Unbridled Evil: The Corrupt Reign of Jiang Zemin in China (Chapter 7, Part 1)

A translation of the book 'The Real Jiang Zemin' from the original Chinese
April 20, 2020 Updated: April 20, 2020

Chapter Seven:  Western Companies Collaborate with Evil Regime (Part 1)

Section 1 Western Corporations Seek Profits in China. 1

Corruption with ‘Chinese Characteristics’ 1

Tax Evasion. 1

Foreign Enterprises Exploit Chinese Workers. 1

‘Don’t you feel ashamed?’ 1

Section 2      Western Media Companies. 1

Murdoch’s News Conglomerate Allies with Communist Party. 1

Western Media: A Platform for CCP Propaganda. 1

 

Section 1 Western Corporations Seek Profits in China

During the 1980s when Deng Xiaoping was opening up China to the world, the corporate West was very leery of the potential of investing in this little-known market. There were many unanswered questions. Would China be good for investment? How were labor relations? Was the society stable enough? Of course, there were differences in ideologies between communist China and the West, and concerns over the Chinese Communist Party’s human rights practices. Hong Kong, Macau, and Southeast Asia—with companies headed mostly by ethnic Chinese—took the lead. After seeing them making a fortune, western companies were eager to jump on the China bandwagon. Corporate ethics and social responsibility took a backseat to the prospect of making a lot of money.

Frankly speaking, Jiang Zemin did not formulate a well-thought-out plan of corrupting the corporate West. He may not have even had the capability of coming up with such a strategy. He simply continued his corrupt rule, exploiting the foremost weakness in businessmen’s human nature: greed. By means of offering big profits to foreign investors, Jiang turned China into an enormous magnet, sucking torrents of foreign capital into the Chinese market. At the same time, with institutionalized and systematic corruption, Jiang turned China into a big dye vat. Once the corporate West jumped into the vat, they couldn’t help but become contaminated.

Corruption with ‘Chinese Characteristics’

When western businessmen decided to enter China, they were aware what trade with “Chinese characteristics” entailed. For a foreign-funded company to gain a solid foothold in China, they knew political protection is a must. It can lead you through numerous doors that were otherwise almost impossible to open. It would help navigate among complicated interpersonal relationships in central and local governments, and even facilitate a policy in favor of foreign investors.

To acquire political protection, one can directly bribe the Chinese officials, or more often do it through their relatives. Starting from Jiang Zemin’s era, sons and daughters of many senior officials received their education in the West. Many western companies and banks hired a number of them—”princelings” —to increase their odds of success when entering the China market. Financial firms expected that the princelings, under the aegis of their fathers, would help them to win projects that invested in Chinese companies in New York or Hong Kong.

Feng Shaodong (aka Wilson Feng), son-in-law of the chair of National People’s Congress Wu Bangguo, once led Merrill Lynch’s China operations. Feng was key to the $14 billion IPO (initial public offering) on the Hong Kong Stock Exchange of the Industrial and Commercial Bank of China (ICBC) in 2006. ICBC is a multinational banking company and the largest bank in China, and by some measures, the largest bank in the world.

Ren Keying (aka Margaret Ren), daughter-in-law of former premier and former general secretary of the Communist Party Zhao Ziyang, was China executive and chairman of Bank of America Merrill Lynch (now BofA Securities), where her job was expanding client relations in China. A career investment banker, Ren has served as chairman of China corporate finance for BNP Paribas, and of China investment banking at Merrill Lynch. She also worked at Citigroup.

Zeng Zhijie (aka Jeffrey Zeng), son of former vice premier Zeng Peiyan, once worked in Japan’s Mitsubishi Corporation and CITIC Pacific Ltd. in Hong Kong. Li Wangzhi, son of Bo Xilai, the former Chongqing party boss, once worked for Citigroup.

Of course, only the largest financial conglomerates have the resources to buy top Chinese officials. Other companies chose to associate themselves with local officials and those with commercial and financial ties. A good example of a top-level government official was Bo Xilai, when he was the mayor of Dalian. Bo offered a three-year tax exemption and cheap land to attract foreign companies, such as Japanese metal and machine manufacturers, whose owners or managers dined and wined with Bo to seek his protection. Bo didn’t let them down. For example, in order to monitor dissatisfied workers, Bo ordered the installation of hundreds of surveillance cameras in the Development Zone. When workers at Star Micronics Co., a Japanese company that specialized in printers, went on a weeklong strike due to issues with pay and dismissals, Dalian police and government-run labor unions sided with the management and crushed the strike. Managers of another company often asked its female workers for drinks and sex. If they refused, they would be fired. When asked why they didn’t file a lawsuit, they said, “Where can we go? My boss hired Bo Xilai’s wife (Gu Kailai) as their legal advisor. How could we win?”[1]

The political and economic landscape unique to China, plus the deteriorating moral standards, made China a breeding ground for corruption originating from abroad. The number of foreign companies involved in corruption cases has risen sharply since 2000. In 2003 alone, foreign companies had their hands in more than 1,500 corruption cases, a jump of 20 percent over the previous year.[2] According to a survey conducted in 2006, within a span of 10 years, China investigated half a million transnational corruption cases, 64 percent of which dealt with international trade and foreign merchants.[3]

The method of bribery is most often money, as it was in Jiang’s rule.

