Sat, Sep 12, 2015 page9

• China flexes tech muscles before Xi Jinping’s state visit to US

  • By Paul Mozur and Jane Perlez / NY Times News Service, HONG KONG
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  As Chinese President Xi Jinping (習近平) prepares for his first state visit to the US this month, Washington has warned that it could hit Chinese companies with sanctions over digital attacks for trade secrets. Beijing is now pushing back in an unorthodox way: by organizing a technology forum to demonstrate its own sway over the US tech industry.

  The meeting, which is set to take place on Sept. 23 in Seattle, Washington, is planned to feature China’s Internet czar Lu Wei (魯煒), the overseer of China’s restrictions on foreign technology companies.

  A number of Chinese tech executives, including Robin Li (李彥宏) of Baidu and Jack Ma (馬雲) of Alibaba, along with executives from top US tech companies, including Apple, Facebook, IBM, Google and Uber, have been invited, according to people familiar with the plan who spoke on condition of anonymity because they were not authorized to speak about the meeting.

  Some invitees, including Apple chief executive officer Timothy Cook, plan to attend, according to one person.

  The forum is being cohosted by Microsoft, another person with knowledge of the matter said.

  The meeting is rankling US President Barack Obama’s administration by veering off the script agreed to for Xi’s carefully stage-managed visit, two US officials said.

  There are also concerns the meeting could undercut Obama’s stern line on China by portraying its leadership as constructively engaging US companies about doing business in China, even as the administration suggests US companies are hurt by anticompetitive Chinese practices.

  For many US tech companies, the invitation is hard to turn down because of the vast opportunities of China’s tech market. Google and Facebook are among those blocked by China’s Web filters from doing business in the country, which is the world’s biggest Internet market.

  While the tech companies have not taken positions opposing US sanctions and some are conflicted about how to approach China, their appearance at the meeting would signal how much leverage China wields over them.

  At the meeting, Xi could briefly address the gathering, or a selected group of US and Chinese executives, an Obama administration official said.

  In Seattle, Xi is also set to meet Microsoft cofounder Bill Gates at his nearby lakeside estate for dinner before heading to Washington to meet Obama.

  A Chinese digital security expert, Zuo Xiaodong (左曉棟), vice president of the China Information Security Research Institute, who plans to attend what is being called the US-China Internet Industry Forum, described it as an “industry meeting.”

  “The Chinese government has attached great importance” to it, Zuo said.

  “The meeting is mostly to discuss the industry cooperation of the two countries, and big companies from China and the US, like Google, will all be there,” Zuo said.

  Microsoft, Facebook, IBM, Apple, Uber and Baidu declined to comment, while Alibaba and Google did not respond to requests for comment.

  Over the past few years, China and the US have been engaged in a sort of technological Cold War.

  US leaders have railed against a series of hackings that they have said emanated from China and they have called for Beijing to relax the regulations that limit the sale of US hardware and block Internet companies.

  In turn, China has said that revelations by Edward Snowden, the former contractor who disclosed US government surveillance, show that the US also hacks Chinese companies and that those attacks justify its restrictive laws against US companies.

  At stake is how the global Internet will be managed.

  While the US supports an Internet in which companies are allowed to operate worldwide and users are given free online expression, China has said countries should be allowed to force Web companies to follow local laws, including censoring content, monitoring users and hosting data about Chinese users within China.

  By dangling the carrot of market access to US companies that follow its rules, Chinese officials like Lu want to influence global Internet governance and have its model more widely adopted.

  Holding the tech meeting in Seattle can also be cast in Beijing as a sign that the titans of US industry recognize China’s power and give it respect. Abroad, it signals that companies must accommodate Beijing’s wishes to ensure market access.

  “This is about putting as much lipstick as possible on the pig in advance of Xi going into Washington where the administration is saying cyberattacks are the problem and the operating environment for US firms is narrowing,” said an industry official with direct knowledge of the planning of Xi’s trip, who spoke on the condition of anonymity.

  The planned meeting also reveals the divides within the US tech industry, and between the government and US companies about how to deal with China.

  On one hand, China’s more than 600 million Internet users and the hundreds of billions of dollars its companies, government and consumers spend on technology are revenue staples for older US hardware and software companies and are viewed by younger companies as areas of huge potential growth.

  On the other hand, a raft of Chinese policies have emerged in the past two years that are meant to wean the country off foreign technology, and Internet blocks have kept out companies like Facebook, Google and Twitter.

  Some US companies are pushing for a harsher US government stance against restrictive Chinese policies aimed at US companies, while others are wary of what they stand to lose if China reacts by further denying market access.

  However, uniting most companies is a fear that sanctions imposed by the Obama administration could lead to a Chinese response that would hit bottom lines and growth prospects alike.

  Administration officials have made it clear that they are considering imposing economic sanctions against China for breaches by using an executive order under which Obama has the authority to freeze financial and property assets of foreign companies that engage in commercial digital theft. The order, signed in April, is not specific to China, but is meant for use against Chinese entities, among others.

  Administration officials have deliberately left open the increasing possibility of such sanctions, but whether they would be imposed before Xi’s arrival — an act that would poison the visit and conceivably cause its cancelation — has become a matter of intense debate in Washington. Such sanctions would almost certainly result in retaliation by China, US and Western diplomats say.

  The administration is in a difficult position, officials say, because Obama first outlined China’s online transgressions to Xi at a summit in California in 2013 and asked him to take action, but the situation has since deteriorated.

  Washington State might seem an unlikely first stop for Xi, but it is the largest exporter by dollars to China and Seattle has a rich history of hosting Chinese leaders.

  In 1993, then-Chinese president Jiang Zemin (江澤民) met then-US president Bill Clinton in Seattle in the highest-level contact between the two countries following the 1989 crackdown on the Tiananmen Square protests.

  During a 2006 visit, then-Chinese president Hu Jintao (胡錦濤) met with Gates in Seattle.

  In an exchange during the trip, Hu said he used Microsoft Windows every day, and Gates offered personal tech support if he ran into problems.

  In the nine years since, things have changed. Beijing is developing its own operating system and has placed government procurement bans on Microsoft’s Windows 8. Other companies, like Qualcomm, have faced antitrust investigations in China.

  Several US business groups also lashed out this year at a Chinese law they said would prevent tech companies based in the US from selling hardware and software to China’s banking industry.
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