, which has been a dominant player in China’s mobile payments, micro-financing services, wealth management and micro-insurance markets.

First, its size and success had become a growing challenge to China’s state banks and state-owned payment services companies such as UnionPay.

Second, the Ant Group’s success – with Mr. Ma enjoying rock star-like status – was anathema to the CCP’s hold on power. Prior to the scheduled IPO, Mr. Ma had irked party members and regulators at a public speaking event in Shanghai where he had stated that China lacked a proper financial ecosystem and that its regulatory agencies had a “pawnshop” mentality.29 These comments backfired spectacularly, particularly as China’s financial and banking regulators were struggling to reduce systemic risks arising from the micro-lending boom in China’s platform-driven economy.

China’s financial and banking regulators are clamping down on FinTech as it powers a booming platform-driven economy.

15


In October 2020, the Ant Group, the world’s largest FinTech company, was set for a US$34.5 billion listing plan for its IPO on both the Shanghai and Hong Kong stock exchange. (Image source: Ennoti/Flickr)

16


Britain’s Arm Ltd., based in Cambridge, is one of the world’s most important technology companies. Its R&D, designs and advanced software are imbedded in the upstream value chains of most of the world’s semiconductors.

Arm dominates the front end of virtually every Fourth Industrial Revolution technology, including internet servers, smartphones, computers, weapons systems, 5G and more.

Arm sells it chip designs to the world’s leading semiconductor companies and also licenses other tools and technologies that are essential for independent chip designers. Many Chinese companies, including HiSilicon and SMIC, rely on Arm’s digital blueprints.

Arm is a cautionary tale about the perils of corporate governance in the technology sector, particularly when it involves China and semiconductors. From a risk management perspective, key concerns include:

1. Rogue affiliates and subsidiaries regarding in-China-for-China operations

2. China’s treatment of aggrieved foreign companies

3. Overarching techno-nationalist policies that lead to state interventionism

Dealing with rogue subsidiaries

In 2016, Softbank, the Japanese investment company, bought Arm Ltd. for US$32 billion. In 2018, Softbank sold more than half of Arm China to

an investment consortium, retaining the remaining 49% ownership. The consortium, consisting of state-backed enterprises such as China’s Silk Road Fund and China Investment Corp (CIC), obtained 51% ownership.30

Arm Ltd.’s problems began when it fired the CEO of Arm China, Allen Wu, who not only refused to step down but hired private security to block Arm Ltd.’s representatives and board members from entering Arm China’s premises. Mr. Wu retained control of the company stamp or “chop”, which meant that under Chinese law he was entitled to maintain control of Arm China until he turned it over of his own volition.

Another problem emerged when Arm Ltd. accused Mr. Wu of conflicts of interest, including the founding of a separate investment firm that would compete with Arm China.31 This opened a Pandora’s box of risks for the parent company including the dangers of its IP being transferred to unauthorized third parties, and, of course, the disruption to its business in China. According to financial filings by Arm Ltd., in 2016, when it was purchased by Softbank, approximately 20% of its global revenues came from China.32

Local treatment of aggrieved foreign parties

As the Arm Ltd. versus Arm China saga continues, investors and multinational businesses around the world will be watching the Chinese government closely to gauge whether the CCP will treat foreign companies fairly in a litigation situation. This is doubly

CASE STUDY

Inter-company warfare: Arm UK versus its China subsidiary

Britain’s Arm Ltd. is a cautionary tale about the perils of corporate governance in China’s technology sector.

Arm China’s mutiny against its British parent company has opened a Pandora’s box of issues for corporate governance.

Multinational businesses around the world will be watching the Chinese government closely to gauge its treatment of foreign companies.

16


17


important because, as global value chains continue to fragment, localize and ring-fence, companies must invest heavily in their “in-China-for-China” ecosystems. Thus, from a corporate governance perspective, they will need a level playing field more than ever.

The Arm China case is also significant because it represents the single most important technology sector for the Chinese government: semiconductors. Chinese semiconductor companies are years – perhaps even decades – behind the world’s leading firms when it comes to producing home-grown, leading-edge microchips.

For the third straight year, in 2020, China will import more than US$300 billion33 in semiconductors and related technologies, making this its number one import, ahead of oil imports.34

This dependency on foreign actors – mostly American – has driven Beijing to unprecedented techno-nationalist spending initiatives. In October 2020, President Xi announced state expenditures of US$1.4 trillion35 in order to expedite the build-out of China’s digital infrastructure. Much of this money will be diverted to achieving a home-grown semiconductor industry which is already the top priority of the Made in China 2025 policy, and other funding initiatives such as China’s “Big Fund.”36

All this leads back to the question of whether Beijing can act impartially when dealing with the Arm China situation, given its quest to obtain leading-edge technology and IP?

Techno-nationalism, company ownership and state interventionism

Arm Ltd.’s corporate governance issues in China come at a time when Washington has weaponized

semiconductor value chains and inflicted heavy damage on Huawei and other Chinese technology companies.

As covered in previous reports in this series, US semiconductor companies such as Applied Materials and Lam Research have a chokehold on critical manufacturing equipment needed to produce high quality microchips in commercial quantities. This is a science that has been mastered by only a handful of companies.

Even leading-edge chip fabricators such as Taiwan’s TSMC rely on American firms for manufacturing equipment, a fact that became abundantly clear when TSMC cut off its supply of microchips to Huawei’s HiSilicon, due to the US Department of Commerce’s revision of the Foreign Direct Product Rule.37

In addition to having a chokehold on manufacturing equipment, American companies such as Synopsis and Cadence Design Systems control 90% of the design software used in the semiconductor industry.38 As a result, there remains only one other major non-American design company to which Chinese interests can turn: Arm Ltd.

Thus, the 51% ownership of Arm China by state-backed investors including the Silk Road Fund and CIC could be interpreted as a form of techno-nationalist insurance policy.

In light of these circumstances, once a full forensics review is done on the behavior of Arm China’s CEO, Allen Wu, the question that remains to be answered is to what extent the fingerprints of the Chinese state are likely to be found on Arm China’s activities.

CASE STUDY: INTER-COMPANY WARFARE: ARM UK VERSUS ITS CHINA SUBSIDIARY

Arm Ltd.’s corporate governance issues in China come at a time when Washington has weaponized semiconductor value chains.

Once the Arm China situation is sorted out, the question will be to what extent was the Chinese state involved.

17


https://www.hinrichfoundation.com/research/wp/tech/semiconductors-at-the-heart-of-the-us-china-tech-war/

18



NVIDIA purchase of Arm Ltd.

In September 2020, Softbank announced that it intended to sell its share of Arm Ltd. to NVIDIA, an American company, for the price of US$40 billion.39 NVIDIA is the world’s leading graphic processing chip semiconductor company. If this sale goes through, it could cause a tectonic event in the global technology landscape.40

At the time of this publication, the sale of Arm Ltd. is still pending government approval in the UK, the US and in China. The NVIDIA-Arm deal, if it goes forward, would hand the US a total monopoly in the technology sector, giving it dominance of the key segments of semiconductor value chains.

The sale of Arm to NVIDIA would therefore affirm three new realities.

First, once an American company owns Arm Ltd., China would lose access to the last remaining vital “neutral” source of technology, as Washington could

apply US export controls and block access.

Second, because NVIDIA is itself a semiconductor company, if it were to acquire Arm, it would be in a position to license Arm designs to competing semiconductor firms (all of whom are Arm customers), which would essentially give NVIDIA access to their competitors’ IP. Granting this kind of monopoly power to NVIDIA would fly in the face of other efforts underway in the UK and the EU to roll back the power of American tech companies such as Amazon, Facebook and Google.

Third, in purely techno-diplomatic terms, the selling of Arm Ltd. would deprive Britain of a key strategic asset. It would lose leverage regarding its influence in standard-setting around AI rule frameworks and, in general, its room to maneuver with the US and other countries, including China, regarding bilateral interests.

Hermann Hauser, the co-founder of Arm, told The Guardian newspaper that

18


In September 2020, Softbank announced that it intended to sell ARM LTD to NVIDIA for the agreed upon price US$40 billion. (Source: Composite image. Left to right: Kici/Wikimedia Commons, The Pop Culture Geek Network/Flickr)

If an American company owns Arm Ltd., China would lose access to the last remaining vital “neutral” design technology.

19



The issue to watch is the direction that the British and the American governments take to decouple strategic industries from China.

British ownership of Arm gave the UK strong leverage in the post-Brexit trade talks.41

Gauging the NVIDIA-Arm outcome

It seems unlikely that Beijing would approve the sale of Arm China to NVIDIA given what is at stake for the CCP.

The issue to watch, however, is the direction that the British and the American governments take regarding multilateral efforts to decouple strategic industries from China, or, at the minimum, move to take further control of strategic value chains.

UK-China tensions continue to escalate over the South China Sea, Hong Kong,

Taiwan or Xinjiang province, Britain’s decision to approve the sale of Arm to NVIDIA – under pressure from Washington – is not outside the realm of possibility.

The UK government has already performed an about-face regarding its decision to block Huawei from its 5G networks.42

From a corporate governance standpoint, how the Arm-NVIDIA deal plays out will reveal the level to which geopolitics and techno-nationalism have primacy over trade and commerce, and the lengths to which companies must go to decouple and ring-fence operations.

19


20


For multinational companies, the next phase of globalization is leaning decidedly towards more localized operations, which is resulting in increased tensions between local rules and global governance frameworks. To see this phenomenon in action, we return to ByteDance, this time to observe its expansion into Southeast Asia, with Singapore functioning as a base of operations.

Can TikTok ignore the Chinese Communist Party?