Siemens is considered the most respected manufacturing conglomerate in Germany and the largest engineering giant across Europe. In November 2006, Germany’s Ministry of Justice raided the headquarters of Siemens AG in Munich, including the office of CEO Kleinfeld and the residence of some employees, and arrested several Siemens employees. German prosecutors confirmed that an amount as high as 200 million euros was involved in the case, while the Siemens internal audit put the total of suspicious funds at up to 420 million euros (U.S. $475 million).[4] An investigation led by U.S. Security and Exchange Commission (SEC) led to the finding of at least 4,283 Siemens bribery cases that implicated officials from multiple governments between 2001 and 2007, involving a total amount of 1.4 billion U.S. dollars, a significant portion of which was connected to projects in China.[5]

Nine Chinese companies were named in the Siemens bribery. One of them received up to 6 million euros in cash. The rest ranged between tens of thousands and millions of euros. Under pressure from both the U.S. and German governments, Siemens submitted a list of bribed officials from various countries, including the Chinese government. However, the list caused a political earthquake within the Chinese government, because it included names of family members of two senior Politburo officials. Then-propaganda chief Li Changchun personally ordered that all media could report anything about the Siemens scandal, except the names of Chinese officials involved in the bribery.[6]

The bribery practices of Siemens also included $14.4 million paid between 2003 and 2007 to middlemen from its medical device subsidiaries, for the purpose of selling $295 million worth of medical equipment to five Chinese state-owned hospitals. Between 2002 and 2007, in order to obtain seven subway project contracts of a total value of one billion dollars and two high-voltage power transmission line projects in South China of a total value of $838 million, Siemens paid the intermediaries $50 million to “get through various connections.”[7]

At the end of 2009, another Siemens corruption case surfaced, causing the fall of three senior China Mobile management personnel. Among them, Shi Wanzhong, chairman of China Mobile in Anhui Province, abused his position by offering at numerous times “assistance” to Siemens communications business. In return, Siemens, through an offshore company, paid up to $5 million in consultation fees to an Anhui consulting company, which was registered under Shi’s wife. Shi received a death sentence.[8]

Siemens is far from being the lone German company involved in unethical business practices.

Daimler AG (parent company of Mercedes-Benz) allegedly bribed in 22 countries, according to the U.S. Justice Department in March 2010. Court documents showed that between 2000 and 2005, a Daimler Chrysler’s employee in China spent at least 4.17 million euros on Chinese government officials.[9]

The SEC charged IBM China in at least 114 bribery cases and imposed fines of tens of millions of dollars. Between 1998 and 2009, IBM bribed Chinese and Korean officials by means of international travel (free vacation), entertainment, gifts, and cash remuneration, in violation of the U.S. Foreign Corrupt Practices Act. Involved personnel included two senior managers and more than 100 employees of IBM’s two wholly owned subsidiaries in China, namely IBM (China) Investment Co., Ltd. and IBM Global Services (China) Co., Ltd.[10]

In April 2012, Garth Peterson, a former China head of Morgan Stanley Real Estate, pleaded guilty in seeking a multi-million-dollar bribe with a Chinese official. Peterson was sentenced to nine months in prison and barred from the securities industry. Peterson paid back more than $250,000 in disgorgement and gave up his interest in Shanghai real estate valued at about $3.4 million. Peterson joined the Morgan Stanley Real Estate Investment Fund in 2000 and is primarily responsible for the Shanghai market. He had cultivated extensive social networks in China that had close ties with the children of senior officials in Beijing and Shanghai.[11]

In May 2005, the U.S. Department of Justice disclosed that the Tianjin subsidiary of Diagnostic Products Corporation (DPC), the world’s largest manufacturer of diagnostics equipment, paid $1.623 million in cash to Chinese doctors at state-owned hospitals over a period of 11 years beginning in 1991, in exchange for these institutions purchasing DPC’s products. DPC was fined $4.7 million by U.S. authorities for violating the Foreign Corrupt Practices Act.[12]

RAE Systems is a California-based global provider of petroleum and mineral exploration instruments and systems. Employees of RAE’s two China joint venture entities, RAE-KLH (Beijing) Co., Limited, and RAE Coal Mine Safety Instruments (Fushun) Co., Ltd., made illicit payments totaling $400,000 to Chinese officials between 2004 and 2008. The payments were obtained as cash advances from accounting personnel. Expenses associated with these payments were improperly recorded on the books of RAE-KLH and RAE-Fushun as “business fees” or “travel and entertainment” expenses. The improper payments resulted in contracts worth approximately $3 million in revenue and garnered more than $1.1 million in illicit profits. RAE was charged by the U.S. Securities and Exchange Commission (SEC) and agreed to pay a penalty totaling $2.9 million.[13]

Avery Dennison, a global manufacturer and distributor of pressure-sensitive adhesive materials, was charged by the SEC for bribing Chinese local officials and fined $200,000 in civil penalties. Since 2004, Avery Dennison’s Chinese subsidiary secured two huge orders by hiring former staff members of the Institute of Traffic Management under the Chinese Ministry of Public Security.[14]

On July 31, 2009, California-based Control Components Inc. (CCI), a provider of factory automation and machine safety solution products, admitted that it engaged in 236 briberies of officials and employees of state-owned and privately-owned companies in 36 countries. CCI was fined up to $18.2 million. The Chinese enterprises on CCI’s payroll included PetroChina, China Petroleum Materials Corporation, Dongfang Electric Corporation, CNOOC, China Resources Power, and many other heavyweight state-owned enterprises, according to the U.S. Department of Justice.[15]

Money is the most frequently used form of bribery during Jiang’s rule. A less conventional way used was sexual bribery.

One story involving sexual bribery was PetroChina’s “AV Idol Gate.” AV idol or adult video idol is a Japanese actress who works in the porn movie industry, often both as an actress as well as a model. Sexual bribery using AV Idol was originally an invention by foreign investors.

Sichuan Petrochemical is a large-scale subsidiary of PetroChina in Chengdu. The bidding was required for purchasing over a hundred chromatographs, a key piece of chemical equipment. In June 2011, Shanghai-based Wison Engineering Services Co. Ltd took charge of the bidding. The bidders included two U.S. based companies, both industry leaders, as well as the Japanese Shimadzu Corporation, which was long been known for its low price and low quality. Shimadzu was bidding through the Beijing based HED group as its agent. Shimadzu’s products were miles behind the American bidders in terms of quality and functional performance. The company also lacked a record of experience with large-scale petrochemical companies.

