Archive for ‘US Secretary of State’

07/05/2019

The night the US bombed a Chinese embassy

The destroyed side of the Chinese embassy in BelgradeImage copyrightSASA STANKOVIC/EPA/SHUTTERSTOCK
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It was close to midnight and Vlada, a Serbian engineer, was speeding towards his apartment in Belgrade. He had taken his 20-year-old son out that evening but bombs had started to fall across the Yugoslav capital. The power grid was down and he wanted to get home.

Nato, the world’s most powerful military alliance, had been pummelling Yugoslavia from the skies since late March to try to bring a halt to atrocities committed by President Slobodan Milosevic’s forces against ethnic Albanians in the province of Kosovo. It was now 7 May 1999 and the US-dominated air campaign was only growing more intense.

Vlada’s family had spent many nights in recent weeks huddled with others in the basement of their apartment building as air raid sirens blared outside, praying that an errant missile wouldn’t strike their homes.

They were lucky, some thought, to live just next to the Chinese embassy – an important diplomatic mission. Being there would surely protect them.

But as Vlada and his son approached the glass doors of their building in the dark, US B-2 stealth warplanes were in the skies above Belgrade. They were locked-on to the precise co-ordinates of a target selected and cleared by the CIA. All Vlada heard at first was the whoosh of an incoming missile. There was no time to move. The doors shattered, spraying glass at them.

“The force of the first bomb lifted us off the ground and we fell… Then one after the other [more bombs landed] – bam, bam, bam. All the shutters on the block were ripped off by the blast, it broke all the windows.”

They were terrified but uninjured. All five bombs had hit the embassy, 100 metres away.

The US and Nato were already facing scrutiny over mounting civilian casualties in a bombing campaign conducted without UN authorisation and fiercely opposed by China and Russia. They had now attacked a symbol of Chinese sovereignty in the heart of the Balkans.

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A man escapes from the Chinese embassy amid a cloud of dusk and smokeImage copyright SASA STANKOVIC/EPA/REX/SHUTTERSTOCK
Image caption Embassy workers escaped through windows after the strikes
Across town, Shen Hong, a well-connected Chinese businessman, was getting word that the embassy had been hit. He refused to believe it. Just a few days earlier, his father had phoned from Shanghai and joked that his son should park his new Mercedes at the diplomatic compound to keep it safe.

“I called a policeman who I knew and he said, ‘Yes, Shen, it’s really hit’. He said come right away, so then I knew it was real, it was true.”

He arrived to a scene of chaos. The embassy was burning; workers covered in blood and dust were climbing out of windows to escape. Politicians close to Milosevic – who had been charged two weeks earlier with crimes against humanity by an international tribunal – were already arriving to denounce the bombing as the latest example of Nato barbarity.

“We could not go inside. There was a lot of smoke, there wasn’t any electricity and we couldn’t see anything. It was horrible,” said Shen.

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Shen Hong stands in front of the memorialImage copyright LAZARA MARINKOVIC
Image caption Shen Hong lost close friends in the bombing
Presentational white spaceHe spotted the cultural attaché, a man he knew, who had knotted together curtains to get out of a first-floor window. “We didn’t see that he was injured and he didn’t notice it either. It was only when I shook his hand that I realised my hands were covered in blood. I told him ‘you’re injured, you’re injured!’ – but when he saw this he passed out.”

The next day Shen would learn that two close friends – newlywed journalists Xu Xinghu, 31, and Zhu Ying, 27 – had been killed by a bomb that hit the sleeping quarters of the embassy. Their bodies were found under a collapsed wall.

The pair had worked for the Guangming (Enlightenment) Daily – a communist party newspaper. Xu, a language graduate who spoke fluent Serbian, had chronicled life in Belgrade during the bombings in a series of special reports called “Living Under Gunfire”.

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Unidentified injured Chinese embassy staff is carried away on a stretcher by Yugoslav rescue workers after the fire at the Chinese embassy, early Saturday, 08 May 1999,Image copyright DRASKO GAGOVIC/EPA
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Zhu Ying worked as an art editor in the paper’s advertising department. Her mother collapsed with grief and was sent to hospital when she learned of her daughter’s death so Zhu’s father travelled alone to Belgrade to see the body.

A third journalist, 48-year-old Shao Yunhuan, of the Xinhua news agency, also died. Her husband, Cao Rongfei, was blinded. The embassy’s military attaché, who is believed to have run an intelligence cell from the building, was sent back to China in a coma. In total, three people were killed and at least 20 injured.

For Shen, this was an act of war. The next day he led a protest through the streets of Belgrade carrying a sign reading “NATO: Nazi American Terrorist Organisation”

It was a sign of what was to come.

Black and white pictures of Shao Yunhuan, Xu Xinghu and Zhu Ying at an exhibition in ChinaImage copyright REUTERS
Image caption Three journalists were killed in the embassy
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Within hours of the bombing, two competing narratives began to emerge. They would harden over the coming months and form the basis of how the incident – which continues to linger over the US-China relationship – remains debated today.

The bombing fuelled speculation, and there was no shortage of unanswered questions and missing pieces that were put together by some to imply a grand conspiracy. Intrigue continued to hang over the incident and, months afterwards, two respected European newspapers suggested the strikes were by design.

But, as former Nato officials point out, in 20 years no clear evidence has come to light proving what almost all of China believes and America strenuously denies: that it was deliberate.

In those first hours after the bombs fell, the US and Nato wasted no time to announce that it was an accident. China’s representative at the UN, meanwhile, denounced a “crime of war” and a “barbarian act”.

In Brussels, Jamie Shea – the British Nato spokesman who became the public face of the war – was woken up in the middle of the night and told he would have to face the world’s press in the morning. The information available in those early hours was thin but he would give one of the first explanations of what had happened, along with an apology. The warplanes, he said from the briefing podium, had “struck the wrong building”.

“It’s like a train accident or a car crash – you know what has happened but what you don’t know is why it has happened,” he says 20 years later. “That took a lot longer to establish… But it was clear right from the get-go, that targeting a foreign embassy was not part of the Nato plan.”

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The father of Zhu Ying weeps over her coffin in BelgradeImage copyright BORIS SUBASIC/EPA
Image caption The father of Zhu Ying weeps over her coffin in Belgrade
Presentational white spaceIt would take more than a month for the US to give Beijing a full explanation: that a series of basic errors had led to five GPS-guided bombs striking China’s embassy – including one that hurtled through the roof of the ambassador’s residence next to the main building but didn’t explode, likely sparing his life.