In 2020, TikTok logged more than 360 million downloads in Southeast Asia, with almost of half of them in Indonesia, the world’s fourth most populous country.43 According to Sensor Tower, an app analytics company, TikTok grew 151% over the previous year in Southeast Asia.44

The localization model of corporate governance reveals the prevalence of

censorship of social media platforms, primarily for political reasons. Much of the censorship is locally driven, at the behest of local host governments such as the Indonesian government, but, in the case of the CCP, the evidence convincingly shows that Beijing expects Chinese companies operating abroad to adhere to its dictates as well.

ByteDance in Indonesia

In Indonesia, for example, from 2018 through mid-2020, Reuters reported that ByteDance’s headquarters in Beijing directed ByteDance Indonesia to censor content on its local news aggregator app called Baca Berita (BaBe), if that content was seen to be critical of China.45

ByteDance’s Indonesian censorship guidelines mirrored the company’s China-based news app, referred to as Toatiao, which, itself, was bound by content rules established by China’s

II. Local versus global corporate governance

For multinational companies, the next phase of globalization is leaning decidedly towards more localized operations.

The localization model of corporate governance reveals the prevalence of censorship of social media platforms.

Figure 2 – Internet censorship by country

Source: Freedom House, https://freedomhouse.org/explore-the-map?type=fotn&year=2020

Not free

Partly free

Free

21


internet regulator, the Cyberspace Administration of China (CAC).

In Indonesia, Toutiao’s content moderation algorithms were modified to parse digital content with the aim of blocking insensitive or offensive words or images regarding Indonesia’s religious, ethnic and racial sensitivities. But its algorithms also blocked key searches for words such as “Tiananmen Square” and “Tibet”.

After it was publicly exposed, ByteDance walked back its China-related censorship practices in late 2020 and installed local Indonesian content moderators on its TikTok and BaBe apps, leaving decisions about what content to remove and block from Indonesian cyberspace to Indonesian nationals.

Content moderation as a business model

ByteDance’s corporate governance practices call for teams of moderators to pursue “non-political” content benchmarks when it comes to, for example, pro-democracy protests in Thailand against the ruling junta or non-favorable content aimed at Vietnam’s Communist Party.

Chinese companies are not alone when it comes to blocking political content from their platforms.

In April 2020, Reuters reported that Facebook agreed to censor its platform in Vietnam and to block offensive, adverse or antagonistic content aimed at the Communist Party of Vietnam.46

Facebook allegedly agreed to this after the Vietnamese government shut down Facebook’s local servers, effectively taking them offline. The “in-China-for-China” corporate governance dilemma

Adjusting to local regulatory environments is putting some of the world’s best known “good corporate citizens” in direct conflict with their own self-professed core values. From a corporate governance perspective, China-based MNEs are confronted with a Faustian bargain: submit to the CCP’s requirements regarding censorship and state surveillance in exchange for market access.

This puts civil society – from consumers to investors – in a compromised position. Apple and Microsoft, two American icons, are a case in point.

II .LOCAL VERSUS GLOBAL CORPORATE GOVERNANCE

The blocking of political content on a country-by-country basis has become standard practice for tech companies.

Adjusting to local regulatory environments is derailing the policy aims of “good corporate citizens”.

22


CASE STUDY

Apple in China

22


Apple’s global value chains have centered on China as an assembly platform, where Taiwanese headquartered contract manufacturers such as Foxconn, Pegatron and Wistron assemble iPhone from parts and components made all over the world. Although Apple is diversifying about one-fifth of this assembly process to India47, China remains at the heart of Apple’s global value chain. The China market also accounted for about 25% of Apple’s global revenue in 2020.48

Local versus global governance

Apple has complied with the CCP’s numerous requests, over time, to remove more than 1000 apps from its Chinese App Store, including The New York Times and Quartz, two influential media outlets, as well as VPN applications, which, when

downloaded, allow users to bypass China’s censorship firewalls and access the internet.49

For the purposes of corporate governance, Apple prioritizes compliance with local laws in host countries over execution of global policies regarding, for example, censorship practices by local authoritarian regimes.

In September 2020, Apple published “Our Commitment to Human Rights”, which spelled out its worldwide policies on this topic.

The document contains language that highlights the primacy of local regulatory environments: “Where national law and international human rights standards differ, we follow the higher standard. Where they are in

Apple CEO Tim Cook with former Chongqing Mayor Huang Qifan in an Apple store in Chongqing city’s CBD. (Source: Junyi Lou/Wikimedia Commons)

Apple has complied with the CCP’s numerous requests, over time, to remove more than 1000 apps from its App Store.

23



CASE STUDY: APPLE IN CHINA

conflict, we respect national law while seeking to respect the principles of internationally recognized human rights.”50

Simply put, in China, Apple follows rules that contradict its global values regarding censorship and privacy. There are other tensions and risks that arise from local versus global governance contradictions:

– Connectivity with local regulatory enforcement offices in China expose MNEs to increased cyber-intrusions and cybersecurity risks, requiring countermeasures.

– Increased scrutiny of in-China- for-China operations by civil

society increases reputational risk and degradation of brand image internationally.

– Sudden escalations in US techno- nationalist policies can result in sanctions against local Chinese governmental departments, individuals and entities that could lead to forced decoupling.

– Rising levels of governmental distrust in China of foreign technology companies requires expensive corporate diplomacy and assurance practices on the part of MNEs.

23

Source: Apple Inc. condensed consolidated statements of operations, via Statista

1Q ’12

3Q ’12

1Q ’13

3Q ’13

1Q ’14

3Q ’14

1Q ’15

3Q ’15

1Q ’16

3Q ’16

1Q ’17

3Q ’17

1Q ’18

3Q ’18

1Q ’19

3Q ’19

1Q ’20

3Q ’20

125

100

75

50

25

0

46.3439.19 35.97

54.51

43.635.32

57.61

45.6537.43

74.6

58.0149.6

75.87

50.5742.36

78.35

88.2984.31

91.82

64.758.32

64.0458.02

62.961.1453.27

45.4152.91 52.58

Reve

nue

in b

illio

n US

dol

lars

Americas Europe Greater China Japan Rest of Asia Pacific

Figure 3 – Revenue of Apple by operating segment from the first quarter of 2012 to the fourth quarter of 2020 (in billion US dollars)

Increased scrutiny of in-China-for-China operations by civil society increases reputational risk and degradation of brand image.

24


CASE STUDY

Microsoft in China

24


Microsoft is another iconic American brand that finds its local business practices in China in conflict with its global policies on human rights.51 Techno-nationalist tensions necessitate adroit engagement with local officials, in order to navigate through a corporate governance minefield.

From a purely economic perspective, its presence in China is a business imperative: Microsoft Windows runs 90% of the computer operating systems in China.52

From a techno-nationalist perspective, China’s reliance on Windows’s operating system is a national security concern for Beijing, perhaps even greater than its dependency on American semiconductor technology.

In 2013, Edward Snowden, a former National Security Agency (NSA) contractor-turned-whistleblower, divulged that Microsoft’s operating system had been infiltrated with ubiquitous surveillance programs. Snowden alleges that the NSA has the capability to infiltrate and monitor virtually any version of Windows, especially the older series.53

From a corporate compliance perspective, Microsoft has hewn to a distinct set of local practices in China.

Like Apple, Microsoft agrees to Beijing’s censorship demands by using algorithms to screen politically sensitive content from its browser, Bing.54 The software giant also blocks content on its professional networking

From a techno-nationalist perspective, China’s reliance on the Windows operating system is a national security concern for Beijing.

Chinese President Xi Jinping (right) visited Microsoft in Redmond in September 2015 and met with Satya Nadella, Microsoft’s CEO. (Source: Washington State Governor Jay and First Lady Trudi Inslee/Flickr)

Like Apple, Microsoft agrees to Beijing’s censorship demands by using algorithms to screen politically sensitive content.

25


platform, LinkedIn, as part of its arrangement with the CCP.55

Customizing local products and services

Because of the strategic vulnerabilities resulting from Microsoft’s total dominance of the Chinese market, the company created an entity in Beijing where government appointed programmers can inspect Windows’s operating source code and test for security weaknesses and backdoors.

In 2017, Microsoft agreed to work with China’s state-owned technology companies to build a special government edition operating system (Windows 10 CMIT)56, because of Beijing’s extreme vulnerability should Windows’s operating system suddenly become a pawn in its technology cold war with Washington and its allies.

In both these instances, there is no way that Beijing can be fully certain

that Microsoft’s operating system is completely safe. Thus, Beijing has embarked on an all-out effort to develop its homegrown operating systems, much like its efforts in developing an upstart semiconductor industry. But its central planners are finding similar barriers to entry in the long-established, highly-specialized ecosystems of software developers using well-known platforms from Microsoft, Google and other US companies.

This situation is a red flag for technology companies operating in China. If, for example, the US places licensing restrictions on the Windows operating system for Chinese companies, the collateral damage to other companies operating in China across an entire spectrum of industries will be severe.

Microsoft agreed to work with China’s state-owned technology companies to build a special government edition operating system.

CASE STUDY: MICROSOFT IN CHINA

In-China-for-China civil society backlash

The clash between local laws and corporate values will increase steadily as the technology cold war intensifies. When Google’s senior management sought to reenter the Chinese market (it withdrew in 2010 because of censorship stipulations by the government), for instance, it attempted to roll out Dragonfly, a censored web browser, which, ultimately, backfired on Google in a very public way.

Google’s Dragonfly project, which had been kept largely secret from its employees, caused an employee revolt. More publicly, Google’s Vice President of Public Policy, Karan Bhatia, was grilled at a US Senate Judiciary hearing, where the company was accused of

facilitating China’s authoritarian rule.57

The takeaway from Google’s situation is that companies that have maintained operations in China for a long time have likely been operating under the radar regarding their acquiescence to local laws.