But soon afterwards, Wison announced that HED group had won the bid at a very low price. Later, Shimadzu and HED group invited officials from PetroChina and Wison to Japan, treating them with glamorous AV idols who provided “full service” sexual entertainment. The AV idol experience won Shimadzu a huge reward. Soon after returning from Japan, the Chinese officials signed a contract modification agreement with HED group and Shimadzu. With the price staying the same, the new contract substantially lowered the specification standard of chromatographs.[16]

The foreign investors were not only getting used to the corrupt way of doing things in China, but able to play the game quite skillfully. A good example of the coordination of multiple cases of corruption occurred in China’s Ministry of Commerce and the State Administration for Industry and Commerce (SAIC).

Between August and November 2008, an entire food chain of officials that review and approve foreign investment surfaced. People implicated included officials almost at every stage of the process. They were Guo Jingyi, an inspector at the Department of Treaty and Law under the Ministry of Commerce; Deng Zhan, Vice President of the China Association of Enterprises with Foreign Investment (CAEFI) under the Ministry of Commerce; Du Baozhong, chief of Administrative Law at the Department of Treaty and Law under the Ministry of Commerce; and Liu Wei, deputy chief of the Bureau for Registration of Foreign-Invested Enterprises under SAIC. Guo’s job had oversight over the drafting, revision, and interpretation of foreign laws and regulations. This chain of operations has been quite rewarding to foreign investors. Guo and others showed them ways of circumventing the law, and used their power of judicial interpretation and discretion to close a large number of “deals” favorable to the companies.[17]

Of course, foreign companies are more likely to take advantage of their uniqueness of being based overseas. For example, they routinely organized Chinese officials to travel abroad, arranged their children to study and work outside China, and set them up with offshore bank accounts. These kinds of bribes seem more dignified and don’t carry the same odoriferous impression that money and sex bribes do.

The U.S.-based Lucent Technologies, Inc. is an exemplar of such “elegant and decent” bribery. In 2004, under pressure from the SEC, Lucent conducted an investigation of its business units in 23 countries and its bribery scandal in China surfaced. From 2000 to 2003, Lucent Technologies (China) invited about 1,000 Chinese government officials and telecommunication executives to travel to the United States at a cost of over $10 million. In 2002 and 2003 alone, there were 24 Lucent sponsored trips arranged for Chinese officials, at least 12 of which were purely sightseeing. Under the pretext of “visiting the factories and training,” Lucent sponsored tourist trips to Hawaii, Las Vegas, the Grand Canyon, Disneyland, New York and other places. In fact, Lucent had outsourced much of its manufacturing operations by the end of 2001. There were no U.S.-based factories open to visit. After its findings, SEC fined Lucent $2.5 million. Four executives at Lucent Technologies (China), including the company’s president, chief operating officer, senior director of sales, and an accounting manager, were dismissed for violating federal regulations that bar U.S. companies from giving bribes overseas.[18]

Tax Evasion

As bribery became widespread as a way of profiting, western corporations allowed their ethical principles to lapse, resulting in still further moral degradation. One very common way this would happen was by tax evasion.

In the late 1990s, the total amount of tax evasion by multinational corporations in China ran as high as 30 billion yuan a year. This figure has been shooting up ever since. According to Su Xiaolu, the head of anti-tax-evasion group under the State Administration of Taxation, as of 2002, China had approved the establishment of more than 400,000 foreign-funded enterprises. A considerable number of foreign enterprises had officially reduced their profits through various tax evasion measures, such as creating large losses, some as high as 60 percent, on the books. The annual loss was more than 120 billion yuan.[19]

Many multinational corporations hired professionals to help find loopholes in the tax code. Sometimes they even paid big bucks to top consulting firms for the purpose of tax evasion.

A typical way of tax evasion was through transfer pricing and moving the profits to affiliated companies. The usual method is to “buy high and sell low.” When the company purchased raw materials or semi-finished products from its overseas subsidiary or companies under the common control, it pays a high price. And then it sells the final products at a very low price to overseas affiliates, so that profits are lost abroad.

Procter & Gamble, the world’s largest chemical company, took a one-time tax deduction of 81.49 million yuan in the form of thin capitalization. In 2002, after obtaining a huge loan of 2 billion yuan from a bank in Guangdong, P&G Guangzhou, a subsidiary of Procter & Gamble in China, allocated a large proportion to associated companies as interest-free loans. Proctor & Gamble would benefit in two ways. First, P&G Guangzhou’s loan from the bank allowed a pre-tax deduction of its interest payment. Second, the interest-free loans to associated companies avoided the payment of tax from interest income from the lending. In 2003, the State Administration of Taxation of Guangzhou demanded P&G Guangzhou make an added payment of corporate income tax of 81.49 million yuan, which was the amount of tax avoided due to the interest-free lending.[20]

Foreign-Funded Enterprises Pollute with Impunity

Some multinational companies use China as a dumpster for industrial pollutants.

A 2006 research study on China listed enterprises that violated environmental regulations. Thirty-three well-known multinational companies in China were on the list. A number of their parent companies were ranked among the world’s top 500 companies.[21]

Quoting from the study, it states regarding the Shanghai Panasonic Battery Limited Company that “Operation failure of the wastewater treatment facilities led to discharge of excessive wastewater.”

Other foreign-funded companies operating in China received similar complaints. Here are several more:

Pepsi Changchun: “excessive discharge of pollutant wastewater.”

Nestle Shanghai Drinking Water Co., Ltd.: “The main project was put into production before review and approval of the environmental protection department.”

3M Shanghai: “Facilities were put into production without the review and approval process for environmental impact assessment.”

Some multinational companies became major polluters in the region.

In Fujian, a company funded by German hydromechanical equipment giant DSD NOELL was singled out as “causing serious pollution for running operations without building pollution-control facilities.”

In Zhejiang, a subsidiary of the British Purolite Group was listed as one of the provincial-level major polluting enterprises of 2005. Purolite Group is the world’s largest multinational group specializing in the production of ion exchange resin.