The real target, officials said, was the headquarters of the Yugoslav Federal Directorate for Supply and Procurement (FDSP) – a state agency that imported and exported defence equipment. The grey office building is still there today – hundreds of metres down the road from the embassy site.

Nato had initially hoped the bombing campaign would only last a few days until Milosevic gave up, pulled his forces out of Kosovo and allowed peacekeepers in. But by the time the embassy was hit it had stretched to more than six weeks. In the rush to find hundreds of new targets to sustain the aerial assault, the CIA, which was not normally involved in target-picking, had decided the FDSP should be struck.

But America’s premier intelligence agency said it had used a bad map.

“In simple terms, one of our planes attacked the wrong target because the bombing instructions were based on an outdated map,” US defence secretary William Cohen said two days after the bombing. He was referring to a US government map that apparently did not show the correct location of the Chinese embassy nor the FDSP.

All US intelligence officers had was an address for the FDSP – 2 Bulevar Umetnosti – and a basic military navigation technique was used to approximate its co-ordinates. The technique used was so imprecise, CIA chief George Tenet later said, that it should never have been used to pick out a target for aerial bombing.

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Map showing location of Chinese embassy, 350 metres away from the FDSP
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To compound the initial error, Tenet said, intelligence and military databases used to cross-check targets did not have the embassy’s new location listed, despite the fact that many US diplomats had actually been inside the building.

Had anyone on the ground visited the site to be bombed they would have found a gated compound, a five-storey building with a green-tiled oriental sloped roof, a bronze plaque announcing the embassy’s presence and a large, bright red Chinese flag fluttering more than 10 metres in the air.

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Front view of the Chinese embassyImage copyright SASA STANKOVIC/EPA/REX/SHUTTERSTOCK
Image caption The front of the embassy was largely undamaged
The crux of the CIA’s explanation was hard for many to believe: the world’s most advanced military had bombed a fellow UN Security Council member and one of the most vocal opponents of the Nato air campaign because of a mapping error. China was having none of it. The story, it said, was “not convincing”.

“The Chinese government and people cannot accept the conclusion that the bombing was a mistake,” the foreign minister told a US envoy sent to Beijing in June 1999 to explain what had happened.

But why would the US intentionally attack China?

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It wasn’t long after the Sun rose on the morning of Saturday, 8 May 1999, that David Rank, a US diplomat, got out of bed in Beijing.

He turned on the television and switched to CNN. The American news network was carrying live pictures of the smouldering Chinese embassy in pitch-dark Belgrade.

By that afternoon, thousands of irate Chinese protesters would be gathered outside. But Rank, at that stage, was fairly calm. He rang his boss, the head of the political section: “I said, you know, Jim, this is the damndest thing.”

The diplomat rushed from his residence to the embassy down the road, where US officials were trying to figure out what had happened. Something had clearly gone wrong but this must have been, had to have been, a tragic mistake.

“It was so patently obvious that it was a sort of fog of war accident… At that point I didn’t think that down the road this was going to be a major problem. Obviously, it was a major problem, but not the sort of convulsive incident that it turned out to be,” said Rank.

But in the next hours, the shape of how the Chinese government and people would respond started to become clear.

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Chinese protestors march to the U.S. Embassy in Beijing May 9, 1999. Protests have erupted in a dozen or so major Chinese cities, drawing tens of thousands of angry citizens onto the streets. State media has fanned the fury by saying that the NATO bombing of the Chinese Embassy in Belgrade was a deliberate act of aggressionImage copyright PETER ROGERS/GETTY IMAGES
Rank began receiving calls from liberal Chinese friends who were outraged at the bombing. American journalists got similar calls from Chinese contacts with pro-US views, expressing shock and a sense of betrayal.

Chinese state media was already laying out a clear narrative – the US had breached international law by bombing a Chinese diplomatic outpost. “The language that I heard from lots and lots of Chinese, it was identical. It was the same almost word-for-word lines of real anger,” said Rank.

By that afternoon thousands of students were streaming onto the streets of Beijing. They gathered outside the embassy and things quickly turned violent.

“They were pulling up the paving stones. Beijing sidewalks aren’t paved, they have big tiles and they were pulling those up and smashing them and throwing them over the walls.”

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A university student demonstrator throws a rock at the U.S Embassy in Beijing May 9, 1999. Protests have erupted in a dozen or so major Chinese cities, drawing tens of thousands of angry citizens onto the streets. State media has fanned the fury by saying that the NATO bombing of the Chinese Embassy in Belgrade was a deliberate act of aggression.Image copyright PETER ROGERS/GETTY IMAGES
Many of those bits of concrete were crashing through the windows of a building where more than a dozen embassy staff, including US Ambassador James Sasser, had hunkered down. Embassy cars were being defaced and attacked.

The message was clear: the bombing was intentional and, as one slogan went, “the blood of Chinese must be repaid”. The protests would continue the next day, with even more people – some reports said 100,000 – storming the diplomatic district, and pelting stones, paint, eggs and concrete at the British and American embassies.

“We feel like we’re hostages,” Bill Palmer, an embassy spokesman trapped in one of the buildings, said at the time.

Demonstrations of this scale had not been seen in tightly-controlled China in the decade since students led a pro-democracy uprising in Beijing’s Tiananmen Square in 1989. This time the anger was directed away from the Communist Party but, with the 10th anniversary of the crackdown on students in Tiananmen approaching, the government had to strike a balance between giving vent to public anger and remaining in control.

In a rare TV address Vice-President Hu Jintao endorsed the protests but also warned they had to remain “in accordance with the law”.

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Ambassador James Sasser looks through the broken doors of the a US embassy building in BeijingImage copyright REUTERS
Image caption US Ambassador James Sasser was trapped in the embassy for four days as protests raged
The uproar was not isolated to Beijing. Crowds also took to the streets of Shanghai and other cities that weekend. In central Chengdu, the US consul’s residence was set alight.

Weiping Qin, a then 19-year-old student leader at the maritime college in southern Guangzhou city, said demonstrators were not informed that Nato had already apologised for what it said was an accident. “The government was hiding this important message. They didn’t tell us – so young people, everybody, felt angry. We just wanted to go in the streets and protest against the United States.”