But, as China, the US and its allies coalesce into de facto trade blocs built around different values, companies wishing to enter the Chinese market, such as Google, will find themselves under increased scrutiny.

Overall, from a corporate governance perspective, “in-China-for-China” corporate governance practices will continue to contradict and stress the global standards and principles of the world’s multinational enterprises.

Companies wishing to enter the Chinese market will find themselves under increased scrutiny.

26


As the world transitions to a more digitized future, the banking and financial sector will become a hotbed of techno-nationalism, as Fourth Industrial Revolution technologies harvest and analyze data on an unimaginable scale.

FinTech will determine how the majority of the world’s population banks, invests, is insured and engages in day-to-day consumption. How all this data will be used will depend on values and principles. The FinTech sector will bring into sharp focus the differences between the competing rule-frameworks of liberal democracy and techno-authoritarianism.

Therefore, core values around privacy, censorship and surveillance will feature prominently in the application of corporate governance policies and internal controls.

Increasingly, organizations will pin their hopes on technology as a compliance management tool (“RegTech” and “TradeTech”) to execute corporate governance.

FinTech and open banking

FinTech is arguably the most critical component of any digital platform or ecosystem. In Southeast Asia, Singapore has become an innovation hotbed for FinTech58, as it disrupts the traditional banking sector in order to open up e-commerce, digital payments and other related fields to a broad range of startups and SMEs.

These policies were inspired, in part, by the EU’s Open Banking initiative, and the Payment Services Directive

Law 2, which was designed to level the playing field and broaden the financial services sector to a host of smaller actors.59

New ecosystems are emerging around mobile payments, account services, lending, financial advice, e-insurance and secure ID, in addition to a plethora of backend services involving application program interfaces (APIs) and infrastructure needed to connect mobile devices, operating systems and apps.

And behind these APIs are AI applications and algorithms driving robo-analytics, fraud detection, chat-bots, biometrics and other non-financial services, such as travel, real estate and other lifestyle apps.

All of this is to say that FinTech touches a broad swath of human activities and produces vast data footprints. FinTech, therefore, is at the core of the techno-nationalist competition over data privacy standards, and how state and non-state actors use data derived from an individual’s personal transactions.

ByteDance, FinTech and privacy standards

ByteDance, once again, provides an important lesson in the convergence of FinTech with corporate governance issues.

As of September 2020, ByteDance’s Singapore operations had 400 employees tasked with e-commerce, e-payment, sales and marketing and, increasingly, data privacy solutions.60

III. New frontiers: FinTech, RegTech and corporate governance

The FinTech sector will bring into sharp focus the differences between liberal democracy and techno-authoritarianism.

FinTech is at the core of the techno-nationalist competition over data privacy standards.

27


SPOTLIGHT

Sesame social credit system

During this same time frame, ByteDance was looking to fill another 200 new positions, many of which would be assigned to its new data center. From a corporate governance perspective, the future success of ByteDance’s Singapore data center will be linked to its implementation of verifiable standards and practices.

By elevating data privacy issues, for example, ByteDance’s management recognized the importance of achieving several key objectives.

First, like other Chinese technology companies, it needed to disassociate itself from the idea that its users’ data would be subject to, for example, the

Alipay’s Sesame Credit program, also known as Zhima Credit, involves the collection of data from an individual’s spending and purchasing habits, social interactions, physical movement and other observed behavior on social media and in public settings.

Through the use of AI and algorithmic analysis, individuals are then rewarded or penalized for their “trustworthiness” with a Sesame score. A high “reputational” score results in discounts and preferential access to goods and services, for example, while a lower score results in higher prices and the denial of access to goods, services and other social benefits. This makes social

credit schemes a powerful behavior altering tool for governments.61

The future of FinTech, therefore, has become entangled in the clash between digital democracy and techno-authoritarianism. As was detailed in the third report in this series, using Chinese technology often means acquiescing to Chinese standards regarding privacy, censorship and surveillance.

Chinese companies in Singapore and beyond will need to turn to data stewardship, including segregation, anonymization and encryption, to be discussed later.

27


Image source: Screenshot from Zhima Credit’s website.

28


kind of ubiquitous surveillance associated with “social credit” programs in China, such as Alipay’s Sesame program, which was mandated by the CCP.

Second, as was discussed earlier, like all Chinese companies, ByteDance must demonstrate that its overseas operations can operate independently from the Communist Party’s dictate. This will come down to transparent and robust corporate governance processes and the host countries’ willingness to monitor compliance.

FinTech, localization and the decoupling of global finance

The CCP’s blocking of Ant Group’s IPO – which wiped an estimated US$60 billion from the group’s market capitalization – provides another telling example of how states, not market forces, are having the final say in the financial sector.

China’s intervention was part of a broader strategy of gaining control over both the technological (FinTech) and the political landscape throughout China.

Beijing is restricting the rapid expansion of digital commerce in the private sector, where the spectre of FinTech companies like the Ant Group displacing large state-owned banks is leading to fears of systemic risk. Beyond this, however, Beijing needs to leverage FinTech to realize its platform banking and digital currency objectives.

Beijing plans to roll out its digital currency – the e-RMB – first throughout China, and then as a de facto international digital currency with its trading partners along the Belt and Road and throughout Asia. It needs to confine the technology development and digital infrastructure to state-

controlled entities, or, at least, Chinese FinTech companies that publicly pledge loyalty to the party and avoid behavior that calls into question the CCP’s competence.

New accounting standards aimed at Chinese companies

In the US, new laws have been drafted with the intention of delisting Chinese companies from US stock markets. Legislation known as the Holding Foreign Companies Accountable Act (HFCAA), for example, was approved by Congress in December 2020, and requires Chinese companies to submit to third-party audits in line with Public Company Accounting Oversight Board (PCAOB) standards.62

The HFCAA was aimed at the financial statements of Chinese companies listed on US stock exchanges, which have not been held to the higher standards of the PCAOB, since 2002 when it was instituted.

In April 2020, the discovery of accounting fraud involving more than US$300 million in the financial statements of US-listed Chinese company, Luckin Coffee, led to a 75% drop in its share price and a backlash against corporate governance practices at Chinese companies.

Despite the Luckin incident, however, the HFCAA was poorly received in the US. It was feared that Chinese companies would choose to delist rather than agree to invasive audits and the overhauling of opaque, questionable accounting practices. It was feared that companies like Alibaba, Baidu and Tencent would pack up and move to Hong Kong, which has fewer demanding requirements. Hong Kong’s stock exchange offers an attractive alternative povided Chinese companies and their investors are willing to submit to its ultimate supervision by the CCP.

Beijing plans to roll out its digital currency, the e-RMB, first throughout China, and then as a de facto international digital currency.

The Holding Foreign Companies Accountable Act (HFCAA) requires Chinese companies to submit to third-party audits.

29


As Chinese companies adopt PCAOB standards in the US, they face exposure in other ways, including questions regarding independence and true solvency, given the involvement and influence of the Chinese government in these companies.

Meanwhile, other financial markets, such as London or Frankfurt, are unlikely to serve as alternates to New York or Hong Kong, as the EU recalibrates its relationship with Beijing and imposes similar standards for listing, at a time when policy makers steer the economy towards a FinTech-driven “open banking” environment, which requires high standards of transparency, data privacy and open accounting practices.

Chinese companies, therefore, are stuck between Washington and Beijing in yet another example of how state interventionism is complicating the trade landscape. The bottom line: this will result in higher corporate governance costs and standards and, inevitably, more decoupling.

American companies operating in China will have to manage risk scenarios where Beijing may retaliate over HFCAA with increased local compliance measures, to be doled out on an ad hoc basis.

US law banning investment in Chinese companies with military ties

In November 2020, President Trump signed an executive order banning US investors from holding shares in Chinese companies believed to have links to the People’s Liberation Army.63 Thus, from January 2021, banks and other American financial institutions were barred from investing in, for

example, China Mobile and China Telecom, which have subsidiaries listed on US stock exchanges.64

For corporate governance, the ramifications of this executive order on the financial sector are enormous. The bar has been raised on the “know your customer” (KYC) standards for financial institutions and investors. Given that China’s “military-civil fusion” philosophy has spilled over into all of the Made in China 2025 key sectors, most leading-edge companies, including financial and academic institutions in China, could be assumed to have ties to the Chinese military.

Influential China hawks in Washington, such as Florida senator Marco Rubio, claim that Beijing has successfully weaponized the openness of US financial markets to fund the expansion of its authoritarian model, and American investors have become unwitting enablers.65

From a corporate governance perspective, due diligence, screening and vetting of Chinese companies regarding their ties to military figures will become an expensive and complicated undertaking for American investors. This will impact large institutional pension funds, investment banks, wealth funds and private investors.

Because of the opaque practices regarding Chinese corporate governance, if the US government chooses to actively enforce this law, many investors will cut ties with Chinese investments. State activism of different kinds by both the US and Chinese governments will accelerate US-China decoupling.

III . NEW FRONTIERS: FINTECH, REGTECH AND CORPORATE GOVERNANCE

Other European financial markets are unlikely to serve as alternates to New York or Hong Kong, as the EU recalibrates its relationship with Beijing.

American companies operating in China will have to manage risk scenarios where Beijing may retaliate over HFCAA.

Due diligence, screening and vetting of Chinese companies will become an expensive and complicated undertaking for American investors.

https://www.hinrichfoundation.com/research/wp/tech/us-china-decoupling-tech/

30


CASE STUDY

International banks caught between Beijing and Washington: HSBC

30


International banks operating in Hong Kong must adjust their corporate governance to deal with Beijing and Washington’s techno-nationalist agendas, as the fallout of Sino-US relations spills over into the world’s financial centers. Banks in Hong Kong are at risk of being exposed to punitive and retaliatory measures from both governments.

