In retaliation for Speaker Nancy Pelosi’s visit to Taiwan last week, China conducted large-scale military exercises around the self-governing island democracy and suspended some trade between the sides.
The exercises led to a few shipping disruptions, but they did not affect traffic at Taiwanese or Chinese ports, analysts say. And the trade bans were notable mainly for what they did not target: Taiwan’s increasingly powerful semiconductor industry, a crucial supplier to Chinese manufacturers.
The bans that Beijing did impose — on exports of its natural sand to Taiwan, and on imports of all Taiwanese citrus fruits and two types of fish — were hardly an existential threat to the island off its southern coast that it claims as Chinese territory.
Taiwanese pineapples, wax apples and grouper fish, among other products.
a self-governing island democracy of 23 million people, as its territory and has long vowed to take it back, by force if necessary. The island, to which Chiang Kai-shek’s Chinese forces retreated after the Communist Revolution of 1949, has never been part of the People’s Republic of China.
Understand the China-Taiwan Tensions
What does Xi Jinping want? China’s leader has made it clearer than any of his predecessors that he sees unifying Taiwan with China to be a primary goal of his rule — and a key to what he calls China’s “national rejuvenation.” Mr. Xi is also keen to project an image of strength ahead of his expected confirmation to an unprecedented third term this fall.
Understand the China-Taiwan Tensions
How is the U.S. involved? In an intentionally ambiguous diplomatic arrangement adopted in 1979, the United States maintains a “one China” policy that acknowledges, but does not endorse, Beijing’s claim over Taiwan. U.S. leaders have remained vague about how they would help Taiwan if China attacked, but President Biden has pledged to defend the island.
Understand the China-Taiwan Tensions
Why are tensions rising now? Speaker Nancy Pelosi’s recent trip to Taiwan — the highest level visit to the island by an American official since 1997 — has ignited regional tensions, prompting China to conduct its largest-ever military exercises near Taiwan. A chorus of official Chinese bodies portrayed her trip as part of an American effort to sabotage China’s efforts at unification with Taiwan.
“The political message is greater than the economic hit,” said Chiao Chun, a former trade negotiator for the Taiwanese government.
Even though about 90 percent of Taiwan’s imported gravel and sand comes from China, most of that is manufactured. China accounted for only about 11 percent of Taiwan’s natural sand imports in the first half of this year, according to the Bureau of Mines.
The two types of Taiwanese fish exports that China restricted last week — chilled white striped hairtail and frozen horse mackerel — are collectively worth about $22 million, less than half the value of the Taiwanese grouper trade that was banned earlier this year. They are also less dependent on the Chinese market.
As for Taiwan’s half-a-billion-dollar citrus industry, its shipments to China account for only 1.1 percent of the island’s total agricultural exports, according to Taiwan’s Agriculture Council. A popular theory is that Beijing singled out citrus farmers because most orchards are in southern Taiwan, a stronghold for the governing political party, the Democratic Progressive Party, a longtime target of Beijing’s anger.
Future bans may become more targeted to punish industries in counties that are D.P.P. strongholds, said Thomas J. Shattuck, an expert on Taiwan at the University of Pennsylvania’s Perry World House. There may also be less retaliation against counties run by the Kuomintang opposition party “in an attempt to put a finger on the scale for Taiwan’s local, and even national, elections,” he added.
increasingly indispensable node in the global supply chains for smartphones, cars and other keystones of modern life. One producer, the Taiwan Semiconductor Manufacturing Company, makes roughly 90 percent of the world’s most advanced semiconductors, and sells them to both China and the West.
simulated a blockade of Taiwan.
Even though some of the exercises took place in the Taiwan Strait, a key artery for international shipping, they did not disrupt access to ports in Taiwan or southern China, said Tan Hua Joo, an analyst at Linerlytica, a company in Singapore that tracks data on the container shipping industry. He added that port congestion would build only if the strait was completely blocked, port access was restricted or port operations were hampered by a labor or equipment shortage.
“None of these are happening at the moment,” he said.
Vessels that chose to avoid the Taiwan Strait last week because of the Chinese military’s “chest beating” activities would have faced a 12- to 18-hour delay, an inconvenience that would generally be considered manageable, said Niels Rasmussen, the chief shipping analyst at Bimco, an international shipping association.
If Beijing were to escalate tensions in the future, it would indicate that it was willing to put at risk China’s own economy as well as its trade and relations with Japan, South Korea, Europe and the United States, Mr. Rasmussen said by phone from his office near Copenhagen.
“That’s just difficult to accept that they would take that decision,” he added. “But then again, I didn’t expect Russia to invade Ukraine.”