He said that initially students at his college were told they had to stay in their dormitories. But 24 hours after the bombing, the university leadership told him that they needed 30,000 students in the streets around the US consulate – 500 of whom would come from the maritime college.

The fired-up students drew lots to choose who could attend. They were loaded onto buses and given statements to read that echoed the stilted official language being broadcast by state media. “They gave us long sentences. But in the street, to speak out in long sentences is very hard.” He decided to yell slogans about the evils of Nato and the US instead.

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Weiping Qin (right) was a student leader at Guangzhou Maritime College in 1999Image copyright WEIPING QIN
Image caption Weiping Qin (right) was a student leader at Guangzhou Maritime College in 1999
“We were just young people and we just felt angry. Our emotions came out like a wave,” said Qin, who now lives in the US and criticises the Chinese government in YouTube videos.

David Rank agreed that the anger was genuine. “I think it would really sell the Chinese people short to say this was manufactured by the system,” he said. “There was real outrage.”

Since the early 1990s, China had embarked on a concerted campaign to instil nationalism and “patriotic education” in its people. The narrative pushed in school textbooks, university classrooms and the media was that China – home to a great and benevolent civilisation – had been subjugated and humiliated at the hands of Western powers. The Belgrade embassy bombing fit the story.

“The anger that ordinary Chinese felt I think can only be understood in that historical context, being socialised to resent the West,” said Peter Gries, a professor of Chinese politics at Manchester University and an expert on Chinese nationalism.

For Liu Mingfu – a retired People’s Liberation Army colonel known for his hardline views of the US – the embassy bombing was part of a series of events that proved the US was engaged in a “new Cold War against China”.

“It was totally intentional. It was a purposeful, planned bombing, rather than an accident,” he said.

China would receive $28m in compensation from the US for the bombing, but had to give back close to $3m for the damage to US diplomatic property in Beijing and elsewhere. The US paid another $4.5m to the families of the dead and injured.

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On the day of the bombing, Dusan Janjic, an academic and advocate for ethnic reconciliation in Yugoslavia, was having lunch at an upscale restaurant in central Belgrade with a man he considered a good friend.

Ren Baokai was the military attaché at the Chinese embassy and Janjic said he was surprisingly open with him about the fact that China was spying on Nato and US operations and tracking warplanes from its Belgrade outpost. The attaché invited him to dinner at the embassy that night because he knew he liked Chinese food.

“And I started making jokes. ‘Come on, you’re going to be bombed! I’m not coming!’,” Janjic recalled. He was being facetious: he did not actually think the embassy would be hit.

But Janjic couldn’t make it to dinner and that evening, when the missiles flew into the building, Ren was thrown to the ceiling by the blast and then fell through a crater left by a bomb. He was found in the basement in a coma only the next morning.

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Former Serbia and Montenegro army officer Martin Martinovic stands between two holes in roof and floor of Chinese ambassy in Belgrade, Friday, 18June 2004.Image copyright SASA STANKOVIC/EPA
Image caption Five bombs hit the embassy compound and one did not explode
Five months after the strikes, in October 1999, two newspapers – Britain’s Observer and Denmark’s Politiken – suggested that activities overseen by the military attaché might have prompted an intentional US bombing.

Citing Nato sources, they reported that the embassy was being used as a rebroadcast station for Yugoslav army communications and was as a result removed from a prohibited target list. US Secretary of State Madeleine Albright decried the story as “balderdash”, while British Foreign Secretary Robin Cook said there was “not a single shred of evidence” to support it.

But two decades later, Jens Holsoe, Politiken’s correspondent in the Balkans from 1995 to 2004, and John Sweeney, formerly of the Observer and now with the BBC, said they stood by their reporting that the bombing was intentional.

Holsoe said what made him investigate in the first place was CIA Chief George Tenet publicly saying that satellite images gave no indication the target was an embassy – “no flags, no seals, no clear markings” – when in fact all three were present.

One of his sources – a very senior Danish military figure – almost went on the record to confirm publicly that the bombing was intentional, he said. “Then he suddenly backed out and said if he uttered another word to me about this story that not only did he risk being fired but also prosecuted.”

Holsoe said it was clear at the time that there was military co-operation between Serb forces and the Chinese – and that he personally saw military vehicles entering and exiting the Chinese embassy. American officials told the New York Times that after the bombing they learned the embassy was China’s most significant intelligence collection platform in Europe.

“This was, and always will be, a murky story,” said Sweeney.

Ren Baokai survived and was later given the rank of general. He declined an interview with the BBC, saying he was now retired.

The Chinese ambassador who narrowly survived the strike, Pan Zhanlin, denied in a book that the embassy had been used for re-broadcasting and that China, in exchange, had been given parts of the US F-117 stealth fighter jet that Serbian forces had shot down in the early stages of the Nato campaign.

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A university student throws a rock during a protest at the U.S. Embassy in Beijing May 9, 1999

Getty Images
I think it’s complete nonsense – it was a bad map-reading error and a bad mistake.
Jamie Shea
Former Nato spokesman
It’s widely assumed that China did get hold of pieces of the plane to study its technology. It’s also been speculated that China was using the Nato air campaign to test technology to track stealth bombers that are normally undetectable.

But even if all these stories are true – the question remains: would the US really take the risk of bombing a Chinese embassy on purpose?

Even among ex-Yugoslav insiders there is no consensus. One former military intelligence officer told the BBC he believed the bombing was intentional and that the CIA’s explanation was ludicrous; while another, a retired colonel, said he believed America’s story.

“When something bad happens everybody thinks there has to be a secret reason – not a cock-up but a conspiracy,” said the former Nato spokesman Jamie Shea. “I think it’s complete nonsense – it was a bad map-reading error and a bad mistake.”

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On a sunny day in late April, more than a dozen fresh bouquets were stacked up neatly against the memorial stone, but Shen Hong still felt compelled to re-arrange them. He comes to the site of the embassy bombing regularly, to remember his friends that died. But these days, it’s rare that he is alone.

Busloads of Chinese tourists arrive every day to gaze at the memorial and the statue of the Chinese sage and philosopher Confucius that now stands nearby.

A young Chinese couple, Zhang and He, were in Belgrade for their honeymoon and decided to visit the memorial. They are around the same age that Xu Xinghu and Zhu Ying were when they were killed in 1999. “Three of our countrymen died here. We knew about this since we were kids and we came to see it,” said He.

