Mounting scrutiny of ethnic Chinese poses risks to corporates

Ethnic Chinese workers and business owners face mounting scrutiny from Western governments fearful of Beijing’s industrial and intelligence strategy. This paranoia poses risks to the many global enterprises which find ethnic Chinese staff and partners to be extremely valuable, whether it be for their technical quality or their ability to bridge the cultural and linguistic obstacles to doing business in China.

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Scrutiny increases in the West

The U.S. government could be about to limit the access of citizens from the People’s Republic of China (PRC) to sensitive projects at U.S. universities and research institutions, according to U.S. newspaper The New York Times on 30 April citing anonymous White House sources familiar with the deliberation. The report added that the restrictions are likely to apply to projects in the advanced materials, software and technologies sectors. It is probable that individuals with permanent residency in the U.S., those granted asylum status and former PRC citizens who have renounced citizenship and become naturalised Americans will be exempted from the measure.

He said that there is a ‘whole-of-society’ threat posed by the PRC in U.S. universities

The report follows a warning by Christopher Wray, the director of the FBI, in February 2018. He said that there is a ‘whole-of-society’ threat posed by the PRC in U.S. universities and suggested that ethnic Chinese professors, scientists, and students could be possible agents of the PRC, regardless of their nationality. Separately, in March 2018, three U.S. lawmakers introduced a congressional bill targeting the Chinese state-run language schools known as Confucius Institutes over propaganda concerns. The organisation is present in more than 100 higher education institutions across the United States.

Countries with large ethnic chinese diaspora

Fanning the U.S. government’s suspicions are a number of cases of industrial espionage perpetrated by ethnic Chinese employees at multinational companies. In April 2018, the U.S. Department of Justice sentenced Zhang Weiqiang, a rice breeder at U.S. biopharmaceutical firm Ventria Bioscience, to ten years in prison for conspiring to steal genetically modified rice seeds. This was after it found Zhang guilty of passing rice seeds to visiting PRC researchers in 2013.

The crackdown on PRC nationals should be viewed against the backdrop of deteriorating Sino-U.S. trade ties

The crackdown on PRC nationals should be viewed against the backdrop of deteriorating Sino-U.S. trade ties. U.S. President Donald Trump has accused China of unfair trade practices and intellectual property (I.P.) theft and threatened to impose at least USD50 billion worth of tariffs against China. This month, the tense relations appeared to have eased. An indication of that is the U.S. decision on 22 May to reverse a seven-year ban against Chinese state-owned telecommunications company ZTE over sanctions violations. However, further punitive tit-for-tat trade measures remain likely, unless Beijing signals its willingness to make further concessions to the U.S.

Business implications

Tighter scrutiny of ethnic Chinese employees and executives has security and operational implications for corporates. In the West, Chinese employees are prominent in science, technology, engineering and mathematics (STEM) sectors, given that China produces most of the world’s STEM graduates ahead of second-place India. California’s technology companies are particularly reliant on Chinese staff; U.S. technology company Google Inc, for instance, reports that 35 per cent of its workforce are of ‘Asian’ ethnicity. As political suspicion of PRC nationals intensifies in the West, political pressure to scrutinise the recruitment of ethnic Chinese staff, even those with Western passports or permanent residence, is likely to increase. This is most likely to occur in sectors that governments regard as strategic, such as advanced material and technologies, which tend to involve highly educated and skilled individuals.

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