Elon Musk's China problem

Tesla CEO Elon Musk gestures during the Tesla China-made Model 3 Delivery Ceremony in Shanghai on January 7, 2020 (Photo by STR/AFP via Getty Images)

"The expansion of shelter-in-place, or as we call it, forcibly imprisoning people in their homes… is, in my opinion, breaking people’s freedoms in ways that are horrible and wrong… What the fuck!… This is not freedom. Give people back their goddamn freedom."

That was Tesla CEO Elon Musk in April 2020 after his Fremont, California manufacturing plant was forced to close for a few weeks due to the pandemic. 

Two years later, Chinese authorities shuttered Tesla's massive plant in Shanghai due to an Omicron outbreak. Musk said nothing. Instead, Tesla quietly complied with Chinese authorities. The Shanghai plant has recently reopened "under strict protocols that included having workers temporarily live at the plant and not returning to their homes." 

Musk cannot afford to cross Chinese authorities because Tesla relies heavily on China for supplies, production and sales. In 2021, Tesla sold "470,000 cars made at its Shanghai factory" — more than half of the 936,000 vehicles Tesla sold globally. Sales in China account for about one-quarter of Tesla's revenue. 

The Chinese government provided Musk with "billions of dollars’ worth of cheap land, loans, tax breaks and subsidies." Tesla was "the first foreign auto maker to build a wholly-owned production facility in China." The Chinese market is "key to Musk’s global ambitions and Tesla’s road to sustained profitability." 

Musk only operates in China "at the pleasure of the Chinese authorities."  Musk has been consistently effusive about China in his public remarks. "China rocks," Musk said on a podcast in 2020, describing the Chinese people as "smart" and "hardworking." Many Americans, on the other hand, are "complacent" and "entitled," according to Musk.

Musk's submissive posture toward China has taken on increased importance after Twitter accepted his proposal to buy the company for $44 billion and take it private. Although Twitter is banned for Chinese citizens, the Chinese government uses it to shape global opinion and closely monitors discussions on the platform.

Musk has been critical of Twitter's current management, arguing that it has an overly restrictive approach to speech on the platform. But Musk has been silent about the Chinese government's decision to ban Twitter for more than a decade. 

Although Musk is months away from gaining control of the platform, individuals affiliated with the Chinese government are already demanding Musk change Twitter's policies. Chen Weihua, a bureau chief at China Daily, said that Musk should remove the label on Twitter that identifies him as "state-affiliated." Weihua did not deny his connections to the government, but said that Twitter's labeling was a "suppression of free speech."

Chinese officials and state-affiliated reporters have "used Twitter to spread conspiracy theories, arguing that the coronavirus had been released from a U.S. bioweapons laboratory and calling into question the safety of mRNA vaccines." 

"China will not hesitate to use any leverage it has," Duncan Clark, a China-based investment consultant, told Bloomberg. "What we know about this place is that any way to gain some tactical advantage is normally taken."

Musk does China's bidding in Xinjiang

According to Human Rights Watch, the "Chinese government is committing crimes against humanity against Uyghurs and other Turkic Muslims in the northwest region of Xinjiang." The group says that "Chinese leadership is responsible for widespread and systematic policies of mass detention, torture, and cultural persecution, among other offenses." Human Rights Watch estimates "as many as a million people have been arbitrarily detained in 300 to 400 facilities." The governments of the United States, Canada, and The Netherlands "have determined that China’s conduct also constitutes genocide under international law."

As a result, many Western companies are avoiding sourcing products from the Xinjiang region. This, however, has precipitated a backlash from the Chinese government. Companies are faced with a choice: "Capitulate to Chinese pressure and face the wrath of Western consumers. Or speak out against human rights violations and risk retaliation from Beijing." 

Musk has made a clear decision. In December, Tesla "opened a new showroom in Xinjiang." To celebrate, Tesla hosted an "opening ceremony that included traditional Chinese lion dances and people posing with placards reading 'Tesla (heart) Xinjiang.'" The company posted photos on the Chinese social media network Weibo.

What China might want from Musk

Although Twitter and other foreign social media networks are banned in China, people in China still are able to use them by employing VPNs and other technical workarounds. The Chinese government, in turn, "has jailed more than 50 people for sharing anti-government views on [Twitter] and on other foreign social media platforms." 

According to Twitter's transparency report, the company has "not disclosed any account information to Chinese authorities." If Musk were to provide such information to the Chinese government, it could put more people at risk of retribution. 

Further, Chinese authorities make hundreds of requests each year for information to be removed from Twitter. This likely includes tweets that are critical of the government or that express views disfavored by the government. Twitter says that it has not "removed content on the basis of a legal demand from Chinese authorities." 

"Twitter is a place Chinese human rights activists trusted that wouldn’t hand in their information to the Chinese government," Yaqiu Wang, a China researcher at Human Rights Watch, told the Daily Beast. But, according to Wang, that is now at risk due to Musk's “vast business interests in China.” 

As a private company fully controlled by Musk, Twitter would be under no obligation to continue producing transparency reports. Musk could choose to change Twitter's policies and comply with more requests from the Chinese government, and no one would ever know. 

China has also used bots on Twitter to "spread videos disputing human rights violations in Xinjiang; downplaying the disappearance of [tennis star] Peng Shuai… buffing the success of the Winter Olympics in Beijing this year." In 2020, Twitter removed over 23,000 accounts linked to the Chinese government.

Tesla seeks assistance from Chinese censors

While Tesla has been a success in China, some Chinese consumers have been vocal about perceived deficiencies in the quality of Tesla's cars. It's not clear there is much behind these complaints, but Tesla has reportedly sought the assistance of Chinese censors to tamp down the controversy. Tesla "complained to the government over what it sees as unwarranted attacks on social media and asked Beijing to use its censorship powers to block some of the posts," according to Bloomberg.