In this week’s episode of China Insider, Miles Yu covers the anti-corruption movement and Gen Z protests that ousted former Nepalese Prime Minister K.P. Sharma Oli, while also examining China’s role in the transition to the new interim government. Next, Miles breaks down the latest from the trade talks between the United States, which wants to advance TikTok divestiture, and China, which wants to avoid tariffs related to purchases of Russian oil. Lastly, Miles unpacks the historic data breach from China’s Great Firewall that compromised confidential and protected information regarding the Chinese Communist Party’s export of censorship and surveillance technology to foreign countries.
China Insider is a weekly podcast project from Hudson Institute’s China Center, hosted by China Center Director and Senior Fellow, Dr. Miles Yu, who provides weekly news that mainstream American outlets often miss, as well as in-depth commentary and analysis on the China challenge and the free world’s future.
Episode Transcript
This transcription is automatically generated and edited lightly for accuracy. Please excuse any errors.
Miles Yu:
Welcome to China Insider, a podcast from the Hudson Institute's China Center. I am Miles Yu, Senior Fellow and Director of the China Center. Join me each week for our analysis of the major events concerning China, China threats, and their implications to the US and beyond.
Colin Tessier-Kay:
It is Tuesday, September 16th and we have three topics this week. First, we cover the ongoing Gen Z anti-corruption protest in Nepal that toppled the government and examine China's potential role during this transition. Second, we discuss the current US-China trade talks underway in Madrid this week, with the US looking to close on the TikTok divestiture and set terms for a bilateral trade deal. Lastly, we look into the leak of internal documents from behind China's Great Firewall and what these documents reveal about China's surveillance infrastructure and actions. Miles, great to be with you again this week.
Miles Yu:
Nice to be with you again, Colin.
Colin Tessier-Kay:
So up first this week, protesters in Nepal took to the streets last week in an anti-corruption demonstration against the now former government under Prime Minister K. P. Sharma Oli, following an announced social media ban that included 26 platforms including WhatsApp, Instagram, and Facebook. Since last week, the protest, comprised mostly of younger individuals carrying placards and banners identifying themselves as the Gen Z protesters, have ousted the Oli government and officials [and] burned the parliament and homes of several politicians as well. So, Miles, what's the background on the protest in Nepal here and how did things escalate so quickly over the past week?
Miles Yu:
The background can be very complicated, but there's one common theme here. Gen Z is a powerful social group. I mean they are a revolutionary bunch. You remember, Gen Z is known for their mastery of social media. This group of people are particularly attuned to this kind of communication. Social media is the extension of the Gen Z mentality and their existence for some in some way. So, whenever governments try to ban or restrict their access to social media, it is going to basically cause major trouble. This is not just in Nepal, [but] in many other countries too, China in particular. Every time the Chinese government tries to strengthen its control over social media, it backfires. It always backfires because the young people, many of them unemployed, are going to rebel. Remember, several years ago, the Chinese government tried to ban a gaming app that many youths play in cars.
This caused an instant national uprising, basically a national honking, where everywhere you go, people were just honking their horns and making the whole nation very noisy and untenable. So, the government had to back down. Two years ago, the Chinese government also tried to strengthen control in China of these gaming apps and not cause a national uproar. The largest gaming company in the world is Tencent that owns WeChat. After the national uproar, Tencent stock fell by 16% the next day. So, the government had to back down. This is really important. I think the Nepalese government learns from the CCP. They share the same kind of communist gene with the CCP. The prime minister, K.P. Sharma Oli is the chairman of the CPU, actually CPN, that is the Communist Party of Nepal. I mean he's a communist. He shares the same playbook with China.
So, that's one reason why the Gen Z revolution is very, very, very, very contagious. This is not the first Gen Z revolution we have seen in South Asia. Last year in neighboring Bangladesh, there was a similar uprising of the youth led by Gen Z, so much so that they actually ousted the Bangladesh government. The long-term prime minister, Sheik Hasina, basically had to resign. She was very close to Xi Jinping. The funny thing is, like Hasina, Oli just returned from China. He was in the September 3rd parade, and days later, less than a week later, he's gone. Hasina, same thing. I mean last year she went to China, got something like $10 billion from Xi Jinping. The moment that she came home and there was an uprising and ultimately got herself ousted. So, this is some kind of karma.