In Hunan, a wholly owned subsidiary of Japan’s Yamaha Motor Co., Ltd., became one of the 20 “top polluters” in Zhuzhou, due to “significant environmental and safety risks in the electroplating production line.”

Many of the violators would claim “coincidences” and “accidents” as excuses. When not dealing with their Chinese partners, these companies usually demanded “zero tolerance” of environmental violations. Some companies touted their “corporate responsibility,” and many of them were brand names known for environmental protection. One can see that after entering China, the western (and Japanese) companies lowered the bar when implementing their environmental standards, and became companies with “Chinese characteristics.”

Foreign Enterprises Exploit Chinese Workers

In the early days when foreign enterprises entered China, they adhered to certain corporate ethics and brought in the values of their own enterprises. At that time, if one compared how well foreign owners treated their Chinese workers, the European and American enterprises did the best, followed by Japanese enterprises, and then by Hong Kong and Taiwan. The differences also showed the attitude of different regions towards human rights. The U.S. strategy toward China aimed to gradually and subtly change China in the process of integrating China into the world order. To certain extent, western countries hoped that their companies would change China to become receptive to western values.

Over time, the “Chinese characteristics” set in, and the foreign companies increasingly focused on the profitability while ignoring their social responsibility and moral conscience. From production to logistics to sales, the entire industrial chain would operate for the sole purpose of making money. Practices that the western businesses would absolutely not allow themselves to do back home were used over and over again in China. The foreign companies either did it by themselves, or did it through Chinese contractors and suppliers while openly denying it. They include the following:

Slave labor. Prisons and labor camps across the country registered as companies. Prisoners were forced to engage in long hours of production under harsh working conditions. The products were sold from China to Europe and the United States at extremely low prices, as one would expect given that the Chinese government does not pay wages to prisoners.

Neglecting workers’ rights. Workers health and safety were not priorities. Also, they would force them to work overtime.

Child labor. Many businesses, including big name brands such as Nestle, H&M, Philip Morris, Walmart, Apple, Victoria’s Secret, Gap, Disney, Forever 21, and Hershey’s, were guilty of using child labor.

Sexual harassment. Cases of female workers being sexually harassed took place in large numbers. Some female workers even had to go to bed with their bosses; otherwise they would be fired or given a hard time at the workplace.

The above abuse of Chinese workers could not have happened without at least the tacit approval of local laws and customs. The communist rulers wanted their lucre and had no concern about the working conditions of their countrymen. Meanwhile, western enterprises acted without conscience.

‘Don’t you feel ashamed?’

The regime also used access to the huge Chinese market to force some foreign enterprises to serve the CCP’s political interests and make them accomplices in the CCP’s human rights persecution. Some globally well-known companies surrendered to the CCP in the face of economic temptation, and gave up their own conscience and corporate responsibility.

A shameless example is the way that Cisco Network Systems aided in human rights abuses by building the Chinese government’s surveillance system that has been used to identify and facilitate the capture and torture of practitioners of Falun Gong and members of dissident groups in China.[22]

The internet giant Yahoo provided information that helped Chinese state security officials convict a Chinese journalist for leaking so-called state secrets to a foreign website, court documents show. The journalist, Shi Tao, was sentenced to 10 years in prison in June 2005 for sending an anonymous posting to a New York-based, Chinese-language website that authorities said contained state secrets. His posting summarized a communication he received from Communist Party authorities to media outlets around the country regarding how the Tiananmen Square massacre was to be reported. The June 4th anniversary was approaching, and the regime did not want opinions given that were contrary to the government’s version.

Yahoo provided Chinese security the records including Shi’s email and IP address, showing that Shi used a computer at his workplace, Contemporary Business News, in Changsha, late in the evening of April 20, 2004, to access his Yahoo e-mail account. The information provided by Yahoo led to his arrest and of a few other dissidents in China. Despite world condemnation of both China and Yahoo, including Amnesty International, Human Rights Watch, Reporters Without Borders, Committee to Protect Journalists, and U.S. congressional committees, Shi served eight and half years in prison.[23]

Google’s corporate motto was once “Don’t Be Evil.” When the CCP initially requested it to block unofficial information from the Google search results, such as positive reports on the Dalai Lama and Falun Gong, Google rejected the request. However, not wanting to lose access to the huge Chinese market, Google finally kowtowed to the CCP and filtered away the “sensitive” contents as the CCP requested at its Chinese subdomain google.cn, emphasizing that it had to respect the laws of the host country. Microsoft also chose to filter out content that the CCP disapproved.

On Feb. 15, 2006, the U.S. Congress held a hearing on four major U.S. internet companies—Yahoo, Google, Microsoft, and Cisco—in helping the CCP to develop the internet under its control. Congressman Tom Lantos, a Holocaust survivor of the Nazi genocide, challenged the representatives of the four companies with a single sentence: “Don’t you feel ashamed?”

Founded in 2001, New Tang Dynasty TV, an independent U.S.-based TV station operated by Falun Gong practitioners, is the only Chinese-language TV network broadcasting uncensored programming to China, from outside China. In 2004, it signed a contract with Eutelsat, a French-based satellite company, enabling its programs to reach China without interception on Eutelsat’s W5 satellite.

However, one year later in 2005, Eutelsat announced its intention not to renew the contract, which expired on April 15th. Eutelsat operates under specific corporate, European, and international laws that require equal access and respect for media pluralism. Under intense Chinese economic and political pressure, Eutelsat has repeatedly tried to shut down NTDTV’s Asia broadcast. The Wall Street Journal reported on April 13, 2005 that Eutelsat tried to trade the shutdown of NTDTV’s broadcast for Chinese state business.