One such bank, the Hong Kong and Shanghai Banking Corporation (HSBC), felt the full brunt of this reality when Beijing halted the Ant Group IPO in Hong Kong.

In 2020, HSBC – headquartered in the UK, with its origins in British colonial Hong Kong – was the sixth largest bank in the world when the Ant Group incident occurred. HSBC had set aside US$100 billion in funds for loan applications associated with the IPO. By the end of October 2020, HSBC had received more than US$50 billion in IPO loan applications66, which represented a significant loss of business revenue when the IPO was cancelled.

US sanctions Huawei and HSBC

HSBC had been dealing with the looming threat of US sanctions and

Fintech companies in China*Tencent | Ant Group | JD Digits | Du Xiaoman Financial | Lu.com | Suning Finance | CMC Capital Group | Souche | Yixin Capital | Bitmain | 9F Group

Banks directly/indirectly working with the Chinese government*China Merchants Bank Co Ltd. | China CITIC Bank Corp | Bank of Shanghai |China Minsheng Banking Corp | Industrial Bank Co. Ltd | Shanghai Pudong Development Bank Co Ltd | China Everbright Bank Co Ltd | Ping An Bank Co Ltd | Hua Xia Bank Co Ltd | China Guangfa Bank | Bank of Beijing

State-owned banks*Agricultural Bank of China | Bank of China |Bank of Communications | China Construction Bank | Industrial and Commercial Bank of China | Commercial Bank of China

Figure 4 – Chinese digital currency initiative and US sanctions

Source: “Reforming the Financial Industry: China’s Top 10 Fintech Companies, EqualOcean; SCMC Report; List of Top Banks in China (Growing Globally), GlobalFromAsia

*The lists are not exhaustive

Foreign entities at risk of US sanctions under the Hong Kong autonomy act

Foreign banks in China

Non-Chinese fintech companies

Foreign tech Start-ups

Foreign venture capitalists

Global universities and R&D centers

Multinational incubators

Foreign entities that are collaborating and/or transacting with Chinese banks and FinTech companies risk exposure to US sanctions under the Hong Kong Autonomy Act passed by the US Congress in July 2020.

HSBC had been dealing with the looming threat of US sanctions and export controls prior to the doomed Ant Group IPO.

31


CASE STUDY: INTERNATIONAL BANKS CAUGHT BETWEEN BEIJING AND WASHINGTON: HSBCCASE STUDY: INTERNATIONAL BANKS CAUGHT BETWEEN BEIJING AND WASHINGTON: HSBC

31


export controls prior to the doomed Ant Group IPO.

First, it had to grapple with the consequences of working with Huawei, the Chinese telecoms equipment maker, and the bank’s role in facilitating transactions with Skycom Tech Company Ltd. (Skycom) – which the Americans alleged was a front company that had been set up so Huawei could surreptitiously sell restricted US technology in Iran.

Plenty was at stake: If HSBC had been complicit by association, the bank could have been subject to punitive measures including being banned from the US banking system.67

Dating back to 2012, HSBC provided financial services to Huawei in a series of transactions with Skycom. Later, when Huawei was under criminal investigation, HSBC conducted an internal probe of its own, in which it

reported that Huawei had deliberately misled the bank by stating it had no ties with Skycom.

Chinese retaliation towards HSBC

Even as HSBC was conducting crisis management regarding US export controls, however, Chinese media accused the bank of having knowledge of Huawei’s ties to Skycom, and consequently, in order to avoid US penalties, colluding with US authorities during its investigations. This chain of events ultimately led to the arrest of Meng Wanzhou, Huawei’s CFO, in Canada, at the request of Washington.

In retaliation, Beijing has threatened to place HSBC on an “unreliable entity list” for cooperating with the US government in the Huawei investigation and, by extension, being complicit in Washington’s global efforts to block Huawei’s 5G expansion into overseas markets.68

Beijing has threatened to place HSBC on an “unreliable entity list” for cooperating with the US government in the Huawei investigation.

31


Huawei’s CFO Meng Wanzhou attending Russia’s “Russia Calling!” Investment Forum in October 2014. (Source: Wikimedia Commons)

32


CASE STUDY: INTERNATIONAL BANKS CAUGHT BETWEEN BEIJING AND WASHINGTON: HSBC

When the CCP imposed its national security law in Hong Kong, HSBC and other international banks, such as Standard Chartered, found themselves facing a dilemma.69 Renouncement of the national security law would result in swift retribution from Beijing. But, bending to the CCP’s will with the issuance of public statements backing Beijing’s law would expose HSBC to recriminations from Washington.

HSBC ultimately decided to issue a formal statement that said: “HSBC…respects and supports all laws that stabilise Hong Kong’s social order.”70

Although headquartered in London, the majority of HSBC’s business is derived from Asia,71 and, specifically, China, where it works with a large base of customers, including state-owned entities such as the Ministry of Finance and the China Development Bank.72

When President Xi announced China’s grand vision of the BRI, HSBC, as a leading financial institution, saw in it the potential to become a clearing

house for currency exchange, BRI funding and capacity building.73 It could ill-afford to jeopardize all of this by denouncing the national security law.

The convergence of sanctions, banking and FinTech companies

Washington’s reaction to HSBC’s China policies was predictable. In August 2020, the US Senate passed the Hong Kong Autonomy Act, which stated that any institution engaging in or facilitating transactions with Chinese state-owned enterprises and named Communist Party officials would be seen as aiding and abetting Beijing’s suppression of human rights in Hong Kong.74

Prior to issuing any new list of sanctioned entities, however, the US Treasury’s Office of Foreign Asset Control (OFAC) assured banks that they would first be contacted and questioned regarding their dealings with Chinese entities.

Techno-nationalism and FinTech decoupling

From a corporate governance perspective, therefore, any banks doing business, directly or indirectly, with Chinese entities will have to expand the reach of their “know your customer” (KYC) processes and increase traceability across all transactions. Negligently doing business with a restricted entity will spell catastrophe.

Because of China’s ambitions to decouple financially75 from the US dollar and launch the e-RMB as part of a cashless economy – controlled by the

state, from top to bottom – the ripple effect of the Hong Kong Autonomy Act will touch an entire ecosystem of FinTech companies.

Pulled into techno-nationalist orbits

Many Hong Kong-based actors have been pulled into China’s orbit as they participate in the design and roll-out of this digital ecosystem in partnership with tech companies in Shenzhen. These tech start-ups range across digital payments and e-wallets, e-identity, blockchain and other forms of innovation required for China’s techno-nationalist FinTech landscape.

Any banks doing business, directly or indirectly with Chinese entities, will have to improve their “know your customer” (KYC) processes.

Many Hong Kong-based actors have been pulled into China’s orbit as they participate in the design and roll-out of this digital ecosystem.

Foreign banks in Hong Kong do substantial business with Chinese firms, which puts them at risk for US sanctions.

33


Hong Kong-based firms find themselves directly and indirectly in collaboration with China’s champion tech firms such as Tencent, Baidu, Alibaba, the Ant Group, SenseTime, Dahua and others, many of which are on US restricted entity lists and are seen as quasi-government entities, given the key role they play in the CCP’s techno-nationalist blueprint.

Alibaba, for example, is building cloud infrastructure, while Alipay is linking the government’s Sesame social credit rating system throughout. Tencent is building the blockchain and QR code technology, while SenseTime, Dahua and HikVision are providing ubiquitous AI and facial recognition tools and technology that comprise the bulwark of the CCP’s techno-authoritarian apparatus.

For some Hong Kong start-ups the choice is stark – yield to China’s demands for data sharing with the state and give up privacy rights for data and cloud-based services or begin drawing up plans to leave the city.76

Some tech companies will elect to move to nearby Shenzhen, a growing hotbed for Chinese innovation.77 In October 2020, President Xi called for measures to get young people from Hong Kong to move to China, to fortify Beijing’s plans for the Greater Bay Area – its answer to Silicon Valley.78

Caught in the middle, increasingly, will be foreign banks, venture capital firms and even individual angel investors, all of whom are now susceptible to “aiding and abetting”, at least indirectly, US-sanctioned activities under the Hong Kong Autonomy Act.

Thus, corporate governance will focus on, foremost, whether the

gains of doing business with China Inc. outweigh the risks of sanctions, reputational damage within civil society and prohibitive compliance and risk management costs. How could these risks be managed? Is there a way to avoid a binary choice?

A likely scenario is that even if the US does not aggressively sanction Hong Kong, some companies will decouple on the grounds that the persistent threat of new restrictions combined with an aversion to authoritarian values are reasons enough to quit.

The US revoking special trade status for Hong Kong not only erased preferential tariff rates for Hong Kong-originating goods, it also meant that exemptions for export licenses for access to American technology were also finished. The burden of additional export controls alone, for Hong Kong tech firms and local universities, were a major blow.

Data privacy and the “splinternet”

The digital landscape continues to fragment into a “splinternet,” based on different political, economic and social standards.

Four distinct blocs have emerged: the libertarian bloc (which is no longer viable); the commercial bloc (which is dominated by a handful of US tech companies and under assault by law makers); the European bloc, based on tough regulation (which is gaining appeal); and the China-style techno-authoritarian bloc.79

Corporate governance must adopt data stewardship processes to function in all four environments, particularly when it comes to the management of data privacy and data localization.

For some Hong Kong start-ups the choice is stark – yield to China’s data demands or begin drawing up plans to leave.