Yang, a guide who was leading some 30 middle-aged Chinese tourists on a two-week bus tour through the Balkans, said the embassy site was a mandatory stop. “Our embassy was destroyed by Americans. Every Chinese knows this.”

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A billboard shows a picture of the Chinese cultural centre that is being built in BelgradeImage copyright LAZARA MARINKOVIC
Image caption The embassy site is being turned into one of the largest Chinese cultural centres in Europe
In 1999, China was not the economic, technological and military giant it is now. It was focused on getting wealthy and had a much less visible foreign policy. But 20 years later the country knows it sits at the top table with America and its ambitions around the world reflect that.

The Belgrade embassy site is being turned into a Chinese cultural centre that will be one of the biggest in Europe. The symbolism is hard to miss: a site of national humiliation and tragedy at the hands of the West re-born as a shiny edifice to China’s glorious history.

It’s a sign that Beijing has no plans to forget a bombing that allows it to paint the US as an imperialist superpower looking to hurt China. Diplomats who have served in Beijing say the incident is still brought up regularly in conversations.

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Chinese tourists walk past a Confucius statute outside the former Chinese embassy siteImage copyright LAZARA MARINKOVIC
But even those who called for immediate retaliation in 1999 now realise it was fortunate that China’s reaction did not spiral out of control: no Americans were killed during the protests and the compensation agreement allowed Beijing to draw a line – if a thin one – under the incident.

“We were the fastest developing country, every year our economy grew by double-digits. And if we would have stopped that because of war back then, we would have lost a lot,” said Shen, as another group of tourists arrived at the memorial.

“By nature, I’m a radical. I am always more for war than for a conversation. But when I look back, they did a good thing. Because now we can sit equally with the Americans.”

Source: The BBC

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06/03/2019

Huawei: The story of a controversial company

The African Union headquarters in Addis Ababa is a shiny spaceship-like structure that glistens in the afternoon sun.

With its accompanying skyscraper, it stands out in the Ethiopian capital.

Greetings in Mandarin welcome visitors as they enter the lifts, and the plastic palm trees bear the logos of the China Development Bank.

African Union HQ, Addis Ababa

African Union HQ, Addis Ababa

 

Everywhere, there are small indications that the building was made possible through Chinese financial aid.

In 2006, Beijing pledged $200m to build the headquarters. Completed in 2012, everything was custom-built by the Chinese – including a state-of-the-art computer system.

For several years, the building stood as a proud testament to ever-closer ties between China and Africa. Trade has rocketed over the past two decades, growing by about 20% a year, according to international consultancy McKinsey. China is Africa’s largest economic partner.

But in January 2018, French newspaper Le Monde Afrique dropped a bombshell.

It reported that the AU’s computer system had been compromised.

The newspaper, citing multiple sources, said that for five years, between the hours of midnight and 0200, data from the AU’s servers was transferred more than 8,000km away – to servers in Shanghai.

This had allegedly continued for 1,825 days in a row.

Le Monde Afrique reported that it had come to light in 2017, when a conscientious scientist working for the AU recorded an unusually high amount of computer activity on its servers during hours when the offices would have been deserted.

It was also reported that microphones and listening devices had been discovered in the walls and desks of the building, following a sweep for bugs.

The reaction was swift.

Both AU and Chinese officials publicly condemned the report as false and sensationalist – an attempt by the Western media to damage relations between a more assertive China and an increasingly independent Africa.

But Le Monde Afrique said that AU officials had privately expressed concerns about just how dependent they were on Chinese aid – and what the consequences of that could be.

In the midst of all of this, one fact remained largely unreported.

The main supplier of information and communication technology systems to the AU headquarters was China’s best-known telecoms equipment company – Huawei.

The company says it had “nothing” to do with any alleged breach.

Huawei “served as the key ICT provider inside the AU’s headquarters”, said Danielle Cave of the Australian Strategic Policy Institute, in a review of the alleged incident.

Huawei headquarters in Shenzhen, China

Huawei headquarters in Shenzhen, China

“This doesn’t mean the company was complicit in any theft of data. But… it’s hard to see how – given Huawei’s role in providing equipment and key ICT services to the AU building and specifically to the AU’s data centre – the company could have remained completely unaware of the apparent theft of large amounts of data, every day, for five years.”

There is no evidence to indicate that Huawei’s telecoms network equipment was ever used by the Chinese government – or anyone else – to gain access to the data of their customers.

Indeed, no-one has ever gone on record to confirm that the AU system was compromised in the first place.

But these reports played into years of suspicions about Huawei – that a large Chinese company might find itself unduly influenced by the Chinese government.

Ren and the rise of Huawei

“When I first started out 30 years ago… we didn’t really have any telephones. The only phones we had were those hand-cranked phones that you see in old World War II films. We were pretty undeveloped then.”

Huawei’s founder and chairman Ren Zhengfei is reminiscing to the BBC about the origins of the world’s second-biggest smartphone firm, while sitting in the Huawei headquarters in Shenzhen – a symbol of the success that he’s worked his whole lifetime for.

A long marbled staircase, covered in plush red carpet, greets you as you first walk in.

At the top of the stairs, a giant painting depicts a traditional Chinese New Year scene.

Inside Huawei's Shenzhen HQ

Inside Huawei’s Shenzhen HQ

A few kilometres away in Dongguan, Huawei’s latest campus is even more eye-catching.

The site – designed to accommodate the company’s 25,000 R&D staff – comprises 12 “villages”, each of which recreates the architecture of a different European city, among them Paris, Bologna and Granada.

It’s as if Silicon Valley had been re-imagined by Walt Disney. Long corridors of Roman pillars and picturesque French cafes adorn the campus, with a train connecting the different areas, running through manicured gardens and past an artificial lake.

It’s a world away from the environment that Mr Ren found himself in when he first started the company in 1987. “I founded Huawei when China began to implement its reform and opening up policy,” he says. “At that time, China was shifting from a planned economy to a market economy. Not only people like myself, but even the most senior government officials, did not have the vaguest idea of what a market economy was. It seemed it was hard to survive.”

Ren was born in 1944 in Southern China – a tumultuous, chaotic place, one of the poorest regions in an already destitute country.

For a long time, hardship was all he ever knew.

