Musk’s ties to China add potential risks to Twitter purchase

Elon Musk’s ties to China through his role as the largest shareholder in electric car brand Tesla could add complexity to his bid to buy Twitter.

Other companies that want access to China are bowing to pressure to follow Beijing’s positions on Taiwan and other issues. But Twitter is blocked by internet barriers that prevent most Chinese users from viewing global social networks, giving Beijing no influence over the company, even though the ruling Communist Party uses it to spread propaganda abroad.

Tesla Inc.’s ambitions in China could give Beijing the upper hand in pressuring Twitter to silence human rights activists and other critics or ease its rules on propaganda if Musk’s $44 billion buyout goes ahead, some experts suggest. . Chinese customers bought half of the Teslas sold last year. Its busiest factory and “main export hub” is in Shanghai.

“The Chinese have tremendous influence over companies,” said Anne Stevenson-Yang of J Capital Research. “If he cares about (Tesla’s) Shanghai operation, then he will put everything else in service of that.”

Musk says he sees “no indications” that Beijing could use Tesla as leverage, but other companies are not waiting for government orders. Automakers, clothing brands and others take preemptive steps to protect their access to China by changing the marketing or products sold around the world to reflect official positions such as the ruling party’s claim that Taiwan’s self-government is part of its territory.

Musk said on Friday that his offer was put on hold while he tried to confirm whether the number of Twitter accounts with no real users behind them was below 5% of the total, as the company says.

On Monday, he told a business conference in Miami that a lower-priced deal was “not out of the question,” Bloomberg News reported. That backed up suggestions from industry analysts that Musk wants out of the deal or a lower price because of the falling value of Tesla’s socks, some of which he has pledged to finance the purchase.

Attempting to use an investor’s stake in one company to pressure another company out 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 as it imposes costs on China and its public.

Officials warned that companies must “respect the sentiments of the Chinese people” and avoid “eating Chinese rice while breaking Chinese bowls.”

A handful have given up opportunities in China to avoid cooperating with official censorship or surveillance or suffer backlash from consumers abroad over human rights or other issues. More common are companies like hotel operator Marriott, which in 2018 fired an employee who “liked” a Twitter post praising a survey of customers outside of China that called Tibet a country.

Regulators can put pressure on automakers by preventing them from expanding production and ordering them to keep quiet about why. More openly, state media have called for boycotts of Japanese, South Korean and other brands during 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, who is the chairman of Tesla, was asked about the possibility that Beijing could use the automaker as leverage over Twitter while appearing virtually at a May 11 event hosted by The Financial Times on the future of Tesla. the automotive industry.

“I haven’t seen any indications to that effect,” Musk replied.

Musk said he expects China to be 25% to 30% of Tesla’s market in the long run.

The South African-born billionaire said he doesn’t see another Tesla factory in China any time soon, but the company will expand in Shanghai.

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

Human rights activists criticized Tesla after it opened a showroom in northwestern Xinjiang last year, despite allegations of abuses against Muslim ethnic 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 as much freedom of expression as the laws of each country allow.

He hasn’t said what he might do about Twitter’s requirement that accounts of China’s state media and officials must be labeled “state-affiliated.” Removing that or curbing inflammatory speech could make it easier for Beijing or other governments to influence American public opinion during elections.

A reporter from the official China Daily newspaper wants the tag removed.

“Elon Musk should remove my tag,” Chen Weihua wrote on Twitter on April 30. “This is totally discriminatory and suppresses freedom of expression.”

Some companies are failing to find a compromise between Chinese pressure and public outrage abroad over allegations of forced labor in Xinjiang and other abuses.

Last year, state media called for a boycott of Swedish clothing retailer H&M and other brands that stopped using Xinjiang cotton. Most held onto their positions despite a hit to sales, possibly fearing further losses from a consumer backlash abroad.

Some companies don’t want to be seen as “carrying water for the government,” said Lester Ross, chief of the Beijing office of the Washington law firm WilmerHale.

China has the largest population of Internet users with just over a billion, according to official data. But most cannot see Twitter, other overseas social networks and thousands of websites run by media outlets, human rights or pro-democracy activists and others.

China has its own popular but heavily censored social networks. They are required to remove material deemed subversive or pornographic.

Sina Weibo, a Twitter-like microblogging service, says it has 573 million active monthly 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 came to power in 2012.

Accounts run by youth gay and lesbian support groups have been shut down. Complaints about food shortages were eliminated when Shanghai was put on lockdown to combat virus outbreaks.

In 2018, Tesla became the first foreign automaker to set up its own factory in China after ownership restrictions in the industry were lifted. Until then, global automakers had to work through state partners that assembled their vehicles.

Tesla’s honeymoon included access to subsidies for electric buyers and a sales tax exemption. But when subsidies were extended in 2020 to help the industry weather the pandemic, Tesla was left out, while its closest Chinese rival, luxury electric brand NIO, remained eligible.

Musk is known for his outlandish gestures including smoking marijuana during a radio interview. But he is alert to Chinese sensitivities.

He complained that anti-virus measures in California disrupted Tesla’s production, but said nothing publicly after the Shanghai shutdown forced his company’s factory to close.

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