Colin Tessier-Kay:
Yeah, let's stay with China here for a second in the conversation because, while certainly not a major security concern, China still very much concerns itself with all political developments in bordering nations, including Nepal. The response from China's foreign ministry expressed hopes to restore stability as soon as possible and properly address domestic issues. Meanwhile, across Chinese state media - this has been an interesting development to follow. Most analysts seem to frame the protests as a consequence of Nepal's economic policy and dependence on migrant labor and that the Nepalese government failed to see how crucial social media platforms are to sustaining the economy. So, Miles, what do you make of the response from the Chinese leadership here and across state media? And what do you see as China's role as these protests continue in Nepal?
Miles Yu:
China's role in the Nepalese government and politics is always very intriguing. Number one, Nepal sits between India and China. India and China have had ongoing tensions since the late 1950s. So, how to deal with Nepal is very tricky because you cannot go too far to push Nepal into the other side [India]. That has always been the case. But China has always tried to control Nepal mostly through security arrangements, but also that kind of a consideration, geopolitical consideration, is boosted through the Belt and Road Initiative (BRI). China and Nepal signed 10 projects altogether. Just recently, the former Prime Minister Wen Jiabao (温家宝) went to Nepal several times. Just before Oli was ousted, Chinese security troops were in Nepal to train with the Nepalese military and police on crowd control techniques, for example. So that is very important.
Now, there is also another part of this, that is Nepalese politics are very divided. The leading party, the ruling party, is the Nepalese Communist Party. They call themselves the United Marxist Leninist Party, the CPN. Oli wants to get Chinese BRI money through Chinese loans. Now, we all know BRI is basically a debt trap. So, a lot of countries [that] took China's bait [are now] are deeply indebted to China. Nepal’s opposition parties, which are also very powerful, oppose any kind of BRI loans. Instead, they pressured Oli to go to China to ask for Chinese BRI money, but not in the form of loans, which are deadly, but grants. And China said, no, no, no, we're not giving you grants, we are going to give you loans with all kinds of ridiculous terms. Now, Chinese BRI loans, as you know, are very short term, sometimes 10 years, and the grace period is just one year, and the rate is about 4.5%. Also, it is a floating rate, it is not like a fixed 30-year rate like most other loans from the World Bank and IMF. So, it's much more likely [for other countries] to default on the Chinese BRI loans. That's how China hooks you on their money and then they basically take control of your sovereign assets.
In Nepalese politics, there has always been a major fight between grants versus loans. And Oli basically is very pro-Beijing and there's some compromise over there, but also, he basically was on China's side. This is the problem. China plays [the situation] gingerly, as I said, because of the India-Pakistan issue, but also China would never give up on Nepal. I think the control is very kind of tacit and furtive instead of overt.
Colin Tessier-Kay:
That's a really good point, especially to round out the topic I guess would be an interesting way to incorporate that because since toppling the former government, the protest movement continues to clash with police and some elements of Nepal's military. But the latter has really yet to organize a unified defense in the absence of the current government leadership. And in the latest development, I believe, the movement has taken to Discord, another social app, to elect a new interim Prime Minister Sushila Karki, who was Nepal's first female Chief Justice. So Miles, I'm curious here what happens next with this movement? Does the interim government stand a chance of establishing new legitimacy or is there a chance that we even see China intervene in any kind of capacity, whether diplomatic or security wise?