He was from a family of seven children. “They were very poor,” says David De Cremer, who has co-written a book on Ren and Huawei.

“I think hardship is something that you can see throughout his life, and which he keeps emphasising himself.”

To escape that life of poverty and drudgery, Ren did what many young Chinese men of that era did. He joined the army.

Soldiers from the People's Liberation Army, 1972

Soldiers from the People’s Liberation Army, 1972

“I was a very low-ranking officer in the People’s Liberation Army,” he says. “I served in an ordinary construction project, not a field unit. At the time, I was a technician of a company in the military, and then I became an engineer.”

He left the military in 1983 when China began to downsize its forces, and went into the electronics business.

By his own admission, he wasn’t a great businessman at first.

“I was someone who had been in the military all my life at the time, used to doing what I was told,” he says. “Suddenly, I began to work in a market economy. I was at a total loss. So I too suffered losses, I too was deceived, and I was cheated.”

But he was quick to learn, and was a keen student of Western business practices and European history.

“I did research on what exactly a market economy was all about,” he says. “I read books on laws, including those about European and US laws. At that time, there were very few books on Chinese laws, and I had to read those on European and US laws.”

Five years later, he founded Huawei – the name can be translated as “splendid achievement” or “China is able” – to sell simple telecoms equipment to the rural Chinese market. Within a few years, Huawei was developing and producing the equipment itself.

Sometime in the early 90s, Huawei won a government contract to provide telecoms equipment for the People’s Liberation Army.

By 1995, the company was generating sales of around US$220,000, mainly from selling to the rural market.

The following year Huawei was given the status of a Chinese “national champion”. In practice, this meant the government closed the market to foreign competition.

At a time when China’s economy was growing by an average of 10% per year, this was no small advantage. But it was only when Huawei started to expand overseas in 2000, that it really saw its sales soar.

In 2002, Huawei made US$552m from its international market sales. By 2005 its international market contracts exceeded its domestic business for the first time.

Ren’s early days in business instilled in him a desire to protect his company from the whims and fancies of the stock market. Huawei is privately held and employee-owned. This gave Ren the power to plough more money back into research and development. Each year, Huawei spends US$20bn on R&D – one of the biggest such budgets in the world.

“Publicly listed companies have to pay a lot of attention to their balance sheets,” he says. “They can’t invest too much, otherwise profits will drop and so will their share prices. At Huawei, we fight for our ideals. We know that if we fertilise our ‘soil’ it will become more bountiful. That’s how we’ve managed to pull ahead and succeed.”

One story from the early days of the company tells how Ren was cooking for his staff (he loves to cook, or so the story goes). Suddenly he rushed out of the kitchen and announced to the room: “Huawei will be a top three player in the global communications market 20 years from now!”

And that’s exactly what happened. In fact, those ambitions were surpassed.

Today, Huawei is the world’s biggest seller of network telecommunications equipment.

From aspiring to be a company like Apple, it now sells more smartphones than Apple.

But shadows have continued to loom over Huawei’s international success.

Ren and Huawei’s links to the Chinese Communist Party have raised suspicions that the company owes its meteoric rise to its powerful political connections in China. The US has accused Huawei of being a tool of the Chinese government.

It’s an accusation which Ren denies. “Please don’t think that Huawei has become what it is today because we have special connections,” he says. “Even 100% state-owned companies have failed. Do good connections mean you will succeed then? Huawei’s success is still very much due to our hard work.”

The case against

It was 1 December 2018. US President Donald Trump and China’s President Xi Jinping were dining on grilled sirloin followed by caramel rolled pancakes at the G20 summit in Buenos Aires.

They had a lot to discuss. The US and China were in the middle of a trade war – imposing tariffs on each other’s goods – and growth forecasts for both countries had recently been cut as a result. This was adding to the fear of a slowing global economy.

In the event, the two leaders agreed a truce in the trade war, with Donald Trump tweeting that “Relations with China have taken a BIG leap forward!”

Xi Jinping and Donald Trump at dinner, December 2018

Xi Jinping and Donald Trump at dinner, December 2018

But thousands of kilometres north in Canada, an arrest was taking place that would throw doubt on this rapprochement.

Meng Wanzhou, Huawei’s chief financial officer and Ren Zhengfei’s eldest daughter, had been detained by Canadian officials while transferring between flights at Vancouver airport.

The arrest had come at the request of the US, who accused her of breaking sanctions against Iran.

“When she was detained, as her father, my heart broke,” says Ren, visibly emotional. “How could I watch my child suffer like this? But what happened, has happened. We can only depend on the law to solve this problem.”

Meng Wanzhou being driven to court in Canada

Meng Wanzhou being driven to court in Canada

Huawei’s problems were just beginning. Nearly two months later, the US Department of Justice filed two indictments against Huawei and Ms Meng.

Under the first indictment, Huawei and Ms Meng were charged with misleading banks and the US government about their business in Iran.

The second indictment – against Huawei – involved criminal charges including obstruction of justice and the attempted theft of trade secrets.

Both Huawei and Ms Meng deny the charges.

January 2019: Acting US attorney general Matthew Whittaker announces charges against Huawei and Meng Wanzhou

January 2019: Acting US attorney general Matthew Whittaker announces charges against Huawei and Meng Wanzhou

The charge of stealing trade secrets centres on a robotic tool – developed by T-Mobile – known as Tappy.

According to legal documents, Huawei had tried to buy Tappy, a device which mimicked human fingers by tapping mobile phone screens rapidly to test responsiveness.

T-Mobile was in partnership with Huawei at the time, but it rebuffed the Chinese firm’s offers, fearing it would use the technology to make phones for T-Mobile’s competitors.

It’s alleged that one of Huawei’s US employees then smuggled Tappy’s robotic arm into his satchel so that he could send its details to colleagues in China.

After the alleged theft was discovered, the Huawei employee claimed that the arm had mistakenly fallen into his bag.

Huawei claimed that the employee had been acting alone, and the case was settled out of court in 2014. But the latest case is built on email trails between managers in China and the company’s US employees, linking Huawei management to the alleged theft.

The indictment also details evidence of a bonus scheme from 2013, offering Huawei employees financial rewards for stealing confidential information from competitors.

Huawei has denied any such scheme exists.