The digital landscape continues to fragment into a “splinternet,” based on different political, economic and social standards.


Corporate governance requires “data stewardship” which will rely heavily on different applications of technology.

34


The European bloc: General Data Protection Regulations

New regulations pertaining to data privacy and security such as the EU’s General Data Protection Regulations (GDPR) and a smattering of other privacy laws around the world, such as Singapore’s Personal Data Protection Act (PDPA) require businesses to exert controls over data such as80:

– Obtaining permission before sharing or using an individual’s personal data

– Deleting private data at the request of users

– Segregating and ring-fencing “sensitive” or private data

– Data security standards

– Intellectual property protection

– Keeping data local

Data privacy laws such as the GDPR and PDPA have fractured business models for companies that have grown to enjoy the seamless flow of data around the world, between, for example, local e-commerce platforms and overseas data processing centers, R&D locations and service centers.

Companies in the social media sphere are not the only ones sending commoditized user data around the world. As more manufacturers move to an asset-light business model – meaning they have begun monetizing data emanating from their machines, appliances and devices – data restrictions will impact everything from autonomous vehicles to medical equipment, aircraft engines and home appliances.

Technology as risk mitigation tool

Given the choice between building walls around private data to prevent it from crossing borders, or, from an open-market’s perspective, utilizing

technology to achieve privacy and security throughout a value chain, most would opt for the latter.

This is true of both large and small companies, especially SMEs, which have become ingrained in global value chains as key suppliers of data-driven services and enablers and facilitators in commoditization of consumer data.

The question is: what kinds of technology and innovation exist today to achieve this end? State-of-the-art data privacy and security technologies that must become ubiquitous throughout a digital environment include:

– Anonymization

– Segregation

– Encryption

The term data anonymization sounds more sophisticated than it really is. It involves “hashing” (#), which, simply put, means obscuring portions of, for example, a phone number or a postal code and giving the access “key” to the “hashed” digits to a third, secure party.

Anonymization entails “segregation” of data behind a cyber “firewall” which requires authentication of passcodes in order for the data to be matched. Today, as hackers have access to powerful AI and ever-increasing computing power, businesses are in a cyber arms race to defend their data against increasingly sophisticated cyber intruders.

For example, when four hackers linked to China’s People’s Liberation Army (PLA) breached the cybersecurity walls of Equifax, the US credit rating bureau, they used a combination of powerful AI and algorithms to steal the personal data of some 147 million Americans, easily overcoming the cybersecurity and data privacy safeguards of

Data privacy laws such as the GDPR have fractured business models for many international companies.


35


Figure 5 – Ring-fencing data behind a corporate firewall

Data privacy, localization and security laws require effective data segregation, anonymization and encryption. Corporate governance must keep data safe from both state and non-state hostile actors.

Segregated data

182f6 ####

Hashed data key held by separate entity

####

Separate entitysafeguards

Encryption/decryption codes & keys

Dedicated data security resourcesEncrypted Encry

pted

Encrypted/Anonymized

what many people thought was an impregnable target.81

Corporate governance in the age of techno-nationalism, therefore, will involve rapidly escalating cybersecurity costs. There simply is no way to avoid this reality. And because data needs to be backed up or “mirrored” in separate storage locations, organizations face compounded risks and resource allocation for each separate database. Each time data is segregated, it opens another window for cyber intrusions, thus encryption is also necessary to protect data.

Encryption is a practice that enhances data security and, hence, privacy. Data encryption converts and translates data into different computer code so that only parties who are given a “decryption” key – which translates the code back into a readable form – can read it.

Organizations must now manage encrypted data in three forms82:

– Data at rest

– Data in-process

– Data in-transit

Data privacy and security is vulnerable in all three phases of its existence, and, again, new corporate governance in a techno-nationalist environment will require upgraded security frameworks and solutions that must vastly improve current systems in place today.

Supply chain transparency and traceability

A 2019 report by the McKinsey Global Institute entitled “Globalization in Transition”, stated that trade in services was growing 60% faster than trade in goods.83 This statistic underscores the importance of managing and protecting data in a techno-nationalist trade environment.

New corporate governance in a techno-nationalist environment will require upgraded security frameworks and solutions that must vastly improve current systems.


Source: Author

36



Figure 6 – Data localization requirements by regions

Source: Data Localization Laws: A New Trade Dispute?, WCCFTech, https://wccftech.com/data-localization-laws-a-new-trade-dispute/

Strength of measures Regions

Strong: Explicit requirements that data must be stored on servers within the country.

Brunei, China, Indonesia, Nigeria, Russia, Vietnam

De facto: Laws that create such large barriers to the transfer of data across borders that they effectively act as data localization requirements.

European Union, UK, Norway

Partial: Wide range of measures, including regulations applying only to certain domain names and regulations requiring the consent of an individual before data about them is transferred internationally.

Belarus, India, Kazakhstan, Malaysia, South Korea

Mild: Restrictions on international data transfer under certain conditions.

Argentina, Brazil, Colombia, Peru, Uruguay

Sector-specific: Tailored to specific sectors, including healthcare, telecom, finance, and national security

Australia, Canada, New Zealand, Taiwan, Turkey, Venezuela

None: No known data localization laws. Remaining countries

Data localization laws have been on the rise throughout the world. Data localization requires foreign companies to store data on internet servers and computers that are physically located within a specific country, if such data pertains to local citizens and local business transactions. This places constraints on the cross-border flow of data within corporate value chains and markets, and necessitates proactive data stewardship. From a corporate governance perspective, data must be ring-fenced and additional safeguards must be put in place to manage data privacy and security.

37


Figure 7 – Supply chain transparency & traceability for restricted technologies

Export controlled item marked with

RFID

Item insidesub-assembly

Item/sub-assembly insidecomponent

End user

Component inside

finished products

RFID item tracked to an end-user’s unique identity.

Tagged item is traceable once

imbedded inside a sub-assembly.

Microscopic (RFID) tags affixed to

items for real-time tracking.

Tagged item is traceable when imbedded inside second

component and, again when incor-porated inside a finished product.

RFID #01

RFID #01RFID #01

RFID #01

Radio Frequency Identification (RFID) can be inserted or sprayed onto the tiniest components and technologies, and tracked in real time throughout a global value chain, even as parts are subsumed within a finished product.

RFID can be used to enforce export controls and prevent restricted entities from handling or acquiring controlled and banned technologies.

Tangible goods, however, still comprise the bulk of cross-border trade. From a corporate governance perspective, therefore, physical supply chains will demand innovative and effective risk management approaches.

The underlying objective of effective value chain management is to achieve transparency and traceability. As non-tariff measures such as export controls increase, businesses need to track and trace strategic dual use technologies – including materials, parts, sub-components, components and finished goods, as well as software, data and people – throughout entire supply chains. “End-use” and “end-users” of technology must be identified.

Similarly, as progressive free trade agreements such as the CPTPP and the EU-Japan Free Trade Agreement proliferate, standards regarding carbon

footprints, sustainably harvested natural resources and labor rights will demand that corporate governance addresses transparency and traceability across value chains. Managing this kind of complexity will require powerful technology.

TradeTech and RegTech

Supply chain transparency and traceability challenges in today’s trading environment have spawned a new field: “TradeTech.” More broadly, the term “RegTech” applies to the usage of customized software and other digital resources to achieve compliance with specific kinds of regulations.RegTech leverages the internet of things (IoT), artificial intelligence (AI), cloud-based platforms, 5G, robotics and other Fourth Industrial Revolution technologies.84


Source: Author

As non-tariff measures such as export controls increase, businesses need to track and trace strategic dual use technologies.

38


As the adage goes: necessity is the mother of invention. TradeTech, therefore, is in the process of evolving to meet the compliance needs of companies that are grappling with, for example, export controls, restricted entities and data security and segregation along their value chains. Going forward, from a corporate governance outlook, TradeTech must address key elements, if it is to be effective. These include:

– Unique identifier technology (UIT)

– Interoperability between platforms and backend IT systems

Unique identifier technology and interoperability of systems

Today’s export control laws require that even the tiniest of “controlled” technologies be traced, as they become imbedded or subsumed into larger components and finished goods. In order to track such items, QR codes, RFID and microscopic unique identifier technologies are being implemented.85

This scenario is playing out through first movers in the logistics industry, as they collaborate in data sharing regimes such as TradeLens,86 a containerized ocean shipping data sharing system jointly developed by IBM and Maersk. Another example involves the IATA “One Record” initiative in the air transport sector.87

TradeTech needs to keep evolving towards common standards for so-called verifiable organization networks (VONS) to gain acceptance, which allow for widespread UIT throughout value chains, across public and private platforms for both large and small actors.

The goal from a corporate governance objective, therefore, must be to migrate from a world of centralized

standards (register once, trusted only by one entity) to a world of decentralized standards (register once, trusted by everyone, everywhere in the network).88 A move of this magnitude will require large-scale allocation of resources.

The shift from a centralized to a decentralized VON has been undertaken, mostly, by large, well-funded multinationals such as Maersk and Walmart, which have partnered with IBM and other technology enablers. Distributed ledger (also known as blockchain) technology has played a significant role, but still presents barriers to entry to smaller players, as there are high costs associated with backend interoperability for IT infrastructure, platforms, enterprise resource planning (ERP), transport management systems (TMS) and trade facilitation platforms.

Singapore’s Networked Trade Platform (NTP) provides an example of a trade and logistics facilitation platform with low barriers to entry, which connects a large ecosystem of importers, exporters, carriers and other third parties, and, is a model for public-private partnerships.89 NTP is scalable, thus additional apps and VONs can be added, making it highly inclusive.