Miles Yu:
That's a very good question. I don't think China is really in the mood of openly intervening because of the India factor, [and] because of international backlash. And remember, China is not a very popular country in the world despite all these displays of bravado by the Chinese government through parades, through all kinds of moralistic sanctimony. Remember, there is something called the “Beijing Curse,” even though it may not be scientific, but it's a fun fact. That is whoever’s government is getting close to Beijing, something bad will happen to it. Maybe it leads to regime change or some leader would just disappear or die. This is very interesting and examples are plenty. East Germany in 1989 was the only European communist government that openly and vigorously backed China's massacre of their students. You know what? The leaders of the East German regime, Erich Honecker and his pro-China stance, pro-massacre stance, aroused a lot of resentment within East Germany and massive protests against him. So, he had to resign. I mean his successor, the young guy [Egon] Krenz, also made a mistake of going to China in August in the immediate aftermath of the massacre and shook hands with the butcher of Beijing, Li Peng (李鹏)，and several other people. And then he was ousted, which directly led to the November 9th demolition of the Berlin War.
And going back to 1979, there was a Chinese Communist leader, Hua Guofeng (华国锋), who was Mao’s successor, and he visited Iran. Weeks later, there was an Islamic revolution when Khomeini came back from France. A few months later, he [Hua Guofeng] visited Yugoslavia who was supposedly China’s buddy-buddy. And then the moment he left, the long-time communist party leader Tito died. And this is really interesting. The same leader of China [Hua Guofeng] visited Japan at the time. And just when he landed back on his return to Beijing, the guy who received him, the Japanese prime minister Masayoshi Ohira, just dropped dead. So, I'm sure this is all coincidence. Some of them may sort of belong to the astrological realm, but it's a fun fact.
The truth is, when China is involved in international affairs in many other countries, the government's attitude relating to China will always become a very hotly debated national issue and the election held will focus on China's relationship with their home country. In this sense, China is a very destabilizing factor in many countries’ domestic politics. You can see this in Sri Lanka, Kenya, Zimbabwe, Angola, you name it. Now, you mentioned the regime change in Nepal last week. One thing that's very interesting is the role of the military. The military basically stayed neutral and didn't really go along with Prime Minister Oli’s hardline against the protestors which is very important. I give credit to the military. Also, there is a sort of a democratic structure in Nepal. There are elections, there are opposition [parties], and also there is a president. It was the president of Nepal who, in the aftermath of Oli’s ousting, appointed the interim Prime Minister who is the [former] judge as you mentioned, the first female Prime Minister. So, the election will be held pretty soon. I think the transition in Nepal is very promising and this once again points to that popular uprisings for just causes, even with violence as the government of Nepal killed dozens of people in this last week’s uprising, can turn out to be good if the country has democratic structures, preventing [more] chaos and the dismembering of the nation.
Colin Tessier-Kay:
Turning to our next topic today, US and Chinese officials are in Madrid this week for the latest round of trade talks between the two countries. They concluded their first day of talks on Sunday, picking up where things last left off in Stockholm, hopeful for resolution on the TikTok divestiture and for a bilateral trade deal amid concurrent demands from Washington for tariffs on imports from China over its purchase of Russian oil. So, Miles, given the geopolitical climate now since the last round of talks in Stockholm, it seems like Secretary Bessent is working from a tough negotiating position. What do you think we can expect from this round of talks in Madrid?
Miles Yu:
I think this is the fourth round of trade talks, which is like a marathon. The Chinese government always tries to delay, delay, delay, hoping to gain some time and to find some kind of leverage to force the opposition to concede or surrender. And you can see, these [are the] same kinds of tactics used by the Japanese infamously before Pearl Harbor. They went on for months and months of negotiation and gained time for their ultimate attack on Pearl Harbor. So, I'm not saying that China is basically exactly doing this military option, but I think China is trying to delay these talks so that it will exhaust the opposition and force President Trump to give up. I don't think it's going to work because Chinese negotiation tactics are very different from Americans. When the United States talks to China, the agenda is always very specific, either on tariff rate, negotiation on specific items, [or] the resumption of exports of rare earth materials. It's very specific. The Chinese government always tries initially to avoid talking about specifics. They always try to give you this moral lecturing, telling you we need respect [and] you don't have the right attitude. [But] they won't change the bottom line of the US negotiation position. So that always is not going to work. I think after four rounds of talks, I believe the United States says, okay, I'm not going to talk about specifics anymore, I'm going to talk about the larger issues. If you want to talk about the larger issues, you want to be philosophical, let me be philosophical with you also. And I think the issues right now are China's substantial and even critical support for Russia's war machine in Ukraine. So that's one of the reasons why I think this time, secondary sanctions are on the top of the agenda of negotiating with China.
