New Analysis
Chinese e-commerce giant
PPD Holdings Inc. launched its shopping site Temu in the United States recently, waging a price war with major online retailers and building on its success with “Shop Like a Billionaire” theme Super Bowl ads. Behind the scenes, the explosive success of the shopping app has sparked major concerns about Chinese data collection tactics.
In an unusual move for a Chinese company,
Temu ran two 30-second ads during the Super Bowl on Feb. 12, at a reported cost of $14 million. The ads increased Temu’s downloads on the day of the Super Bowl by 45 percent and daily active users by about 20 percent, according to a report from Modern Retail.
Since its launch in September of 2022, the online shopping website has been attracting customers with extremely low prices and a variety of marketing tactics. It frequently gives out vouchers and promotions if users promote Temu—which stands for “Team Up, Price Down”—on social media.
The
Temu app was downloaded 24 million times in the five months since its release, according to Forbes, and in the fourth quarter of 2022, Temu surpassed Amazon, Walmart, and Target in terms of app downloads in the United States.
‘Remarkable, Aggressive’ Expansion: Analyst
Anders Corr, founder of Corr Analytics and publisher of the Journal of Political Risk, told The Epoch Times: “Temu’s expansion in the U.S. is remarkable and aggressive. Much of the expansion is likely due to online advertising and prices that, in some cases, could be below the cost of production.”
Douglas Schmidt, a professor at Vanderbilt University, told
Time Magazine that Temu’s entry into the United States to compete for market share with companies like Amazon could force the online retailers to lower their prices. Such competition could hurt the U.S. economy.
Schmidt elaborated, “This is obviously going to put pressure on producers of goods to further slash their cost basis and profit structure—which could have the consequence of further eroding domestic manufacturing in the U.S.”
Temu’s success is reminiscent of Chinese e-commerce giant Shein. Founded in 2008, the fast fashion retailer, popular for its low prices, now sells worldwide in more than 150 countries. In 2021, its sales topped
$15 billion.
A Potential Data Privacy Nightmare
Temu’s enticing deals come with a price: users give up a great deal of personal
information to the e-commerce company, including their names, email addresses, and shipping details, as well as their device data, online activity, and location information. User information and data collected by Temu may also include details related to user-generated content, such as personal profile pictures, written comments, and payment information.
Zach Edwards, an independent cybersecurity researcher, tested the security of Temu’s website. He told the
Voice of America’s Chinese edition the Temu app is a data privacy nightmare that may violate Apple’s
privacy standards.
“Temu is inaccurate about the information disclosed by the public and deceives some consumers who read their privacy labels and think they may obtain some privacy in the device ID and location,” Edwards told Voice of America.
The Real Reason Behind the CCP’s E-Commerce Push
Competition with American companies is not the biggest threat to the United States from Chinese e-commerce companies. Neither is their collection of information, per se. The real issue lies in the Chinese Communist Party’s (CCP’s) behind-the-scenes support for these companies, and the possibility that Chinese e-commerce companies may be spying on Americans on behalf of the CCP.The CCP is aggressively promoting e-commerce. In July 2021, the
State Council of the CCP issued “Opinions on Accelerating the Development of New Businesses and Foreign Trade,” which aimed to encourage foreign trade enterprises to build their own e-commerce platforms similar to websites like Amazon. Since then, the number of e-commerce websites in China has grown rapidly.
In March 2022,
Hong Yong, a deputy researcher at the Chinese Ministry of Commerce, wrote an article that hinted at the real reason why the CCP is prioritizing Chinese e-commerce.
Among the reasons why Chinese merchants are leaving Amazon, the article said, are Amazon fees and the retail giant’s closure of foreign trade enterprise accounts.
More significantly, in April of 2021, Amazon stopped providing buyers’ names, addresses, and other information to FBA (Fulfillment by Amazon) sellers.
Past Attempts to Steal American Data
The Chinese regime has targeted American information for many years.Many of the attempts involve overt hacking, such as the 2015 breach of the U.S. Office of Personnel Management network, in which the security clearance records of more than 22 million people were stolen by Chinese hackers. Also in 2015, a Chinese hacking group breached American insurance company
Anthem’s system, and the information of more than 78 million American clients was stolen.