Under pressure from the U.S. Congress, as Eutelsat has the largest share of U.S. government satellite contracts, Eutelsat finally backed off and renewed the contract with NTDTV. Four years later in 2009, Eutelsat claimed it was forced to suspend NTDTV on 16 June because of a technical problem, but a recorded conversation with an employee of Eutelsat showed it was a premeditated, politically-motivated decision violating the free flow of information and the convention under which Eutelsat operates, according to Reporters Without Borders. “The real reason for the decision to suppress NTDTV exposes how Eutelsat operates in China,” the press freedom organization said.[24]

 

Section 2  Western Media Companies

Among the western businesses that have been seeking to enter the Chinese market, media companies, including the new social media companies, are a special group. On the one hand, they are a useful platform for the Chinese communist agenda; on the other hand, they pose a potential threat to the CCP’s propaganda. The CCP played especially hard on the foreign media companies and prevented them from freely operating in China as they are accustomed to in democratic countries. As the leverage was on the CCP side, these companies were stopped cold. Once the media companies started to cooperate with the CCP, the free expression emblematic of social media in the West died, due to the tight controls.

Media companies are not manufacturers and cannot hire cheap Chinese labor. In a sense, they simply cannot make money in China. However, those companies did not see clearly their situation in China, but instead held on to the wishful thinking that they could succeed by not touching the taboos of CCP’s propaganda. As a rule, no matter how hard they try to please the CCP, the CCP can only be satisfied when it’s entirely in control. The media companies not only got nothing, but allowed themselves to be used by the CCP to serve its purpose.

Murdoch’s News Conglomerate Allies with Communist Party

The most typical story was Rupert Murdoch, who, over a period of two decades, invested billions of dollars in China and courted the CCP leaders, but in the end had to accept failure.

Murdoch owned News Corporation, 1980-2013, a multinational mass media corporation, according to Wikipedia. In 1996, News Corporation launched Fox News Channel, a 24-hour news service, according to its website. In 2013, it split into two companies: News Corp and 21st Century Fox. In 2019, the latter became Fox Corporation. This information was taken from its website.

In 1993, Murdoch purchased the satellite broadcaster Star TV of Hong Kong for nearly $1 billion, and dropped BBC News the next year, which had frequently angered Chinese officials with its reporting on mainland affairs.

When Murdoch learned that China Central Television, known as CCTV, was struggling to develop a news website, he dispatched a team from Fox News to help design and operate one. Another News Corporation team brought People’s Daily, the mouthpiece of the Communist Party, online. When China needed help encrypting satellite transmissions so it could develop a pay TV service—a specialty of the News Corporation’s NDS subsidiary—NDS helped Beijing create a proprietary encryption system.[25]

Over the years, he coveted the $50 billion in ad spending that flows mainly to China’s state-owned news media. And he has been doing more than most western businesses in honing relationships with senior communist leaders.

Harper Collins, Murdoch’s book unit, published a biography of Deng Xiaoping written by his daughter, Deng Rong. Although it mainly recycled propaganda about Deng Xiaoping, Murdoch threw an elaborate book party at Le Cirque in New York.

For Deng’s eldest and disabled son, Deng Pufang, Murdoch chartered a jet to ferry a troop of disabled acrobats that the younger Deng had promoted to perform abroad.

The Murdochs often echoed the Chinese government line. In a 1999 interview, Murdoch spoke disparagingly of the Dalai Lama, whom the Chinese condemn as a separatist. “I have heard cynics who say he is a very political old monk shuffling around in Gucci shoes,” he said.[26]

His son, James Murdoch, who ran Star TV from 2000 to 2003, said in a speech in Los Angeles in 2001 that western reporters in China supported “destabilizing forces” that are “very, very dangerous for the Chinese government.” He lashed out at Falun Gong practitioners, who endure brutal repression in China, calling the “dangerous and apocalyptic.”[27]

Between 1999 and 2001, the Murdochs invested about $150 million in half a dozen start-up internet and telecom companies. Only one, Netcom, returned an appreciable investment profit. Through this investment, the Murdochs befriended Jiang Mianheng, the son of Jiang Zemin. It is unclear what role, if any, Jiang played. But in 2002, the company became the first foreign broadcaster to receive “landing rights” to sell programs to cable systems in Guangdong Province, which is near Hong Kong.

In 2004, when Beijing began allowing Chinese-foreign joint ventures to produce shows that could be broadcast locally without the restrictions that apply to overseas content, Murdoch’s News Corporation allied itself with a state-run broadcaster in the western province of Qinghai. Through middlemen, News Corporation also purchased prime-time slots in 25 Chinese provinces.

News Corporation also recruited a media and stock market entrepreneur named Ding Yuchen to join the venture as a partner. Mr. Ding’s father, Ding Guangen, was the longtime Communist Party’s propaganda chief. A second partner was on the Central Committee of the Communist Youth League, considered the political power base of China’s new top leader, Hu Jintao.[28]

In 2005, China’s broadcast regulator tightened control and published new regulations forbidding foreign stations from buying domestic channels and other media outlets. News Corporation was forced to cancel the joint venture with Qinghai Satellite Television. The cost of the debacle was estimated between $30 million and $60 million.

Murdoch’s third wife, Wendi Deng, pushed the News Corporation’s social networking site, MySpace, to enter the Chinese market. As a local venture, MySpace China, which began operations in the spring of 2007, abided by domestic censorship laws and the “self-discipline” regime that governs proprietors of Chinese websites. Every page on the site has a link allowing users or monitors to “report inappropriate information” to the authorities.

The Murdochs may have been one of the most aggressive media empires in terms of being willing to delve into grey areas to do business, but Murdoch never made any headway at all in terms of getting his own channel in China.

In August 2010, News Corporation signed an agreement with China Media Capital (CMC), whereby CMC acquired a controlling stake in Star China TV.[29]

In 2014, 21st Century Fox sold its residual minority stake in Star China TV to China Media Capital after finally giving up on the emerging Chinese television market.[30]

Western Media: A Platform for CCP Propaganda

In May 2016, the CCP’s Chief of Central Propaganda Department Liu Qibao signed a series of agreements with top media companies in Australia when he visited Sydney. According to the agreement, a supplement of China Daily was to be inserted into the conservative newspaper Sydney Morning Herald. The China Daily is the state-controlled English-language voice of the Chinese government to the outside world.