Not only that, President Trump has urged the European allies and all allies of the United States to stop buying Russian energy, particularly oil. So this time, I think [they] are united and hopefully Europeans will take action in compliance with their words. Ms. Von der Leyen actually said famously about a year ago that whoever is supporting Russia's war effort in Ukraine will never be Europe’s partner. So that's basically the policy statement that's very welcome [to the United States]. Secondly, I think right now another philosophical issue the US is going to force China to really deal with is the whole grand objective of President Trump, that is to open up China. China remains very closed to international free trade. One of the grandest dreams of the West has been to open up China since the time of the Opium War in the 1840s. China remains a very closed society today under communism, not only [due to] a traditional sort of nationalistic zeitgeist, but mostly because of the China's capability to keep that door very closed through technology, very draconian regulations and anti-west intelligence, [and] anti-espionage laws.
So, they make foreign investment and international exchange with China almost untenable and impossible. That's one of the reasons why President Trump has said, we're not going to sort of bully you, we're not going to do anything [to you], except you have to accept the fair terms of normal, international engagement. Open up your society, just like the United States is open to you. So, this is the second issue that I think US negotiators are going to push China to agree [on]. Specifics can be very easy to change or moderate and modify. But on the fundamental issues, mostly secondary sanctions as well as opening up the Chinese market, those were the two issues and I think gradually we might be successful because China has very little cards in this situation, particularly on economic ground. If the United States really takes this tariff issue on China very seriously, China has very little options but to comply.
Colin Tessier-Kay:
So, you made a good point there Miles about talking about the specifics of China's negotiation strategies and trying to stay within a very narrow framework. And given the last round of talks in Stockholm, it seems like Madrid will yield another round of deadline extension for these talks, especially regarding TikTok, which is a new agenda item for this meeting I should add, as well as the planned framework for a bilateral agreement. Some trade experts currently suggest that until Trump and Xi meet themselves that there won't be much progress on these fronts and further believe that China is less pressured to reach an agreement without concessions on export controls and lower tariffs. So Miles, I'd like to get your take on these assessments. We talked about China's domestic economic pressure from its unemployment and real estate crises. How much flexibility does China have here?
Miles Yu:
China has very little flexibility in terms of TikTok. I mean China would definitely kill it rather than just let Americans buy it. I think it is a dream to hope that China will give up this very powerful social media app because it is to China's advantage. We have US laws that were upheld by the US District Court as well as a US Supreme Court that TikTok belongs to and is controlled by an adversary. As such, TikTok does not have the constitutional protections of free speech because it is controlled by an adversary. So, I don't know if President Trump can succeed in the TikTok transaction, but TikTok again is not even a transaction. It's a strategic asset the Chinese government has over Americans. So I'm not sure about the legal side. I think even if TikTok is transferred to American ownership, but China still has technological control over its servers, if that tie is not severed, I don't see the whole point of even buying TikTok.
Colin Tessier-Kay:
The other issue of focus in the Madrid talks has been to pressure China and India as well to stop buying Russian oil to hopefully incentivize Moscow to participate in good faith peace negotiations. The US imposed an additional 25% tariff on India due to their purchase of Russian oil, but have, as far as I know, so far held off on imposing similar tariffs on China. For those reasons, though, that might be soon to change. Miles to round out this kind of topic here, is there a chance on this issue at least that Bessent and Greer may be able to work out an arrangement with Chinese officials? Or are their efforts better spent trying to bring together the rest of the G7 nations to counter China and India's moves with Russian oil?
Miles Yu:
China is by far the largest purchaser of Russian energy, particularly Russian oil to pump funds into Russia's war machine or killing machine, I should say. India of course is not an issue. I think the tariff over secondary sanction on India's purchase of the Russian oil from the US point of view, I don't think it's 25%, I think it's 50%. So, President Trump over the weekend actually sent an appeal to European allies and NATO allies that, hey, listen, we are ready to put secondary sanctions on China, but everybody should stop buying oil from Russia. If you [European allies] are willing to put 50% or even a 100% sanction on China for purchasing Russian oil, we're [the United States] ready to act accordingly. So again, there's a 50%, there is a 100%. Now, even 50% oil secondary sanctions on China, that would amount to about a 100% tariff against China on top of what we [the United States] already have.