Meng Wanzhou, photographed in 2014

Meng Wanzhou, photographed in 2014

This is not the first time that Huawei has been accused of stealing trade secrets. Over the years companies like Cisco, Nortel and Motorola have all pointed the finger at the Chinese firm.

But US fears about Huawei are about much more than industrial espionage. For more than a decade, the US government has seen the company as little more than an arm of the Chinese Communist Party.

These concerns have been brought to the fore with the advent of “fifth generation” or 5G mobile internet, which promises download speeds 10 or 20 times faster than at present, and much greater connectivity between devices.

As the world’s biggest telecoms infrastructure provider, Huawei is one of the companies best placed to build new 5G networks. But the US has warned its intelligence partners that awarding contracts to Huawei would be tantamount to allowing the Chinese spy on them.

US Secretary of State Mike Pompeo recently cautioned against Huawei, saying, “If a country adopts this and puts it in some of their critical information systems, we won’t be able to share information with them.”

US Secretary of State Mike Pompeo

US Secretary of State Mike Pompeo

The UK, Germany and Canada are reviewing whether Huawei’s products pose a security threat.

Australia went a step further last year, and banned equipment suppliers “likely to be subject to extrajudicial directions from a foreign government”.

Huawei was not mentioned by name, but Danielle Cave of the Australian Strategic Policy Institute says the company posed a national security risk because of its government links.

She cites an article in Chinese law that makes it impossible for any company to refuse to help the Chinese Communist Party in intelligence gathering.

“Admittedly, what is missing from this debate is the smoking gun,” she says.

“For the average person who has a Huawei smartphone it’s not a big deal. But if you’re a Western government that has key national security to protect – why would you allow this access to a company that is in the political system that China is in?”

For his part, Ren says that Huawei’s resources have never and would never be used to spy for the Chinese government.

“The Chinese government has clearly said that it won’t ask companies to install backdoors,” he says. A “backdoor” is a term used to describe a secret entry point in software or a computer system that gives access to the person or entity who installed it to the inner workings of the system.

“Huawei will not do it either,” he continues. “Our sales revenues are now hundreds of billions of dollars. We are not going to risk the disgust of our country and our customers all over the world because of something like that. We will lose all our business. I’m not going to take that risk.”

Xi’s China

Zhou Daiqi is Huawei’s chief ethics and compliance officer.

He’s been with the company for nearly 25 years, in a number of different positions – chief engineer, director of the hardware department, head of the research centre in Xi’an, according to his biography on the company’s website. He is also understood to combine his high-ranking executive duties with another role – party secretary of Huawei’s Communist Party committee.

All companies in China are required by law to have a Communist Party committee.

Zhou Daiqi's profile on Huawei's website

Zhou Daiqi’s profile on Huawei’s website

The official line is that they exist to ensure that employees uphold the country’s moral and social values. Representatives of the committee are also often tasked with helping workers with financial problems.

But critics of China’s one-party system argue that they allow the state to exert control on corporate China. And they say the level of this control has increased in recent years.

“[President] Xi Jinping is exerting greater control over the business community in China,” says Elliott Zaagman, who regularly advises Chinese companies on their PR strategy. “As these companies gain power and influence overseas, the party doesn’t want to lose control over them.”

Ren, however, argues that the role of Huawei’s Communist Party committee is far less important than many in the West believe.

“[It] serves only to educate its employees,” he says. “It is not involved in any business decisions.”

In China, most chief executives are Communist Party members.

Every year, they dutifully turn up to the National People’s Congress along with local and national party chiefs, officials and chief executives.

It’s where the big economic decisions are voted on – although no proposal is put forward which hasn’t already been agreed upon.

Still, big CEOs come to show their commitment to the party, and to contribute to working papers that are meant to help the government understand the concerns of the business community.

Being a member of the party is very much a networking opportunity – in the way one would join a business association.

Elliott Zaagman argues that this is a system that demands loyalty.

“There is no separation from the party and the state,” he says.

“The system in China encourages the lack of transparency in companies like Huawei.”

The worry is that these close links mean that if the Communist Party asked a company to do something, they would have no choice but to comply.

And if that company is one that is involved in sensitive global telecoms infrastructure projects, it’s easy to see why Western observers would be worried.

There is no evidence to indicate that Huawei is in any way under the orders of the Chinese government, or that Beijing has any plans to dictate business plans and strategy at Huawei – particularly when it comes to spying.

But the way in which the Chinese Communist Party has robustly defended Huawei has raised questions about how independent the company is of its influence.

For example, Beijing stated that Ms Meng’s detention was a rights abuse .

And while her extradition case to the US was moving forward, China detained two Canadian citizens and accused them of stealing state secrets. Critics say the detentions are linked to Ms Meng’s arrest.

December 2018: Chinese police patrol outside Canada's embassy in Beijing

December 2018: Chinese police patrol outside Canada’s embassy in Beijing

While not commenting on the arrest of the Canadians, Ren says China’s defence of Huawei is understandable.

“It is the Chinese government’s duty to protect its people,” he says. “If the US attempts to gain competitive edge by undermining China’s most outstanding hi-tech talent, then it is understandable if the Chinese government, in turn, protects its hi-tech companies.”

Over the past few years, there have been signs of a bigger push by the government to get private companies, and in particular tech firms, to cooperate with party rules – even when they are firmly resistant.

 A Didi Chuxing logo adorns a building in Hangzhou, China

 A Didi Chuxing logo adorns a building in Hangzhou, China

China’s ride-hailing giant Didi Chuxing’s troubles are an example of the struggles Chinese firms face when they try to uphold their independence in the face of government pressure.

Chinese attitudes to data collection and data privacy are different to those in the West – many people don’t care if businesses have access to their data, arguing that it adds to the convenience of life and work.

Government access to data in China is not the free-for-all that many outside of China assume it to be

Samm Sacks, CSIS

So it wasn’t unusual when, after the murders of two of its passengers by Didi drivers, regulators used the scandal to force Didi to share more corporate data with the government. But Didi resisted – citing customer privacy. Under Chinese law, it had no choice but to comply.

When it did, it handed over “three boxes of data printed on paper, including 95 hard copies for authorities to review”.

According to Samm Sacks of the Center for Strategic and International Studies (CSIS), the case demonstrates that “government access to data in China is not the free-for-all that many outside China assume it to be”.

She says this indicates that there appears to be “a kind of tug of war between the government and companies over data”.