The information targeted by the CCP goes far beyond financial data. At the height of the pandemic, it was revealed that the
Chinese biotechnology company BGI Group had approached Washington, D.C., and five other states with an offer to build and operate a state-of-the-art COVID testing laboratory in the United States.
William Evanina, former director of the National Counterintelligence and Security Center, told CBS in January of 2021, “Current estimates are that 80 percent of American adults have had all of their personally identifiable information stolen by the Communist Party of China.” That information may include their DNA.
One way for the CCP to obtain data on Americans is for Chinese tech companies, such as social media and e-commerce companies, to enter the United States and collect customer information.
In China, there is no clear-cut line between business and government. Therefore, the CCP’s so-called national security laws can mandate that companies—regardless of whether they are Chinese or foreign companies—share data with the regime.
Chinese Businesses Process Intelligence Data for CCP
In 2017, Beijing enacted a
new national intelligence law that mandated that Chinese companies cooperate with the Chinese regime’s intelligence and security agencies when requested.
In light of this, during the Trump administration, the U.S. intelligence community obtained extensive evidence of collusion between nominally private Chinese companies and the CCP’s intelligence services.
Zach Dorfman, a senior fellow at the Carnegie Council for Ethics in International Affairs, wrote in a December, 2020
Foreign Policy article that the relationship between the CCP’s intelligence services and Chinese companies is becoming closer.
According to Dorfman’s article, the Chinese regime’s ability to access and obtain data from private companies provides the CCP with tremendous opportunities to target foreign governments, private companies, and individuals to gather information on research, technology, trade secrets, or other confidential information.
Chinese tech companies play a vital role in processing this vast amount of data and making it useful to the CCP. In this way, Chinese intelligence agencies can quickly locate key information of intelligence value. For example, they could cross-check information to help identify a CIA agent.
TikTok, ByteDance, and US National Security
Popular app TikTok and its parent company, ByteDance, have increasingly been the focus of U.S. security concerns.In June of 2022,
Buzzfeed News reported that Chinese employees of TikTok repeatedly accessed the non-public data of American TikTok users. The Buzzfeed report led to questions from the U.S. Senate, and a subsequent response from TikTok CEO Shou Chew.
In a June 30, 2022,
letter to U.S. senators, Chew admitted that employees outside the United States had access to American users’ data, but claimed that the information reported by Buzzfeed was actually part of a larger effort by ByteDance to “strengthen the company’s data security program.” The ByteDance effort, reportedly dubbed “Project Texas,” aimed to “safeguard user data and U.S. national security interests,” said the letter.
Despite the company’s reassurances,
Forbes reported in October 2022 that ByteDance planned to use TikTok to monitor the exact locations of certain American citizens. The monitoring was conducted by an internal team said to be investigating potential misconduct.
However, according to materials reviewed by Forbes, in at least two cases, the team planned to collect location data on U.S. citizens who had no relationship with the company. In December, Forbes reported, “ByteDance confirmed it used TikTok to monitor journalists’ physical location using their IP addresses.”
Further, a Feb. 16, 2023 letter (
pdf) to Treasury Secretary Janet Yellen expressed concern that “pixel” technology embedded in TikTok partner websites allows the company to track even American users who do not use the TikTok app. Yellen chairs the
Committee on Foreign Investment in the United States (CFIUS).The letter, from Senators Richard Blumenthal (D-Conn.) and Jerry Moran (R-Kan.), said that “while this collection effort is ostensibly an advertising effort by the company, the transmission to TikTok of non-user IP addresses, a unique ID number, and information about what an individual is doing on a site provides a deep understanding of those individuals’ interests, behaviors, and other sensitive matters." It urged the CFIUS to impose “strong remedies to separate ByteDance from TikTok’s American users.”
Temu: A Multi-Faceted Threat
As the United States wakes up to the security threat posed by TikTok, experts fear that Temu could be the next big danger.Corr said: “Temu could eventually replace Amazon if allowed to do so. Given the possibility that Temu could become monopolistic as the sector trends that way, this is more than a threat to one company. It is a threat to the privacy of users, the ability of users to acquire goods from a diverse marketplace, a threat to all non-Chinese manufacturers, a cyber-security threat, and ultimately a threat to U.S. national security.”
Temu did not respond to a request for comment.