Corporate diplomacy

Corporate governance is about implementing and executing rules, standards and values that focus on financial and economic outcomes, as well as social responsibility and sustainability. All are inter-related. More broadly, corporate governance is about risk management and strategic optimization, which go hand-in-hand. But, in the end, it comes down to different kinds of corporate power.


Supply chain transparency and traceability challenges in today’s trading environment have spawned a new field: “TradeTech.”

Distributed ledger (also known as blockchain) technology still presents barriers to entry to smaller players as costs are high.

39


As has been discussed, in a time of techno-nationalism, corporate governance must focus on increasing levels of state activism and intervention in markets, as well as tensions between local laws and standards and “global” values. Where possible, companies must rely on the application of technology to manage data and hard goods.

Paying attention to all of these objectives will require executive leadership to channel resources into the following areas:

– Legal frameworks and processes

– Lobbying through NGOs

– Public-private partnerships

Legal frameworks and processes

Pursuing legal recourse against the imposition of laws and penalties remains a powerful option when prosecuting corporate governance. In September 2020, for example, more than 3500 US companies filed lawsuits in US Court of International Trade against the “section 301” assessment of customs duties on Chinese imported goods.90

Iconic companies such as Ford and Coco-Cola have been absorbing the costs of duties on imported materials, components, and finished products, and, along with others, are suing to recover these costs.

Similarly, when the US executive order to ban the TikTok app in the US was signed in August 2020, TikTok took the matter to court. In September 2020, a Washington DC judge blocked the ban that would have resulted in the removal of TikTok from Apple’s and Google’s app stores.91

A month later, a federal judge in Pennsylvania issued an injunction that

blocked a November 2020 deadline for the official banning of TikTok, because doing so would have deprived TikTok account holders of their livelihoods, as millions of followers produced revenue streams from the app.92

Lobbying through NGOs

Non-governmental organizations (NGOs) and trade associations play a key role as partners in corporate governance. NGOs, in the modern information age, provide valuable services regarding thought leadership, research, and lobbying power.

The Semiconductor Industry Association (SIA), for example, has provided US companies with a powerful voice in Washington. The group has lobbied for government funding for US-based R&D and re-shoring activities, as well as for relief from export bans and restrictions of US technology, which has damaged US companies’ market share overseas and hastened Chinese “de-Americanization” of their value chains.93

NGOs also lobby foreign governments and can be strong allies in influencing policy makers and public opinion.

Public-private partnerships

As was documented in previous reports in this series,94 a paradigm shift in the global trading system and the resulting rise of innovation-mercantilism has galvanized public-private partnerships in market economies. These include initiatives around semiconductors, quantum computing, wireless networks and a host of other areas.

Some of these partnerships include international coalitions, such as the G7 AI initiative, which involves governments, businesses, academic institutions and NGOs.


In September 2020, a Washington DC judge blocked the ban that would have resulted in the removal of TikTok from Apple’s and Google’s app stores.

NGOs, in the modern information age, provide valuable services regarding thought leadership, research, and lobbying power.

Pursuing legal recourse for the imposition of laws and penalties remains a powerful option for corporate governance.

https://www.hinrichfoundation.com/research/wp/tech/us-china-tech-innovation-race/

40


These types of techno-nationalist initiatives and techno-diplomacy produce both challenges and windfalls for non-state actors.

Conclusion

This study has sought to address the complexities and contradictions facing multinational companies in today’s techno-nationalist landscape, specifically, rising state activism and interventionism in markets, as well as competing local versus global compliance and corporate governance matters.

As global value chains continue to fragment and companies strive to deal with multiple streams of strategic goods, data and digital resources, certain sectors such as FinTech will demand increased attention. This trend has compelled companies to address governance issues pertaining to data

privacy and security along with supply chain transparency, all of which require proactive corporate governance.

If the global trading system is to avoid deepening decoupling, and, instead, realize a more open, fair and sustainable global economy, multinational companies should leverage the latest TradeTech and RegTech tools to achieve more traceable value chains and better data stewardship.

Going forward, the question is, to what extent will state and non-state actors work together to mitigate risks associated with techno-nationalism and its impact on the global economy? This responsibility will also drive enhanced corporate governance, as companies reorient their focus to navigating in a world of intensifying geopolitical rivalry.

The rise of innovation-mercantilism has galvanized public-private partnerships in market economies.

41


Researcher bio: Alex Capri

Alex Capri is a research fellow at the Hinrich Foundation and a senior fellow and lecturer in the Business School at the National University of Singapore. He also teaches at the NUS Lee Kuan Yew School of Public Policy.

He is the author of Techno-Nationalism:How it’s reshaping trade, geopolitics,and society (Wiley), due out in 2021.

From 2007-2012, Alex was the Partner and Regional Leader of KPMG’s International Trade & Customs Practice in Asia Pacific, based in Hong Kong. Alex has over 20 years of experience in global value chains, business and international trade – both as an academic and a professional consultant.

He advises governments and businesses on matters involving trade and global value chains. Areas of focus include: IT solutions for traceable supply chains, sanctions, export controls, FTAs and trade optimization.

Alex has been a panelist and workshop leader for the World Economic Forum.He writes a column for Forbes Asia, Nikkei Asia and other publications and is a frequent guest on global television and radio networks.

He holds a MSc from the London School of Economics in International Political Economy and a BSc in International Relations from the University of Southern California.

Alex Capri

Research Fellow, Hinrich Foundation andVisiting Senior Fellow,NUS Business School

42


1. Schwab, K., “The Fourth Industrial Revolution: what it means, how to respond”, World Economic Forum, 14 Jan 2016, https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/

2. Dual use technologies are defined as tangible goods as well as software, blueprints, designs and other forms of IP that are developed for commercial applications but could be used for military purposes.

3. Mancheri, N., “World trade in rare earths, Chinese export restrictions, and implications”, Resources Policy, Vol. 46, Part 2, Dec 2015, pp. 262,271, https://www.sciencedirect.com/science/article/abs/pii/S0301420715001002

4. Yang, Y.Z., Nair, A., “TikTok owner ByteDance to invest billions in Singapore over three years: source”, Reuters, 11 Sept 2020, https://www.reuters.com/article/uk-china-bytedance-singapore/bytedance-to-invest-billions-recruit-hundreds-in-singapore-in-three-years-source-idUKKBN2620FW

5. Ross, W., “Commerce Department Prohibits WeChat and TikTok Transactions to Protect the National Security of the United States”, US Department of Commerce, 18 Sept 2020, https://www.commerce.gov/news/press-releases/2020/09/commerce-department-prohibits-wechat-and-tiktok-transactions-protect

6. Sherman, A., “TikTok reveals detailed user numbers for the first time”, CNBC, 24 Aug 2020, https://www.cnbc.com/2020/08/24/tiktok-reveals-us-global-user-growth-numbers-for-first-time.html

7. Gibbs, M., “MIT researchers show you can be identified by a just few data points”, Network World, 30 Jan 2015, https://www.networkworld.com/article/2878394/mit-researchers-show-you-can-be-identified-by-a-just-few-data-points.html

8. “The Information Major Tech Companies (Including Google, Apple, Facebook, TikTok) Are Collecting From Their Users”, Digital Information World, 12 August 2020, https://www.digitalinformationworld.com/2020/08/infographic-what-data-are-giant-tech-companies-collecting-from-you.html

9. 2020 Crowdstrike Global Threat Report, Crowdstrike, https://www.crowdstrike.com/resources/reports/2020-crowdstrike-global-threat-report/

10. Tucker, E., “US charges 5 Chinese citizens in global hacking campaign”, Associated Press, 17 Sept 2020, https://apnews.com/article/technology-media-social-media-crime-china-abe63876eedc5a95c90a37ca88024809; O’Kane, S., “Chinese hackers charged with stealing data from NASA, IBM, and others”, The Verge, 20 Dec 2018, https://www.theverge.com/2018/12/20/18150275/chinese-hackers-stealing-data-nasa-ibm-charged

11. “Addressing the Threat Posed by TikTok, and Taking Additional Steps To Address the National Emergency With Respect to the Information and Communications Technology and Services Supply Chain”, Federal Register, 11 Aug 2020, https://www.federalregister.gov/documents/2020/08/11/2020-17699/addressing-the-threat-posed-by-tiktok-and-taking-additional-steps-to-address-the-national-emergency

12. “TikTok deal under new threat as Trump insists on total US control”, BBC, 21 Sept 2020, https://www.bbc.com/news/technology-54233234

13. Yang, Y., Liu, N., Kruppa, M., Fontanella-Khan, J., “TikTok deal hit by confusion over who will own and control the app”, Financial Times, 21 Sept 2020, https://www.ft.com/content/c077eed2-44a5-43f7-b0c4-5531a451fdc1

14. “Chinese tech groups display closer ties with Communist Party”, Financial Times, 10 Oct 2017, https://www.ft.com/content/6bc839c0-ace6-11e7-aab9-abaa44b1e130

Endnotes

43


15. He, L., “China is sending government officials into companies like Alibaba and Geely”, CNN Business, 24 Sept 2019, https://edition.cnn.com/2019/09/24/business/china-government-officials-companies/index.html

16. He, L., “Xi Jinping wants China’s private companies to fight alongside the Communist Party”, CNN Business, 22 Sept 2020, https://edition.cnn.com/2020/09/22/business/china-private-sector-intl-hnk/index.html

17. “Executive Order on Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies”, White House, 12 Nov 2020, https://www.whitehouse.gov/presidential-actions/executive-order-addressing-threat-securities-investments-finance-communist-chinese-military-companies/

18. “The Chinese Communist Party’s Military-Civil Fusion Policy”, US Department of State, https://www.state.gov/military-civil-fusion/