Not only in Australia, the CCP has also signed similar agreements with the Washington Post, UK’s Daily Telegraph, and Le Figaro newspaper in France.

In the Washington Post, China Daily originally consisted of paid newspaper-like inserts. The insert identifies itself as “an advertising supplement to The Washington Post” that is “prepared by China Daily, People’s Republic of China.” Later, the Post provided the supplement on its website. A “China Watch” subdomain of the Washington Post’s site, http://chinawatch.washingtonpost.com, carried the contents of China Daily online. If the reader is not careful enough, one could easily make the mistake that the articles on China Watch are produced by The Washington Post.

In February 2011, journalist James Fallows criticized the Washington Post handling of the CCP supplements in his article in The Atlantic.[31]

“I showed this to a seasoned world traveler a few minutes ago and asked what he thought it was. ‘China Watch’ ? – ‘The Post’s blog about China?’ Reasonable guess. In fact if you click on the image above to see an enlarged version, you’ll make out the tiny words, ‘A Paid Supplement to the Washington Post’ in the upper right hand corner.”

Fallows notes that the content provides clues of who is the real source—and it’s not The Washington Post. In the example he cites from 2011, the supplement says, “Stop Telling Us What We Should Do,” with “we” meaning China and the object receiving the command being the United States. In another example the writer argues how unfair it is for foreigners to criticize China’s “rare earths” exports policy. One could infer from these examples that the PRC was the true author of the content.

Fallows observed that the supplement appears like any other story from the Post with the URL making the supplement look “like part of the ‘real’ Post.” In other words, the link looks like a direct link to the Washington Post and not to content of some foreign entity. Only the smaller type provides an indication that its content in not from the Post, he explained.

Western media have for a long time cooperated with the Chinese official mouthpiece, Xinhua News Agency.

In May 2015, Xinhua News Agency President Cai Mingzhao met with President of Reuters Stephen Adler in New York. Noting that the first cooperation contract between Reuters and Xinhua dates back to 1957, Adler stressed his agency greatly values the friendly relationship with Xinhua.[32]

Xinhua News Agency is the official press agency of the Chinese government. It has never been a media in the western standard. As a ministerial level government agency underneath the State Council, Xinhua’s president has always been handpicked by the CCP leadership.

In August 2017, President of Xinhua News Agency Cai Mingzhao and his Associated Press (AP) counterpart Gary Pruitt discussed possible cooperation in media technology and innovation in Beijing. Cai briefed Pruitt on Xinhua’s progress on big data technology, short video clips, and financial information services, calling on the two news outlets to deepen cooperation in developing new technologies tailored for the media industry. Calling wire service a challenging business, Pruitt said AP and Xinhua are partners who try to help each other.[33]

Newer social media such as Twitter and Facebook are trying to catch up.

Facebook’s Mark Zuckerberg went on an all-out charm offensive to curry favor with China’s government. Facebook had an estimated 1.59 billion users by the fourth quarter of 2015, but was still denied access to China, the world’s biggest Internet market, where more than 721 million people have internet access. Zuckerberg was learning Mandarin, and was jogging through pollution-choked Tiananmen Square—a place many westerners know for the Tiananmen Square massacre in 1989—when he posted a photo of himself on Facebook doing it, with this status update: “It’s great to be back in Beijing! I kicked off my visit with a run through Tiananmen Square, past the Forbidden City, and over to the Temple of Heaven.” Zuckerberg also met with China’s propaganda czar, Liu Yunshan.[34]

In 2016, Twitter appointed Chen Kui as the first China managing director. Chen previously worked at Cisco and Microsoft as a senior officer in Chinese matters, and was once the president of a software company founded by the Chinese Ministry of Public Security. Chen also worked at the First Research Center for the Second Artillery Force (the strategic and tactical missile forces) of the People’s Liberation Army.[35] As soon as Chen Kui took office, she excitedly interacted with Chinese government mouthpiece CCTV and Xinhua News Agency on Twitter. She tweeted, “Let’s work together and tell the world the great China story!”[36]

A very important aspect of the western media companies’ value to the CCP is that it helped the CCP to acquire a certain amount respect that it did not deserve and it helped create the illusion that China’s human rights practices had improved. They hadn’t improved and, in fact, human rights had worsened.

In January 2005, four years after the January 2001 Tiananmen Square self-immolation incident, the Associated Press’s Beijing Bureau did a story titled, “Chinese Government Shows off Repentant Falun Gong Followers.” The article was written after an interview of several individuals who participated in the self-immolation and were serving jail terms. The central message was that these individuals renounced Falun Gong and were “rehabilitated.” However, knowing that the interview was government-arranged, Beijing barred foreign journalists from interviewing the so-called victims, and even went so far as to detain those who sought to investigate the story. The AP reporter failed to question and check out the information the state provided from the interviewees. The article gave no voice to Falun Gong. Nor did it engage the wealth of information that suggested the immolation incident was staged. The AP article basically followed the CCP’s script, which resembled the many government mouthpiece attacks on Falun Gong.

A week later, the Eastern U.S. Buddha’s Study Falun Dafa Association published an open letter to the Associated Press, with the question: “Is the AP willingly serving as a mouthpiece for the Chinese Communist Party in its deadly campaign against Falun Gong?”

The falsity of the self-immolation incident is obvious to any sensible human being. If Falun Gong teaches people to burn themselves so as to reach spiritual fulfillment, why did it take place only in China, but nowhere else, such as the United States and other nations outside of China?

Unfortunately, the story had real consequences. The CCP has been using the incident to breed hatred and violence against Falun Gong and legitimize its persecutory policies. As the open letter stated, “To the extent that it can dehumanize and discredit the group through incidents like the ‘immolation,’ it can more easily torture, maim, and kill Falun Gong adherents. Insofar as your article lends AP’s name and credibility now to the CCP line, it has contributed in no small way to the deadly anti-Falun Gong campaign.”