How this plays out will determine how Chinese companies are viewed by foreign governments when they do business overseas.

Companies like Huawei have grown up in a system where to survive and thrive they needed strong links to the Chinese government – there was and is no other choice. But these links could harm their reputation abroad.

“It’s two different systems,” says Zaagman. “Think of it like an electrical outlet. China’s plug doesn’t fit in to the outlets we have in the West.”

What’s at stake

“Basically you want to connect to everything that can be connected.”

Zhu Peiying, head of Huawei’s 5G wireless labs, is showing off devices that can connect to the new technology. From a smart toothbrush that collects data about how well you brush your teeth, to a smart cup that reminds you when you should drink some water, this is a world where everything you can think of is being measured and analysed.

At its most sophisticated, everything in entire cities would be connected – driverless cars, the temperature of buildings, the speed of public transport – the list is endless.

Huawei is thought to be a year ahead of its competitors in terms of its technological expertise and what it can offer customers, according to industry sources.

It’s also thought that the company can offer prices that are about 10% cheaper than its competitors, although critics claim this is because of state support.

Ren dismisses this, saying that Huawei doesn’t receive government subsidies.

He says the real reason behind the US resistance to Huawei is its superior technology.

“There’s no way the US can crush us,” he says. “The world needs Huawei because we are more advanced. Even if they persuade more countries not to use us temporarily we could just scale things down a bit.”

Many analysts say that Huawei’s exclusion from US networks could actually cause the US to fall behind in its 5G capabilities.

“It would mean we wouldn’t be able to participate in any blended network [using Huawei] in Europe or Asia,” says Samm Sacks of CSIS. “That would put us at a significant disadvantage.”

What this would mean in reality is a world of two internets – or what analysts are calling a “digital iron curtain” – dividing the world into parts that do business with Chinese companies like Huawei, and those that don’t.

Because of US pressure on its allies, Huawei has been on an aggressive public relations campaign to win over customers and government stakeholders.

In recent days, Vodafone’s boss Nick Read called on the US to share any evidence it has about Huawei, while Andrus Ansip, the European Commission’s vice president for the digital single market, said in a tweet that he had met with Huawei’s rotating CEO to discuss the importance of being open and transparent, as they explored ways of working together.

But suspicions about Huawei remain.

One security firm reports a sharp rise in inquiries by Asian government clients about Huawei.

“Some have asked us how much they should worry about whether Huawei is really a liability,” says an analyst who consults to Asian governments, on condition of anonymity.

Ren is sanguine about such concerns.

“For countries who believe in them [suspicions about Huawei] we will hold off,” he says. “For countries who feel Huawei is trustworthy, we may move a little faster. The world is so big. We can’t walk across every corner of it.”

But this is about more than just one company or one CEO and his family.

Increasingly, this is perceived as a battle between two world orders, and which one is the future.

In the early days of China opening up, US presidents like George HW Bush espoused the merits of engagement.

“No nation on Earth has discovered a way to import the world’s goods and services while stopping foreign ideas at the border,” he said in a 1991 speech. “Just as the democratic idea has transformed nations on every continent, so, too, change will inevitably come to China.”

1989: George HW Bush in Beijing - he encouraged economic engagement with China

1989: George HW Bush in Beijing – he encouraged economic engagement with China

Previous US administrations believed that economic engagement in China would lead to China following a freer, more “liberal” path.

There’s no denying China has made remarkable strides in the past 40 years. The economy grew by an annual average of 10% for three decades, helping to lift 800 million people out of poverty. It is now the second-largest economy in the world, only surpassed by the US.

Some estimates put China’s economy ahead of America’s by 2030.

It achieved this while maintaining one-party rule and the supremacy of the Communist Party.

But its success has raised concerns that it is only possible with a huge amount of government control over the country’s companies. The fear is that control could be used to achieve the Communist Party’s goals – which are at this point unclear.

“It’s a double-edged sword for China,” says Danielle Cave. “[Because of its laws] the Chinese Communist Party has made it virtually impossible for Chinese companies to expand without attracting understandable and legitimate suspicion.”

Added to this, China has become more authoritarian under Xi Jinping’s rule.

President Xi Jinping 

President Xi Jinping 

“Xi is systematically undermining virtually every feature that made China so distinct and helped it work so well in the past,” writes Jonathan Tepperman, editor in chief of Foreign Policy.

“His efforts may boost his own power and prestige in the short term and reduce some forms of corruption. On balance, however, Xi’s campaign will have disastrous long-term consequences for his country and the world.”

But Ren dismisses this, insisting that China is more open than ever before.

“If this meeting took place 30 years ago,” he says of our interview, “it would have been very dangerous for me. Today, I can be straightforward when answering difficult questions. This shows that China has a more open political environment.”

Still, Ren is hopeful of the direction China will take in the future.

“China has more or less tried to close itself off from the outside world for 5,000 years,” he says. “Yet we had found ourselves poor, lagging behind other nations. It was only in the past 30 years since Deng Xiaoping opened China’s doors to the world that China has become more prosperous. Therefore, China must continue to move forward on the path of reform and opening-up.”

In one of Huawei’s vast campus sites across Shenzen, lies a man-made lake. Swimming in these serene waters are two black swans.

There is a story that Ren put the birds here to remind employees of “black swan” events – unpredictable and catastrophic financial eventualities that are impossible to prepare for. He dismisses this as an urban myth, but it’s hard not to read something into it.

For Huawei, and Ren, these are highly uncertain times with no way of telling what lies ahead.

Source: The BBC

06/03/2019

China’s February exports seen falling most in 2 years, imports down again – Reuters Poll

BEIJING (Reuters) – China’s exports likely contracted in February after a surprise bounce in January, while imports fell for a third straight month, a Reuters poll showed, heightening anxiety over whether Washington and Beijing can resolve deep differences over trade.

China’s exports in February are expected to have fallen 4.8 percent from a year earlier, according to the median estimate of 32 economists in a Reuters poll, following a 9.1 percent rise in January.

Such a drop would be the biggest since December 2016, and suggest a further weakening in global demand.

Imports in February are expected to have fallen 1.4 percent from a year earlier, compared with the previous month’s 1.5 percent decline.Stronger-than-expected imports could prompt some China watchers to say the economy is showing signs of bottoming out in response to a string of stimulus measures in 2018.