BEIJING — The saving opportunity with the rural bank in central China looked, to Sun Song, a 26-year-old-businessman, like a great find. It would be linked to his existing account at a large, reputable state-owned bank. The rural bank was also offering high interest rates, making it seem like an ideal place to park his roughly $600,000 in savings.
Then the bank abruptly froze his account this year, and officials said they were investigating potential fraud. “I owe money on my credit card and have to repay my car loan,” he said. “I have two sons. They’re all waiting.”
The financial scandal ensnaring Mr. Sun and thousands of others across the country could pose a serious test to the ruling Communist Party, which prizes stability and its ability to control any threats to it.While the amount of money at risk is small relative to China’s economy, it strikes at the core promise of the party that it will provide a better future for the people.
slowest rate of growth since the beginning of the coronavirus pandemic.
physically attacked by a mob of men while police officers stood by. Many protesters have since reported being harassed by the police.
“The government takes our taxpayer money and then beats us,” Mr. Sun said in a phone interview before the authorities warned depositors against speaking to the media. “My worldview has been destroyed.”
tested by the economic slowdown, born in part of the government’s draconian campaign against the coronavirus and a regulatory crackdown on the once-booming real estate industry. This banking scandal has exposed more systemic issues in China’s financial system, including potential corruption and weak regulatory oversight at rural banks.
Zhiwu Chen, a professor of finance at the University of Hong Kong. “The extent of this anxiety shared by people is increasing very fast. It’s not good for social stability.”
surveillance apparatus, it is facing growing unease about the lack of safeguards to prevent the theft or misuse of personal data. Beijing’s move to censor news about one of the largest known breaches of a Chinese government computer system showed keen awareness of how security lapses can harm its credibility.
Immediately, officials tried to silence them. Censors shut down protesters’ messaging groups. The local authorities manipulated depositors’ mobile health codes — digital indicators that China uses to track coronavirus infections — to bar them from entering public spaces. But after the manipulation attracted widespread condemnation, local officials retreated, and protesters continued to gather, including on July 10.
Many of the demonstrators presented their demands as appeals, rather than challenges, to the Communist Party’s authority. Some waved Chinese flags. Others invoked Mr. Xi’s slogan of the “Chinese Dream” or carried a portrait of Mao Zedong. They were met with ferocity all the same. Men in plainclothes began hitting and kicking the protesters.
promised last week to repay the depositors — but only those who had put in less than 50,000 yuan, about $7,500, with details for the rest to be announced later. They also said they would not repay anyone who had used “additional channels” to obtain higher interest payments or those suspected of dealing with “illegal funds.”
Those stipulations were seemingly a nod to the police’s announcement about the suspected criminal gang. According to the police, the gang’s scheme included setting up illegal online platforms to solicit new customers.
Huang Lei, a lawyer in the eastern city of Hangzhou who has worked on fraud cases, said people who had unknowingly participated in an illegal scheme should still be entitled to repayment. But he acknowledged that, in reality, they might have little recourse.
“The other party is eager to characterize it as illegal — they’ve described it four or five different ways — because they don’t want to take responsibility,” he said of the authorities. Even if the depositors sued for repayment and won, he added, the bank might not have adequate assets to make them whole, and it was unclear if the state would make up the difference.
Indeed, the scandal has raised broader questions about who is accountable for the lost money, besides the suspected criminals.
the deteriorating economy has put more pressure on those same institutions. As a result, Professor Chen said, “I expect to see more rural banks having to face the same kind of problems as the Henan rural banks.”
There are most likely hidden debts spread across China’s financial sphere. The country’s seemingly unstoppable growth over the past few decades had encouraged speculative borrowing and lending behavior by everyone from online lenders to major real estate companies.
The government has sought to downplay concerns about a broader problem. China’s central bank said last week that 99 percent of China’s banking assets were “within the safe boundary.”
Still, it will now be up to the government to decide how to address the losses both in Henan and those yet to be revealed, said Michael Pettis, a professor of finance at Peking University. Officials could allow institutions to default, hurting lenders; they could squeeze workers; they could print more money, leading to inflation. In the end, Professor Pettis said, “somebody’s got to absorb the loss.”
For the Henan depositors, the fear is that it will be them.
Wang Xiaoping, a 39-year-old software industry employee from Hangzhou, said she had put about $95,000 into one of the rural banks. But all she had to show for it was an injured chin, from being attacked by a man wearing black at the Zhengzhou protest. She tried to report the assault to the police, but they told her to go to another district, she said.
“I told the police, I’m willing to die here,” she said in an interview on July 10. “This is my entire net worth, this is all of my paychecks put together, and it’s gone just like that.”
At an employee dinner, women were told to rank the attractiveness of the men at the table. During a team-building exercise, a woman was pressured to straddle her male co-worker in front of colleagues. Top executives traded lewd comments about male virility at company events and online.