19. Yang, Y.Z., Nair, A., “TikTok owner ByteDance to invest billions in Singapore over three years: source”, Reuters, 11 Sept 2020, https://www.reuters.com/article/uk-china-bytedance-singapore/bytedance-to-invest-billions-recruit-hundreds-in-singapore-in-three-years-source-idUKKBN2620FW

20. “Singapore receives 21 applications for five digital bank licences”, Financial Times, 7 Jan 2020, https://www.ft.com/content/f9356bdc-3102-11ea-a329-0bcf87a328f2

21. Ruehl, M., “Switzerland of Asia: Singapore increases presence as tech hub”, Nikkei Asia, 5 Nov 2020, https://asia.nikkei.com/Spotlight/Comment/Switzerland-of-Asia-Singapore-increases-presence-as-tech-hub

22. Alibaba Group Holding Limited (BABA), Yahoo Finance, https://finance.yahoo.com/quote/BABA/

23. Capri, A., “Alibaba: Can A Chinese E-Commerce Company Save The American Dream?”, Forbes, 12 Jan 2017, https://www.forbes.com/sites/alexcapri/2017/01/12/alibaba-can-a-chinese-e-commerce-company-save-the-american-dream-trump-jack-ma/?sh=4837ce952fe3

24. Huang, J., “Have Retired Jack Ma, Alibaba Steered Away From China Communist Party’s Clutches?”, Voice of America, 18 Sept 2019, https://www.voanews.com/east-asia-pacific/have-retired-jack-ma-alibaba-steered-away-china-communist-partys-clutches

25. “Jack Ma confirmed as Chinese Communist Party Member”, Bloomberg, 27 Nov 2018, https://www.bloomberg.com/news/articles/2018-11-27/jack-ma-communist-and-the-tricky-balance-for-china-s-capitalists

26. “Alipay Teams up with UnionPay as Beijing Cuts Ties Between Payments Sector and Banks”, China Banking News, 17 Sept 2018, https://www.chinabankingnews.com/2018/09/17/alipay-teams-unionpay-beijing-cuts-ties-payments-sector-banks/

27. Deng, I., “Tencent and state-owned UnionPay to merge QR code systems for mobile payments in China”, South China Morning Post, 8 Jan 2020, https://www.scmp.com/tech/apps-social/article/3045226/tencent-and-state-owned-unionpay-merge-qr-code-systems-mobile

28. Wilhelm, A., “Pulled Ant Group IPO costs Alibaba nearly $60B in market cap”, TechCrunch, 4 Nov 2020, https://techcrunch.com/2020/11/03/pulled-ant-group-ipo-costs-alibaba-nearly-60b-in-market-cap/

29. Ren, S., “Jack Ma’s Blunt Words Just Cost Him $35 Billion”, The Washington Post, 10 Nov 2020, originally printed in Bloomberg, https://www.washingtonpost.com/business/jack-mas-blunt-words-just-cost-him-35-billion/2020/11/03/bd2ef486-1ded-11eb-ad53-4c1fda49907d_story.html

30. 3King, I., Wu, D., “Arm Accuses China Venture Ex-CEO of Blocking its Business”, Bloomberg, 29 Jul 2020, https://www.bloomberg.com/news/articles/2020-07-29/arm-accuses-china-venture-ex-ceo-of-blocking-its-business?sref=jeNvC3eC

31. “Arm China chief defends move to seize control of unit”, Financial Times, 26 Nov 2020, https://www.ft.com/content/f86a7ecf-8a6c-4be1-8c96-567f3dd424fd

ENDNOTES

44


32. “Arm China sued by investor over unit chief ouster”, Nikkei Asia, 16 Sept 2020, https://asia.nikkei.com/Business/Companies/Arm-China-sued-by-investor-over-unit-chief-ouster#:~:text=SHANGHAI%20(Reuters)%20%2D%2D%20The%20Chinese,in%20a%20%2440%20billion%20deal

33. “China to import $300 billion of chips for third straight year: industry group”, Reuters, 26 Aug 2020, https://www.reuters.com/article/us-china-semiconductors-idUSKBN25M1CX

34. Workman, D., “China’s top 10 imports”, World’s Top Exports, http://www.worldstopexports.com/chinas-top-10-imports/

35. Nusbaum, M., “Chinese groups go from fish to chips in new ‘Great Leap Forward”, Financial Times, 12 Oct 2020, https://www.ft.com/content/46edd2b2-1734-47da-8e77-21854ca5b212

36. Capri, A., “Semiconductors at the hear of the US-China tech war”, Hinrich Foundation, 17 Jan 2020, https://www.hinrichfoundation.com/research/wp/tech/semiconductors-at-the-heart-of-the-us-china-tech-war/

37. Commerce Addresses Huawei’s Efforts to Undermine Entity List, Restricts Products Designed and Produced with U.S. Technologies, US Department of Commerce, 15 May 2020, https://www.commerce.gov/news/press-releases/2020/05/commerce-addresses-huaweis-efforts-undermine-entity-list-restricts

38. Li, L., Cheng, T.F., Yu, Y.F., “How a handful of US companies can cripple Huawei’s supply chain”, Nikkei Asia, 19 Aug 2020, https://asia.nikkei.com/Spotlight/Huawei-crackdown/How-a-handful-of-US-companies-can-cripple-Huawei-s-supply-chain

39. Wataru, S., Li, L., Cheng, T.F., “SoftBank reaches $40bn deal to sell Arm to US chipmaker Nvidia”, Nikkei Asia, 14 Sept 2020, https://asia.nikkei.com/Business/SoftBank2/SoftBank-reaches-40bn-deal-to-sell-Arm-to-US-chipmaker-Nvidia#:~:text=Announcing%20the%20deal%20on%20Monday,the%20era%22%20of%20artificial%20inte-lligence.&text=SoftBank%20will%20receive%20%2412%20billion,%2421.5%20billion%20in%20Nvidia%20stock

40. “Arm China chief defends move to seize control of unit”, Financial Times, 26 Nov 2020, https://www.ft.com/content/f86a7ecf-8a6c-4be1-8c96-567f3dd424fd

41. Sweney, M., “Arm co-founder: Nvidia takeover would create another US tech monopoly”, The Guardian, 12 Oct 2020, https://www.theguardian.com/business/2020/oct/12/arm-co-founder-nvidia-takeover-would-create-another-us-tech-monopoly

42. “Huawei ban: UK to impose early end to use of new 5G kit”, BBC, 30 Nov 2020, https://www.bbc.com/news/business-55124236

43. “TikTok booms in Southeast Asia as it picks path through political minefields”, The Straits Times, 28 August 2020, https://www.straitstimes.com/asia/se-asia/tiktok-booms-in-south-east-asia-as-it-picks-path-through-political-minefields

44. Ibid.

45. Potkin, F., “Exclusive: ByteDance censored anti-China content in Indonesia until mid-2020, sources say”, Reuters, 13 Aug 2020, https://www.reuters.com/article/us-usa-tiktok-indonesia-exclusive-idUSKCN2591ML

46. Pearson, J., “Exclusive: Facebook agreed to censor posts after Vietnam slowed traffic – sources”, Reuters, 22 April 2020, https://www.reuters.com/article/us-vietnam-facebook-exclusive-idUSKCN2232JX

47. Mankotia, A.S., “Apply may take a bigger bite of India’s manufacturing pie”, The Economic Times, 11 May 2020, https://economictimes.indiatimes.com/tech/hardware/apple-may-take-a-bigger-bite-of-indias-manufacturing-pie/articleshow/75665975.cms?from=mdr

48. Apple – Consolidated Financial Statements 4Q20, page 1, October 2020, via Statista, https://www.statista.com/statistics/382175/quarterly-revenue-of-apple-by-geograhical-region/

49. Borak, M., “Apply removed 805 apps in China from 2018 to 2019”, South China Morning Post, 29 Jan 2020, https://www.scmp.com/abacus/tech/article/3048047/apple-removed-

ENDNOTES

45


805-apps-china-2018-2019

50. Apple Human Rights Policy, https://s2.q4cdn.com/470004039/files/doc_downloads/gov_docs/2020/Apple-Human-Rights-Policy.pdf

51. Microsoft Global Human Rights Statement, https://www.microsoft.com/en-us/corporate-responsibility/human-rights-statement

52. Xie, J., “China’s Computers Run on Microsoft Windows: Are They Vulnerable to US Pressure?”, Voice of America, 9 June 2020, https://www.voanews.com/east-asia-pacific/voa-news-china/chinas-computers-run-microsoft-windows-are-they-vulnerable-us

53. Greenwald, G., MacAskill, E., Poitras, L., Ackerman, S., Rushe, D., “Microsoft handed the NSA access to encrypted messages”, The Guardian, 12 Jul 2013, https://www.theguardian.com/world/2013/jul/11/microsoft-nsa-collaboration-user-data

54. Statt, N., “Microsoft’s Bing search engine is back online in China”, The Verge, 23 Jan 2019, https://www.theverge.com/2019/1/23/18195200/microsoft-bing-search-engine-blocked-in-china-internet-censorship

55. Mozur, P., Goel, V., “To Reach China, LinkedIn Plays by Local Rules”, The New York Times, 5 Oct 2014, https://www.nytimes.com/2014/10/06/technology/to-reach-china-linkedin-plays-by-local-rules.html

56. Xie, J., “China’s Computers Run on Microsoft Windows: Are They Vulnerable to US Pressure?”, Voice of America, 9 June 2020, https://www.voanews.com/east-asia-pacific/voa-news-china/chinas-computers-run-microsoft-windows-are-they-vulnerable-us

