Elon Musk’s China ties add potential risk to Twitter purchases

Elon Musk’s ties to China through his role as the largest shareholder of electric car brand Tesla could add complexity to his Twitter acquisition attempt.

Elon Musk’s ties to China through his role as the largest shareholder of electric car brand Tesla could add complexity to his Twitter acquisition attempt.

Other companies seeking access to China have yielded to pressure to conform to Beijing’s stance on Taiwan and other issues. However, Twitter has been shut down by internet barriers that prevent most Chinese users from viewing the global social media, which leaves Beijing with no leverage over the company, even though the Communist Party The ruling property uses it to propagate abroad.

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

“The Chinese use enormous leverage over businesses,” said Anne Stevenson-Yang of J Capital Research. “If you’re interested in (Tesla’s) Shanghai operation, you’d put everything else into that.”

Musk said he has “no indication” Beijing could use Tesla as leverage, but other companies are not waiting for government orders. Automakers, clothing brands and others take action first to protect their access to China by changing marketing practices or products sold worldwide to reflect reflect official positions, such as the ruling party’s claim that self-governing Taiwan is part of its territory.

Whether the Twitter deal will go ahead remains an open question. On Tuesday, Musk tweeted that that can’t happen unless the company gives public proof that the number of Twitter accounts with no users actually behind them is less than 5% of the total.

On Monday, he said at a business conference in Miami that a deal for a lower price was not “out of the question,” Bloomberg News reported. That has supported suggestions by industry analysts that Musk wants to pull out of the deal or a lower price due to the falling value of the Tesla sock, some of which he has pledged to fund. buying.

Attempting to use an investor’s stake in one company to pressure 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 and attacking global brands even if it comes at a cost to them. China and the public.

Officials have warned companies to “respect the feelings of the Chinese people” and avoid “eating Chinese rice while smashing Chinese bowls”.

A few have given up opportunities in China to avoid cooperating with official censorship or surveillance authorities or incur backlash from overseas consumers 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 customer survey outside of China calling Tibet a country. family.

Regulators can pressure automakers by preventing them from expanding output while asking them to keep quiet about why. More openly, state media have called for boycotts of Japanese, Korean and other brands during the dispute with their governments.

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

Musk, the chairman of Tesla, was asked about the possibility that the automaker could be used as leverage by Beijing on Twitter during a virtual appearance at a May 11 event hosted by The Financial Times. about the future of the auto industry.

“I don’t see any indication of that effect,” Musk replied.

Musk said he expects China to account for 25% to 30% of Tesla’s market in the long term.

The South African-born billionaire said he doesn’t see another Tesla factory in China anytime 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 have criticized Tesla after it opened a showroom in Xinjiang, in the northwest, last year despite complaints about abuses of Muslim ethnic groups living there. The company is not alone: ​​Volkswagen AG operates a factory in the region, and the Chinese partners of other global brands have sales outlets there.

Musk said that he wants to make Twitter a “politically neutral” forum for as much freedom of expression as each country’s laws allow.

He has not said what he can do about Twitter’s request that the accounts of Chinese state media and officials be labeled “state-affiliated”. Removing that or limiting inflammatory speech could make it easier for Beijing or other governments to influence American public opinion in elections.

A reporter for the official China Daily wants the card removed.

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

Some companies have failed 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 had stopped using cotton fabrics from Xinjiang. Most held their ground despite suffering sales, possibly fearing greater damage from the overseas consumer backlash.

Lester Ross, head of the Beijing office of the Washington law firm WilmerHale, said some firms don’t want to be seen to “burden the government”.

According to official data, China has the largest population of Internet users with more than 1 billion people. But most cannot see Twitter, other social media abroad, and the thousands of websites run by news outlets, human rights or pro-democracy activists, and others.

China has a popular but heavily censored social network. They are required to remove material deemed subversive or obscene.

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

Censorship has been tightened since President Xi Jinping came to power in 2012.

Accounts run by gay and lesbian youth support groups have been closed. Complaints about food shortages as Shanghai closed to combat the virus outbreak have since been quashed.

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

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

Musk is known for his pompous gestures including smoking marijuana during a radio interview. But he is wary of China’s sensitivities.

He complained that anti-virus measures in California had disrupted Tesla’s production but did not speak publicly after the Shanghai shutdown forced his company’s factory to close.

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