The e-commerce giant Alibaba, one of China’s most globalized internet companies, has often celebrated the number of women in its senior ranks. In 2018, the company’s billionaire co-founder, Jack Ma, told a conference in Geneva that one secret to Alibaba’s success was that 49 percent of employees were women.
But that message of female empowerment is now being called into question after an Alibaba employee accused her boss of raping her after an alcohol-fueled business dinner. The woman, who has been identified by the police and her lawyers only by her surname, Zhou, said bosses and human resources had shrugged off her complaints. She eventually resorted to screaming about the assault in a company cafeteria last month.
“An Ali male executive raped a female subordinate, and no one in the company has pursued this,” Ms. Zhou yelled, according to a video that was posted on the internet.
fired the man accused of rape, said it would establish an anti-sexual-harassment policy and declared itself “staunchly opposed to the ugly forced drinking culture.” Yet former Alibaba employees say the problems run much deeper than the company has acknowledged.
Interviews with nine former employees suggest that casual sexism is common at Alibaba. They describe a work environment in which women are made to feel embarrassed and belittled during team-building and other activities that the company has incorporated in its culture, a striking departure from the image of inclusion Alibaba has tried to project.
The police investigation into Ms. Zhou’s case is continuing. Alibaba appears to be trying to keep a lid on discussions of the matter. The company recently fired 10 employees for leaking information about the episode, according to two people familiar with the matter. Most former employees who spoke with The New York Times asked to remain anonymous because they feared retaliation.
immediate changes to the way it handles workplace culture and misconduct matters after Ms. Zhou’s case came to light, the statement said. Upon examining its policies and reporting processes, the company found “certain areas that did not meet our standards,” the statement said.
The statement did not address any of the specific allegations made by the former employees who spoke to The Times.
Many Alibaba departments use games and other ice-breaking activities to make co-workers feel at ease with one another. Kiki Qian joined the company in 2017. Her team welcomed her with a game of charades. When she lost, she said, she was punished by being made to “fly the plane,” as her co-workers called it. The stunt involved straddling a male colleague as he sat in an office chair. The colleague then lay back in the chair, causing Ms. Qian to fall on top of him, face first.
“I realized while carrying out the punishment that it could be a little perverted,” Ms. Qian, 28, said in a telephone interview.
On a separate occasion, Ms. Qian said, she saw a woman burst into tears after being pressured to jump into the arms of a male colleague during a team game.
Other former Alibaba employees said ice-breaking rituals included uncomfortable questions about their sexual histories. One former employee said she and other women at a team dinner had been asked to rank their male colleagues by attractiveness. Another said she had felt humiliated during a game in which employees were required to touch each other on the shoulders, back and thighs.
Mr. Ma joked onstage about how Alibaba’s grueling work hours affected employees’ sex lives.
went further with the riff at the next year’s ceremony.
“At work, we emphasize the 996 spirit,” he said, referring to the practice, common at Chinese internet companies, of working 9 a.m. to 9 p.m., six days a week.
“In life, we need 669,” Mr. Ma said. “Six days, six times.” The Mandarin word for “nine” sounds the same as the word for “long-lasting.” The crowd hooted and clapped.
Alibaba shared the remarks, with a winking emoji, on its official account on Weibo, the Chinese social media platform. Wang Shuai, the company’s public relations chief, wrote on Weibo that Mr. Ma’s comments had reminded him of how good it was to be young. His post included vulgar references to his anatomy.
Alibaba also gives employees a handbook of morale-boosting “Alibaba slang.” Several entries are laced with sexual innuendo. One urges employees to be “fierce and able to last a long time.”
Feng Yuan, a prominent feminist in China, said the kind of behavior described at Alibaba could create the conditions under which bullying and harassment were quietly tolerated and promoted.
“In companies where men dominate, hierarchical power structures and toxic masculinity become strengthened over time,” Ms. Feng said. “They become hotbeds for sexual harassment and violence.”
Last month, Ms. Zhou shared her rape accusation on Alibaba’s internal website. According to her account of the events, her boss told a male client who was also at the alcohol-fueled business dinner, “Look how good I am to you; I brought you a beauty,” referring to Ms. Zhou.
Boozy meals have long been widespread in corporate China, where it can be seen as offensive to refuse to drink with a superior. Three days after Ms. Zhou reported the assault to Alibaba, her boss still had not been fired, she wrote in her account. She was told that this was out of consideration for her reputation.
“This ridiculous logic,” she wrote. “Just who are they protecting?”
Elsie Chen contributed reporting. Albee Zhang and Claire Fu contributed research.