Colin Tessier-Kay:
Turning to our final topic today, China's Great Firewall suffered the largest leak of internal surveillance documents last week with over 500 gigabytes of source code, work logs, and internal communication records made public. The information spans much of the firewall's operations including research and development. Miles, start us off here. How exactly did this leak happen, and do we know who is behind the leak and what exactly has been exposed so far?
Miles Yu:
Well, the leak is basically [being] reported as done by Western company. Mostly they are concerned about the Chinese Great Firewall mechanism. The technological side of that is very complicated. It is associated with the Chinese Academy of Sciences and several other key national labs in China. So, it actually should not be surprising to anybody at all. Now, what's surprising here, we should really take a deep breath and recognize the significance of this leak. People always tend to have this misunderstanding of China's Great Firewall as if this is just the wall to keep the Chinese inside and prevent them from knowing something [about] what's going on outside. This is different. With this leak we know for sure that China’s Great Firewall is not just for domestic audiences, [but] also for the globe because this is the perfect example of China's policy of export[ing] repression.
What we have seen here is that China’s Great Firewall has been used, with Chinese assistance, in countries like Burma, Pakistan, Ethiopia and Kazakhstan. Many of the Chinese BRI countries are receiving, sometimes willingly, sometimes imposed by Chinese authorities, this kind of a control censorship system. And that is really alarming. The second thing we should really realize is that this gives further justification for the West, particularly the United States, to impose severe export controls on China. That is, China can no longer be allowed to use Western technologies to improve [or] enhance its already draconian censorship and surveillance tools. And this is going to be endangering not just [for] the Chinese people, but also mostly to the rest of the world. And you can see [this] from this leak.
Colin Tessier-Kay:
Like you mentioned, as part of the exposure, the documents detailed that the company involved not only provides services to domestic governments in Xinjiang, Jiangsu, and Fujian, but internationally exports censorship and surveillance tech to countries like Myanmar, Pakistan, Ethiopia, Kazakhstan, among others. China's exports of censorship and surveillance tech have been known for some time at least certainly in the intelligence community. But what does this leak reveal about the extent to which China carries out these coercive operations? What really should people on a citizenship level take away from this event?
Miles Yu:
Well, it's obvious this information technology is such that it dramatically shrinks or even completely eliminates the distance between peoples and among countries. You can upload malware somewhere on the internet and a hundred million people instantly could get infected by that. So that's why I think this is no longer just a Chinese issue, it's a global issue that is emanating from China
Colin Tessier-Kay:
To finish up the conversation here, Miles, let's kind of keep it within China. What is the impact of this leak on China's domestic population? Some experts say this will allow citizens to better understand how the firewall interacts and tracks their VPN use making it easier for them to evade censorship and surveillance. But does this increase the risk for domestic Chinese citizens at all?
Miles Yu:
I think it will force China to adjust its exposed technologies. And there are a lot of people inside China who are really yearning to learn this sort of uncontaminated information. That's why you see a lot of Chinese who are “wall climbers,” they climb over the firewall and then register through VPN to say, Twitter, Facebook, Instagram, these kinds of social media outlets that are free in the west, but that carries danger [in China]. There's always a tension between the censored and the censers. And so that's one reason I think this one is a very comprehensive exposure of China's censorship system and they won’t let the freedom seekers know what the vulnerabilities of the Great Firewall [are]. On the other hand, [for] individuals, it's very difficult for them to fight against the whole state sponsored machinery. And so that's one reason why I think no, it's a little help, but it is not much.
Colin Tessier-Kay:
Well, that's unfortunately our time for this week. Thank you to our listeners for joining us and thank you Miles for your expert insights analysis on this week's issues. We'll check back in with you again next week.
Miles Yu:
Right. Thanks a lot. See you next week.