Elon Musk’s China ties add potential risks to Twitter acquisition


BEIJING — Elon Musk’s ties to China, in his role as the largest shareholder in electric car brand Tesla, could complicate his bid to buy Twitter.

Other companies seeking to enter China are bowing to pressure to follow Beijing’s stance on Taiwan and other issues. But Twitter is shut down by internet barriers that prevent most Chinese users from seeing global social media, which puts no pressure on Beijing on the company, although the ruling Communist Party uses it to spread propaganda abroad.

Tesla Inc.’s ambitions in China, if Musk’s $44 billion buyout continues, could give Beijing leverage to put pressure on Twitter to silence human rights activists and other critics, or to ease propaganda rules, some experts say. Chinese customers bought half of the Teslas sold last year. Its busiest factory and “main export center” is in Shanghai.

“The Chinese use tremendous leverage on businesses,” said Anne Stevenson-Yang of J Capital Research. “If you care about (Tesla’s) Shanghai operation, then you will put everything else at your service for it.”

Musk says he sees “no indication” that Beijing might use Tesla as leverage, but he is not awaiting government orders from other companies. Automakers, clothing brands, and others are taking preventative measures to protect their access to China by modifying the marketing or products sold worldwide to reflect official positions, such as the ruling party’s claim that self-governing Taiwan is part of its territory.

Whether the Twitter deal will continue remains an open question. Musk tweeted on Tuesday that this cannot happen unless the company shows public evidence that the number of Twitter accounts with no real users behind them is less than 5% of the total.

He said Monday at a business conference in Miami that a deal at a lower price was “unlikely”, Bloomberg News reported. This bolstered suggestions from industry analysts that Musk wanted to exit the deal or at a lower price due to the drop in the value of Tesla stockings, some of which he had committed to fund the purchase.

Trying to use an investor’s stake in a company to put pressure on another company outside of China would be a new tactic. But foreign investors know that the ruling party is increasingly assertive in defending its “core interests” around the world, attacking global brands even at cost to China and the public.

Authorities warned companies should “respect the feelings of the Chinese people” and avoid “eating Chinese rice while breaking Chinese bowls”.

A handful of people have given up on opportunities in China to avoid collaborating with official censorship or surveillance or facing a consumer backlash abroad on human rights or other issues. More common are companies like hotel operator Marriott, which fired an employee in 2018 for “liking” a Twitter post praising a customer survey that named Tibet as a country outside of China.

Regulators can put pressure on automakers by preventing them from expanding output while ordering them to remain silent about the cause. More openly, state media has called for a boycott of Japanese, South Korean and other brands amid disputes with their governments.

Tesla’s sales in China rose 226% last year to 473,600 vehicles, according to LMC Automotive. That was about half of its 935,222 global deliveries.

Musk, the chairman of Tesla, was asked about the possibility of the automaker being used as leverage by Beijing via Twitter, while appearing virtually at an event hosted by The Financial Times on May 11 about the future of the auto industry.

“I didn’t see any signs of that direction,” Musk replied.

Musk said he expects China to make up 25-30% of the Tesla market in the long run.

The South African-born billionaire said he doesn’t see another Tesla factory in China in the near term, but the company will grow in Shanghai.

The Austin, Texas-based company did not respond via email to questions about its expansion plans.

Human rights activists criticized Tesla last year after opening a showroom in northwest Xinjiang despite complaints of harassment against ethnic Muslim groups living there. The company is not alone: ​​Volkswagen AG operates a factory in the region, and Chinese partners of other global brands have outlets there.

Musk says he wants to make Twitter a “politically neutral” forum for free speech to the extent permitted by each country’s laws.

He did not say what Twitter could do about Chinese state media and officials’ accounts that should be labeled as “state-linked.” Throwing this aside or limiting provocative speech could make it easier for Beijing or other governments to influence American public opinion during elections.

A reporter for the official China Daily wants the label to be dropped.

“Elon Musk should untag me,” Chen Weihua wrote on Twitter on April 30. “This is completely discriminatory and stifling freedom of expression.”

Some companies are unable to find a compromise between Chinese pressure and public anger abroad over accusations of forced labor and other abuses in Xinjiang.

Last year, state media called for a boycott of Swedish clothing retailer H&M and other brands that stopped using cotton from Xinjiang. Most held their positions despite falling sales, presumably for fears of greater losses from a consumer backlash abroad.

Lester Ross, head of the Beijing office of Washington law firm WilmerHale, said some companies don’t want to appear like they’re “carrying water for the government.”

According to official data, China has the largest population with just over 1 billion internet users. But many cannot see Twitter, other social media abroad, and the thousands of websites run by news organisations, human rights or pro-democracy activists and others.

China has its own popular but heavily censored social media. They must delete material that is considered subversive or pornographic.

Sina Weibo, a Twitter-like microblogging service, says it has 573 million monthly active users, or more than double Twitter’s 229 million. Tencent’s WeChat messaging service says 1.2 billion people use it every day.

Censorship has steadily tightened since President Xi Jinping took power in 2012.

Accounts run by support groups for young gays and lesbians have been disabled. Complaints about food shortages were erased when Shanghai was closed to fight virus outbreaks.

In 2018, Tesla became the first foreign automaker to set up its own factory in China following the lifting of industry ownership restrictions. Until then, global automakers had to work through state-owned partners who assembled their vehicles.

Tesla’s honeymoon includes access to subsidies for buyers of electricity and an exemption from sales tax. But when subsidies were extended in 2020 to help the industry through the pandemic, Tesla was excluded, while its closest Chinese competitor, luxury electric brand NIO, remained eligible.

Musk is known for flashy moves that include smoking marijuana during a radio interview. But China is on guard against its sensitivities.

He complained that anti-virus measures in California were disrupting Tesla production, but said nothing publicly after Shanghai’s closure forced his company’s factory to shut down.

Copyright © 2022 The Washington Times, LLC.


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