The question is whether the new technology is going to make the yuan an attractive alternative to other currencies. Chinese central bankers say it is not an effort to supplant the dollar, and Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, said digitization won’t fix issues that make the yuan unattractive as a reserve currency in the first place — like capital controls, which mean you can’t exchange it easily at all times.
Is Bitcoin coming for the dollar?
Others worry that private-sector innovations like Bitcoin or “stablecoins,” which are backed by a bundle of assets or currencies, could become an attractive alternative to government-created cash if central banks don’t keep up.
Mr. Powell has argued that Bitcoin is more like gold than the dollar. It has value because it’s rare and people want to hold it, so it can even at times be traded for other goods and services, but it is not government-guaranteed money.
But global regulators did slow down Facebook’s stablecoin project, originally known as Libra and now called Diem, because they worried about the potential for money laundering and financial system disruption.
Mr. Powell said in testimony last year that Libra was “a bit of wake up call that this is coming fast and could come in a way that is quite widespread and systemically important fairly quickly,” highlighting the “importance of making quick progress.”
If tech companies come to dominate the payment system, that could create privacy and stability issues. In fact, China’s digital yuan was pursued partly in reaction to the rise and dominance of private-sector digital payment platforms like Alipay and WeChat Pay.
A faster or instant payments system, like the FedNow instant payment technology that America’s central bank is now developing, could keep the Fed up-to-date without changing the system as much as a digital currency would. But digital dollar fans say the point is to prepare for the future — and the future might be central bank digital currency.
“Digital cash, if built in the right way, could be really groundbreaking,” said Neha Narula, who is the director of the Digital Currency Initiative at the Massachusetts Institute of Technology and is working with the Boston Fed on its project.
Players, observers, lobbyists and the lobbied alike consider this a critical moment for crypto and its influencers. Succeeding or failing to persuade officials now will determine whether regulation allows the digital gold rush to accelerate or slows it to a sputter.
What’s at stake?
Here are four of the big issues keeping crypto lobbyists busy:
Reputation. The impression that crypto facilitates crime is voiced with some frequency by lawmakers and regulators, and it remains a significant hurdle to legitimacy. The Crypto Council’s first commissioned publication is an analysis of Bitcoin’s illicit use, and it concludes that concerns are “significantly overstated” and that blockchain technology could be better used by law enforcement to stop crime and collect intelligence.
Reporting requirements. New anti-money-laundering rules passed this year will significantly expand disclosures for digital currencies. The Treasury has also proposed rules that would require detailed reporting for transactions over $3,000 involving “unhosted wallets,” or digital wallets that are not associated with a third-party financial institution, and require institutions handling cryptocurrencies to process more data. The Financial Action Task Force, an intergovernmental watchdog and standards body, recently provided draft guidance on virtual assets that would require service providers to hand over further information.
Securities insecurities. When is a digital asset a security and when is it a commodity? Not technically a riddle, this question has puzzled regulators and innovators for some time. Bitcoin and other cryptocurrencies that are released via a decentralized network generally qualify as commodities and are less heavily regulated than securities, which represent a stake in a venture. Tokens released by people and companies are more likely to be characterized as securities because they more often represent a stake in the issuer’s project.
The Securities and Exchange Commission sued Ripple Labs in December, accusing it of selling unregistered securities in the form of a token called XRP. Ripple insists that XRP is a commodity. A decision in this case may prove to be a watershed for determining how to properly characterize cryptocurrencies in the future.
This week, an S.E.C. commissioner, Hester Peirce, published an updated “safe harbor” proposal that would give developers a grace period to issue a token without fear of mischaracterization and to keep regulators informed. “The idea is to give people a three-year runway,” Ms. Peirce said.
Catching up with China. The Chinese government is already experimenting with a central bank digital currency, a digital yuan. China would be the first country to create a virtual currency, but many are considering it. Some crypto advocates worry that China’s alacrity in the space threatens the dollar, national security and American competitiveness.
Today in Business
For more, see our previous weekend edition about the future of crypto regulation.
Meet me in the lobby
“With any new industry, figuring out Washington isn’t easy,” said Ms. Peirce, the S.E.C. commissioner. Entering a heavily regulated industry like finance and talking about technology that few officials understand only compound the difficulty for the crypto crowd.
Since joining the S.E.C. in 2018, Ms. Peirce has been a vocal supporter of blockchain both in the halls of power and in crypto insider circles, sharing her thoughts on hot topics like when there will finally be a Bitcoin exchange-traded fund in the United States. (Not soon enough, in her view, but perhaps soonish.)
As the sector matures, some things will get easier even while the landscape of players gets more complex. Blockchain businesses will increasingly speak to regulators who understand their language, Ms. Peirce said, like the new S.E.C. chair, Gary Gensler, a former M.I.T. professor who taught crypto classes and was coincidentally confirmed on the day that Coinbase listed.