What the western media companies did violated one of the most fundamental values of the free world, namely, freedom of speech and press. Their victims included not only the Chinese people but all of their readers.

The importance of freedom of speech and press in a democratic system is well established. People’s access to unfiltered information is the basis of an informed citizenry. In a democracy, the free flow of information, opinions, and news is vital in the formation of public opinion; freedom of speech and press go hand in hand with a well-functioning democracy. Thomas Jefferson once said, “Were it left to me to decide whether we should have a government without newspapers or newspapers without a government, I should not hesitate a moment to prefer the latter.”

Freedom of speech and press are also essential for the protection of democracy. They provide a check on demagoguery and the manipulation of the news by media controlled by the state.

When western media exercises self-censorship in an effort to please the CCP, they turn the news product that should serve the public interest into a private product of media companies. The latter can be bought and sold like any material product. News detached from the truth and the public interest is the kind of news that serves the needs of the Party. The CCP simply made the best use of it for their aims, and used its considerable resources to develop the western media as its platform.

Any news that hurts the profitability of media companies is banned and deleted. The consideration of the economic benefit overrides any concerns for objectivity and fairness. This approach is not fundamentally different from press control. The media’s self-censorship makes its viewers unable to know the truth.

Due to this misinformation of western media, people in the free world knew little about the real China and were particularly affected by the propaganda campaigns of the Chinese communists. When they learned the truth about the deterioration of human rights in China, their reaction was: I thought that human rights in China had made a lot of progress. In that sense, the West had been misled even more than the Chinese people under the CCP’s rule. For example, Chinese scholars had started discussions of China’s “low human rights advantage” in terms of industrial workers, while nobody in the West was even thinking about this. Similarly, when the Chinese media have openly discussed “purchase order diplomacy” between China and the West, it was not picked up in the western media. As a result, people in the West could not understand what was behind their country’s China policy.

 

Continue reading Chapter 7 here

To read the Introduction, click here.

To read Chapter 1, Jiang Zemin’s Rise, Part 1, click here.

To read Chapter 1, Jiang Zemin’s Rise, Part 2, click here.

To read Chapter 2, Corruption Soars Under Jiang, Part 1, click here.

To read Chapter 2, Corruption Soars Under Jiang, Part 2, click here.

To read Chapter 3, The Reality Behind China’s Economic ‘Miracle,’ Part 1, click here.

To read Chapter 3, The Reality Behind China’s Economic ‘Miracle,’ Part 2, click here.

To read Chapter 4, Jiang’s Crusade Against Falun Gong, Part 1, click here.

To read Chapter 4, Jiang’s Crusade Against Falun Gong, Part 2, click here.

To read Chapter 5, Moral Degeneration in China, Part 1, click here.

To read Chapter 5, Moral Degeneration in China, Part 2, click here.

To read Chapter 6, The West Enables the China ‘Miracle.’ Part 1, click here.

To read Chapter 6, The West Enables the China ‘Miracle.’ Part 2, click here.


Notes:

[1] Jiang, Weiping. (2013, February 16) Bo Xilai leans on moneybags; how many suicide jumps do Terry Gou need? Jiang’s personal blog. http://www.jiangweiping.com/index.php?route=news/article&catid=1_50&news_id=229

[2] Xin, Hua. (2005, July 6) Corruption of foreign companies: the unspoken rules for the survival of multinational companies in China. Sina.com http://finance.sina.com.cn/review/observe/20050706/12161766677.shtml

[3] Liu, Yang; Wu, Fang. (2007, September 4) Review of bribery incidents of multinational companies in China in recent years. People’s Daily Online http://paper.people.com.cn/gjjrb/html/2007-09/04/content_18817509.htm

[4] Feng, Yuding. (2007, July 5) Siemens “bribery gate”: tearing away fig leaves of the largest commercial bribery case in German history. Sohu.com http://business.sohu.com/20070705/n250919085.shtml

[5] People’s Daily Online. (2009, August 13) Frequent occurrences of bribery cases of multinational companies; China becomes the hotspot of “foreign corruption.” http://mnc.people.com.cn/GB/9848740.html

[6] New Tang Dynasty Television. (2009, April 25) (China orders) no report on involved Chinese personnel in Siemens bribery case. https://www.ntdtv.com/gb/2009/04/25/a285921.html

[7] People’s Daily Online. (2009, August 13) Frequent occurrences of bribery cases of multinational companies; China becomes the hotspot of “foreign corruption.” http://mnc.people.com.cn/GB/9848740.html

[8] Website of China Communications Industry Association. (2010, July 19) Series of China Mobile corruption cases emerge: problems with the institution and difficulty of correction http://www.ccia.org.cn/news_show.php?id=3321

[9] Press release of U.S. Department of Justice. (2010, April 1) Daimler AG and Three Subsidiaries Resolve Foreign Corrupt Practices Act Investigation and Agree to Pay $93.6 Million in Criminal Penalties https://www.justice.gov/opa/pr/daimler-ag-and-three-subsidiaries-resolve-foreign-corrupt-practices-act-investigation-and

[10] Hilzenrath, David. (2011, March 18) SEC accuses IBM of misconduct in providing gifts to Korean, Chinese officials. Washington Post https://www.washingtonpost.com/business/economy/sec-accuses-ibm-of-bribing-korean-officials/2011/03/18/ABcuYMr_story.html?