57. Su, J., “Confirmed: Google Terminated Project Dragonfly, Its Censored Chinese Search Engine”, Forbes, 19 Jul 2019, https://www.forbes.com/sites/jeanbaptiste/2019/07/19/confirmed-google-terminated-project-dragonfly-its-censored-chinese-search-engine/?sh=40dd6d667e84

58. Paul, V., Forster, M., “Singapore: Digitization of a Financial Powerhouse”, ASEAN Briefing, 8 Apr 2019, https://www.aseanbriefing.com/news/singapore-digitization-of-a-financial-powerhouse/

59. Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC, OJ L 337, 23.12.2015, p. 35–127, December 2015, Official Journal of the European Union, http://data.europa.eu/eli/dir/2015/2366/oj

60. Chanjaroen, C., Huang, Z.P., “TikTok Owner to Spend Billions in Singapore After US Ban”, Bloomberg, 11 Sept 2020, https://www.bloomberg.com/news/articles/2020-09-11/tiktok-owner-plans-to-spend-billions-in-singapore-after-u-s-ban?sref=jeNvC3eC

61. Campbell, C., “How China Is Using ‘Social Credit Scores’ to Reward and Punish Its Citizens”, Time, https://time.com/collection/davos-2019/5502592/china-social-credit-score/

62. Schulp, J., DeWitt, C., “The ‘Holding Foreign Companies Accountable Act’ has all the nuance of a sledgehammer”, MarketWatch, 24 July 2020, https://www.marketwatch.com/story/the-senates-china-bashing-legislation-on-auditors-has-the-nuance-of-a-sledgehammer-2020-07-24

63. “Executive Order on Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies”, White House, 12 Nov 2020, https://www.whitehouse.gov/presidential-actions/executive-order-addressing-threat-securities-investments-finance-communist-chinese-military-companies/

64. Sevastopulo,D., Smith, C., “US investors barred from shares in China military-linked companies”, Financial Times, 13 Nov 2020, https://www.ft.com/content/c3c034cd-15bb-415d-89d7-203b1681523e

65. “Pentagon lists 20 companies aiding Chinese military”, Financial Times, 24 Jun 2020, https://www.ft.com/content/cd44c4ae-adda-4c5b-aa0e-853505c25d31

66. “HSBC: Over $50B ANT GROUP’s IPO Loan Applications Received as at 6pm Yesterday”,

ENDNOTES

46


AAStocks Financial News, 28 Oct 2020, http://www.aastocks.com/en/stocks/news/aafn-con/NOW.1051686/popular-news

67. Freifeld, K., Stecklow, S., “Exclusive: HSBC probe helped lead to U.S. charges against Huawei CFO”, Reuters, 26 Feb 2019, https://www.reuters.com/article/us-huawei-hsbc-exclusive-idUSKCN1QF1IA

68. Yeung, K., “China’s ambiguous Unreliable Entity List gives Beijing ‘leeway’ to take punitive actions against foreign firms”, South China Morning Post, 22 Sept 2020, https://www.scmp.com/economy/china-economy/article/3102520/chinas-unreliable-entity-list-gives-beijing-leeway-take

69. Makortoff, K., “How HSBC got caught in a geopolitical storm over Hong Kong security law”, The Guardian, 20 Sept 2020, https://www.theguardian.com/world/2020/sep/30/how-hsbc-got-caught-in-a-geopolitical-storm-over-hong-kong-security-law

70. Chatterjee, S., White, L., “HSBC and StanChart back China security law for Hong Kong”, Reuters, 3 Jun 2020, https://www.reuters.com/article/us-hongkong-protests-hsbc-hldg-idUSKBN23A1ZO

71. HSBC Annual Report and Accounts 2019, https://www.hsbc.com/investors/results-and-announcements/annual-report

72. Bray, C., “HSBC is in from the cold as China’s finance ministry adds bank in latest €4 billion bond sale after previous exclusion”, South China Morning Post, 18 Nov 2020, https://www.scmp.com/business/banking-finance/article/3110317/chinas-ministry-finance-includes-hsbc-latest-eu4-billion; China Development Bank bonds, 15 Oct 2020, https://www.ebanking.hsbc.com.hk/1/content/hongkong/pdf/investments/bonds_rmb_101019e.pdf

73. Rapoza, K., “Why HSBC Loves China’s Silk Road”, Forbes, 17 May 2017, https://www.forbes.com/sites/kenrapoza/2017/05/17/why-hsbc-loves-chinas-silk-road/?sh=6f627aea697e

74. Sanchez, I., Garcia, M., “Release of Hong Kong Autonomy Act report paves way for sanctions against foreign financial institutions”, DLA Piper, 19 Oct 2020, https://www.dlapiper.com/en/us/insights/publications/2020/10/release-of-hong-kong-autonomy-act-report-paves-way-for-sanctions-against-ffis/. The US, EU and other countries are increasingly linking sanctions to China’s public record on human rights.

75. Wang, O., “Time for China to decouple the yuan from US dollar, former diplomat urges”, South China Morning Post, 5 Jul 2020, https://www.scmp.com/economy/china-economy/article/3091865/time-china-decouple-yuan-us-dollar-former-party-official

76. “Tech startups leaving Hong Kong due to security law eye move to US, UK, Singapore”, Business Times, 21 Jul 2020, originally published by Bloomberg, https://www.businesstimes.com.sg/technology/tech-startups-leaving-hong-kong-due-to-security-law-eye-move-to-us-uk-singapore

77. Sheng, W., “Shenzhen looks to draw tech firms with new dual-class share rule”, TechNode, 27 Aug 2020, https://technode.com/2020/08/27/shenzhen-looks-to-draw-tech-firms-with-new-dual-class-share-rule/

78. “Xi Wants Young Hongkongers to Move to China”, Bloomberg, 14 Oct 2020, https://www.bloomberg.com/news/articles/2020-10-14/xi-looks-to-attract-hong-kong-youth-to-china-after-protests

79. “The President’s Executive Order on Hong Kong Normalization”, Executive Orders, The White House, 14 Jul 2020, https://www.whitehouse.gov/presidential-actions/presidents-executive-order-hong-kong-normalization/

80. Data Protection Laws of the World, DLA Piper, https://www.dlapiperdataprotection.com/

81. Barrett, B., “How 4 Chinese Hackers Allegedly Took Down Equifax”, Wired, 2 Oct 2020, https://www.wired.com/story/equifax-hack-china/

82. “What is Data Encryption at Rest?”, Security First, 17 Dec 2018, https://securityfirstcorp.com/what-is-data-encryption-at-rest/

83. Lund, S., Manyika, J., Woetzel, J., Bughin, J., Krishnan, M., Seong, J.M., Muir, M., “Globalization in transition: The future of trade and value chains”, McKinsey Global Institute, 16 Jan 2019,

ENDNOTES

47


https://www.mckinsey.com/featured-insights/innovation-and-growth/globalization-in-transition-the-future-of-trade-and-value-chains#

84. Schwab, K., “The Fourth Industrial Revolution: what it means, how to respond”, World Economic Forum, 14 Jan 2016, https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/; “Mapping Trade Tech”, World Economic Forum, December 2020

85. See Goldsmith, C., “Microscopic ‘smart dust’ sensors are set to revolutionise a range of sectors”, The New Economy, 3 Jun 2019, https://www.theneweconomy.com/technology/microscopic-smart-dust-sensors-are-set-to-revolutionise-a-range-of-sectors

86. TradeLens, https://www.tradelens.com/platform

87. WEF Agenda Blog, Dec. 2020, Alex Capri and Wolfgang Lehmacher

88. Hewett, N., Ballinger, A., “3 ways to use digital identity systems in global supply chains”, The European Sting, 15 May 2019, in collaboration with World Economic Forum, https://europeansting.com/2019/05/15/3-ways-to-use-digital-identity-systems-in-global-supply-chains/

89. Introduction to NTP, https://www.ntp.gov.sg/public/introduction-to-ntp---overview

90. “Thousands of companies sue US over China tariffs”, Financial Times, 4 Oct 2020, https://www.ft.com/content/2b85124a-2196-42ec-96bb-4e9a3cb962dd

91. Perez, S., Panzarino, M., “TikTok stars got a judge to block Trump’s TikTok ban”, TechCrunch, 31 Oct 2020, https://techcrunch.com/2020/10/30/tiktok-stars-got-a-judge-to-block-trumps-tiktok-ban/

92. Ibid.

93. Kadam, H., “Semiconductor Association to lobby for $37B to boost US manufacturing”, Business-Newsupdate, 1 Jun 2020, http://business-newsupdate.com/semiconductor-association-to-lobby-for-37b-to-boost-us-manufacturing; “Ban on Huawei may weaken the global competitiveness of US chip suppliers”, SemiMedia, 11 Sept 2020, http://www.semimedia.cc/?p=8192

94. See Capri, A., “Techno-nationalism and the US-China tech innovation race”, Hinrich Foundation, August 2020, https://www.hinrichfoundation.com/research/wp/tech/us-china-tech-innovation-race/

ENDNOTES


The Hinrich Foundation is a unique Asia-based philanthropic organization that works to advance mutually beneficial and sustainable global trade.

We believe sustainable global trade strengthens relationships between nations and improves people’s lives.

We support original research and education programs that build understanding and leadership in global trade. Our approach is independent, fact-based and objective.

MEDIA INQUIRIES

Ms. Theresa Fonseca Head of Marketing and CommunicationsT: +65 9827 [email protected]

There are many ways you can help advance sustainable global trade. Join our training programs, participate in our events, or partner with us in our programs. [email protected]

Receive our latest articles and updates about our programs by subscribing to our newsletterhinrichfoundation.com

hinrichfdn hinrichfoundation hinrich foundation hinrichfoundation

Documents

Techno-nationalism and corporate governance