But most analysts typically caution that China’s data early in the year can be highly distorted by the timing of the Lunar New Year holidays, when some business rush out shipments or scale back output before shutting for a extended break. As such, analysts’ estimates for February varied widely.

TRADE DEAL NOT A SILVER BULLET

In recent weeks, the United States and China appear to have moved closer to a trade deal that would roll back tit-for-tat tariffs on each others’ goods, with Beijing making pledges on structural economic changes, a source briefed on negotiations said on Sunday.

But President Donald Trump will reject any pact that is not perfect, Secretary of State Mike Pompeo said this week.
Even if concrete steps such as dismantling tariffs are agreed, it would not be a panacea for all of China’s economic woes. Its exporters would have to piece supply chains back together, win back market share and contend with slowing demand globally.
Factory surveys have suggested exports and imports will remain weak in coming months, with February’s official gauge showing export orders fell to their weakest level since the global financial crisis.
China’s overall trade surplus is seen to have shrunk sharply to $26.38 billion in February from $39.16 billion the previous month, according to the Reuters poll.
In response to growing domestic and global pressure, China’s government this week unveiled a 2019 economic growth target of 6.0-6.5 percent, down from an actual 6.6 percent in 2018, the slowest pace in nearly 30 years.
China to slash taxes, boost lending to prop up slowing economy
Premier Li Keqiang told parliament on Tuesday that China will shore up the economy through billions of dollars in additional tax cuts and infrastructure spending, and will lower real interest rates.
“A set of pro-growth measures are planned despite positive progress in U.S.-China trade talks, which makes us think that either China doesn’t have full confidence in a trade truce or that the damages from the trade conflict cannot easily be undone,” said Iris Pang, Greater China economist at ING.
Source: Reuters
19/02/2019

The US cannot crush us, says Huawei founder

The founder of Huawei has said there is “no way the US can crush” the company, in an exclusive interview with the BBC.

Ren Zhengfei described the arrest of his daughter Meng Wanzhou, the company’s chief financial officer, as politically motivated.

The US is pursuing criminal charges against Huawei and Ms Meng, including money laundering, bank fraud and stealing trade secrets.

Huawei denies any wrongdoing.

Mr Ren spoke to the BBC’s Karishma Vaswani in his first international broadcast interview since Ms Meng was arrested – and dismissed the pressure from the US.

“There’s no way the US can crush us,” he said. “The world cannot leave us because we are more advanced. Even if they persuade more countries not to use us temporarily, we can always scale things down a bit.”

However, he acknowledged that the potential loss of custom could have a significant impact.

What else did Mr Ren say about the US?

Last week, US Secretary of State Mike Pompeo warned the country’s allies against using Huawei technology, saying it would make it more difficult for Washington to “partner alongside them”.

Australia, New Zealand, and the US have already banned or blocked Huawei from supplying equipment for their future 5G mobile broadband networks, while Canada is reviewing whether the company’s products present a serious security threat.

Mr Ren warned that “the world cannot leave us because we are more advanced”.

“If the lights go out in the West, the East will still shine. And if the North goes dark, there is still the South. America doesn’t represent the world. America only represents a portion of the world.”

What did Mr Ren say about investment in the UK?

The UK’s National Cyber Security Centre has decided that any risk posed by using Huawei technology in UK telecoms projects can be managed.

Many of the UK’s mobile companies, including Vodafone, EE and Three, are working with Huawei to develop their 5G networks.

They are awaiting a government review, due in March or April, that will decide whether they can use Huawei technology.

Commenting on the possibility of a UK ban, Mr Ren said Huawei “won’t withdraw our investment because of this. We will continue to invest in the UK.

“We still trust in the UK, and we hope that the UK will trust us even more.

“We will invest even more in the UK. Because if the US doesn’t trust us, then we will shift our investment from the US to the UK on an even bigger scale.”

Huawei boothImage copyrightGETTY IMAGES
Image captionHuawei has denied that it poses any risk to the UK or any other country

What does Mr Ren think about his daughter’s arrest?

Mr Ren’s daughter Meng Wanzhou, Huawei’s chief financial officer, was arrested on 1 December in Vancouver at the request of the US, and is expected to be the subject of a formal extradition request.

In total, 23 charges are levelled against Huawei and Ms Weng. The charges are split across two indictments by the US Department of Justice.

The first covers claims Huawei hid business links to Iran – which is subject to US trade sanctions. The second includes the charge of attempted theft of trade secrets.

Mr Ren was clear in his opposition to the US accusations.

“Firstly, I object to what the US has done. This kind of politically motivated act is not acceptable.

“The US likes to sanction others, whenever there’s an issue, they’ll use such combative methods.

“We object to this. But now that we’ve gone down this path, we’ll let the courts settle it.”

Meng Wanzhou, Huawei Technologies Co Ltd"s chief financial officer (CFO), is seen in this undated handout photo obtained by Reuters December 6, 2018.Image copyrightREUTERS
Image captionMeng Wanzhou was arrested in Vancouver last December

What did Mr Ren say about Chinese government spying?

Huawei, which is China’s largest private company, has been under scrutiny for its links to the Chinese government – with the US and others expressing concern its technology could be used by China’s security services to spy.

Under Chinese law, firms are compelled to “support, co-operate with and collaborate in national intelligence work”.

But Mr Ren said that allowing spying was a risk he wouldn’t take.

“The Chinese government has already clearly said that it won’t install any backdoors. And we won’t install backdoors either.

“We’re not going to risk the disgust of our country and of our customers all over the world, because of something like this.

“Our company will never undertake any spying activities. If we have any such actions, then I’ll shut the company down.”

Presentational grey line

Is Huawei part of the Chinese state?

Analysis – Karishma Vaswani, BBC Asia business correspondent – Shenzhen

For a man known as reclusive and secretive, Ren Zhengfei seemed confident in the conviction that the business he’s built for the last 30 years can withstand the scrutiny from Western governments.

Mr Ren is right: the US makes up only a fraction of his overall business.

But where I saw his mood change was when I asked him about his links to the Chinese military and the government.

He refused to be drawn into a conversation, saying only that these were not facts, simply allegations.

Still, some signs of close links between Mr Ren and the government were revealed during the course of our interview.

He also confirmed that there is a Communist Party committee in Huawei, but he said this is what all companies – foreign or domestic – operating in China must have in order to abide by the law.

Source: The BBC

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