[11] Press release of U.S. Department of Justice. (2012, April 25) Former Morgan Stanley Managing Director Pleads Guilty for Role in Evading Internal Controls Required by FCPA https://www.justice.gov/opa/pr/former-morgan-stanley-managing-director-pleads-guilty-role-evading-internal-controls-required

[12] Press release of U.S. Department of Justice. (2005, May 20) DPC (TIANJIN) LTD. CHARGED WITH VIOLATING THE FOREIGN CORRUPT PRACTICES ACT https://www.justice.gov/archive/opa/pr/2005/May/05_crm_282.htm

[13] Press release of U.S. Securities and Exchange Commission. (2010, December 10) SEC Charges RAE Systems for Illegal Payments Made Through Joint Ventures to Win Chinese Government Contracts https://www.sec.gov/news/press/2010/2010-242.htm

[14] Press release of U.S. Securities and Exchange Commission. (2009, July 28) SEC FILES SETTLED CHARGES AGAINST AVERY DENNISON CORPORATION FOR VIOLATING THE BOOKS AND RECORDS AND INTERNAL CONTROLS PROVISIONS OF THE FOREIGN CORRUPT PRACTICES ACT https://www.sec.gov/litigation/litreleases/2009/lr21156.htm

[15] Press release of U.S. Department of Justice. (2009, July 31) Control Components Inc. Pleads Guilty to Foreign Bribery Charges and Agrees to Pay $18.2 Million Criminal Fine https://www.justice.gov/opa/pr/control-components-inc-pleads-guilty-foreign-bribery-charges-and-agrees-pay-182-million

[16] Fang, Xiao. (2014, March 5) China National Petroleum Corporation senior managements confirmed to involve in “porn star gate.” The Epoch Times. http://www.epochtimes.com/gb/14/3/5/n4098337.htm

[17] Zhu, Tao. (2010, February 12) Huang Guangyu and the first case of approving foreign investment. Caijing Magazine. http://misc.caijing.com.cn/chargeFullNews.jsp?id=110377180&time=2010-02-12&cl=106

[18] Press release of U.S. Securities and Exchange Commission. (2007, December 21) SEC Files Settled Action Against Lucent Technologies Inc. in Connection With Payments of Chinese Officials’ Travel and Entertainment Expenses; Company Agrees to Pay $1.5 Million Civil Penalty. https://www.sec.gov/litigation/litreleases/2007/lr20414.htm

[19] Yang, Chao. (2003, August 4) China’s ongoing crackdown on tax evasion. People’s Daily Online. http://www.people.com.cn/GB/jingji/1045/1998974.html

[20] Shi, Haiping. (2004, November 13) China State Taxation Administration targets the huge tax evasion of multinational corporations. Sina.com http://finance.sina.com.cn/g/20041113/13471153094.shtml

[21] Ma, Changnan; Xu, Nan. (2006, October 26) Pollution survey of multinational companies in China shows serious gap of corporate social responsibility. China.com.cn http://www.china.com.cn/txt/2006-10/26/content_7280959.htm

[22] Garcia, Cardiff. (2011, May 23) Cisco accused over China crackdown. Financial Times. https://www.ft.com/content/ed449f78-8567-11e0-ae32-00144feabdc0

[23] Reporters Without Borders. (2005, September 6, updated 2016, January 20) Information supplied by Yahoo! helped journalist Shi Tao get 10 years in prison. https://rsf.org/en/news/information-supplied-yahoo-helped-journalist-shi-tao-get-10-years-prison

[24] Reporters Without Borders. (2005, March 14, updated 2016, January 20) Eutelsat is stopping the transmission of the Chinese-language channel NTDTV under pressure from Beijing https://rsf.org/en/news/eutelsat-stopping-transmission-chinese-language-channel-ntdtv-under-pressure-beijing

[25] Kahn, J. (2007, June 26). Murdoch’s dealings in China: It’s business, and it’s personal. The New York Times: online https://www.nytimes.com/2007/06/26/world/asia/26murdoch.html?pagewanted=print

[26] Los Angeles Times. (1999, September 8) COMPANY TOWN : Rupert Murdoch Takes a Slap at Dalai Lama. https://www.latimes.com/archives/la-xpm-1999-sep-08-fi-7834-story.html

[27] The Guardian. (2003, November 3) James Murdoch in a minute. https://www.theguardian.com/media/2003/nov/03/rupertmurdoch.bskyb

[28] Kahn, J. (2007, June 26). Murdoch’s dealings in China: It’s business, and it’s personal. The New York Times: online https://www.nytimes.com/2007/06/26/world/asia/26murdoch.html?pagewanted=print

[29] Young, Doug. (2010, August 9) News Corp sells controlling stake in China TV channels. Reuters. https://www.reuters.com/article/us-newscorp-china/news-corp-sells-controlling-stake-in-china-tv-channels-idUSTRE67810L20100809

[30] Patnaik, Sampad. (2014, January 2) 21st Century Fox sells Star China TV stake. Reuters. https://www.reuters.com/article/us-fox-divestment/21st-century-fox-sells-star-china-tv-stake-idUSBREA010CC20140102

[31] Fallows, James. (2011, February 3) Official Chinese Propaganda: Now Online from the WaPo! The Atlantic. https://www.theatlantic.com/international/archive/2011/02/official-chinese-propaganda-now-online-from-the-wapo/70690/

[32] Xinhua News Agency. (2015, May 15) President of Xinhua Cai Mingzhao meets with the President of Reuters. http://www.xinhuanet.com/xhsld/2015-05/15/c_1115290343.htm

[33] Xinhua News Agency. (2017, August 21) Cai Mingzhao meets with the President of Associated Press Gary Pruitt. http://www.xinhuanet.com/xhsld/2017-08/21/c_1121519264.htm

[34] Wiener-Bronner, Danielle. (2016, March 21) Mark Zuckerberg’s Beijing ‘Smog Jog’ Raises Eyebrows In China. Huffington Post. https://www.huffpost.com/entry/mark-zuckerberg-smog-jog-beijing_n_56ef3604e4b09bf44a9da6fb

[35] Philipp, Joshua. (2016, April 18) CHINA SECURITY: Twitter’s First China Director Signals Censorship and State Control. The Epoch Times. https://www.theepochtimes.com/china-security-twitters-first-china-director-signals-censorship-and-state-control_2028724.html

[36] Chen Kui’s twitter account. https://twitter.com/kathychen2016/status/720856644670791680?lang=en