China Brief: 2-8 July 2019

A2 Global’s China Brief contains assessments of events and policies that may impact commercial interests, personnel, and assets throughout Greater China. This edition looks into protests in Hong Kong, the installation of malware on tourists’ phones in Xinjiang, and the imposition of fines in Shanghai following the introduction of waste-sorting regulations, among other subjects.

Hong Kong – Travel risk: Low – Overnight clashes point to further unrest as extradition issue remains unresolved

Taiwan – Travel risk: Low – Strike by EVA Air staff to end on 10 July, de-escalating risk of travel disruption

China – Political risk: Medium – Authorities fine Shanghai businesses after waste-sorting regulations introduced

China – Natural hazard risk: High – Sustained heavy rainfall forecast across Southern and Eastern China

China & Nigeria – Chinese workers kidnapped in southern state

China –  Travel risk: Medium – Large protest held in Wuhan over proposed waste incineration plant

China – Political risk: Medium – WeChat bans Microsoft chatbot over alleged violation of regulation

China – Political risk: Medium – Authorities installing malware on phones of tourists entering Xinjiang

China – Maritime risk: Low – China reportedly raises threat level to ships transiting Strait of Malacca

Hong Kong –  Political risk: Minor – China condemns protesters, calls for criminal investigation

Hong Kong – Overnight clashes point to further unrest as extradition issue remains unresolved

HONG KONG – Travel risk: Low

8 July: Hundreds of police officers confronted thousands of protesters overnight on 7-8 July in the territory’s Kowloon district. Many of the protesters had left a peaceful rally of up to 200,000 people held earlier, ostensibly to ‘inform’ visitors from China about the demonstrations against the extradition of suspects for trial on the mainland. Clashes occurred as protesters marched up Kowloon’s Nathan Road, a popular tourist and shopping area, to Mong Kok where unrest continued in the early hours of 8 July.

Why it matters: A2 Global warns that the peaceful march and subsequent localised clashes with the police form a pattern that protesters and the authorities can anticipate and prepare for. This increases the potential for escalating unrest as both sides seek to counter each other’s actions, making more extreme forms of protest and the police response likely. There are no clear indications of how this sequence can end in the short term. A2 Global continues to advise companies to constantly update assessments of their exposure to a range of physical, economic, and operational threats to their staff and assets.

Taiwan – Strike by EVA Air staff to end on 10 July, de-escalating risk of travel disruption

TAIWAN – Travel risk: Low

8 July: The Taoyuan Flight Attendants Union (TFAU), representing staff of EVA Air, a Taiwanese international airline, has signed an agreement that will officially end strike action on 10 July, according to media reports on 7 July.

Why it matters: TFAU members began an indefinite strike on 20 June over pay and work conditions. The end of the strike will de-escalate the risk of transport disruption on affected routes after the beginning of August. However, residual disruption will remain, as 2,250 flights affecting 300,000 passengers had been cancelled up until 19 July. Operations may fully resume by the end of July or the beginning of August, according to the airline. A2 Global advises business travellers due to fly with EVA Air to re-confirm their flight status and make alternative travel arrangements if their flights are affected. The latest updates on EVA Air flights can be found on the airline’s website.

China – Authorities fine Shanghai businesses after waste-sorting regulations introduced

CHINA – Political risk: Medium

8 July: Shanghai authorities have inspected 9,600 businesses and individuals to ensure compliance with a waste sorting regulation introduced on 1 July, according to local media reports on 7 July. The city authorities have imposed 190 fines and issued disciplinary actions against 3,300 businesses.

Why it matters: The regulations require all businesses and individuals to sort waste into four categories: recyclable, hazardous, dry, and wet. Individuals can be fined up to RMB200 (USD30), while businesses can be fined up to RMB50,000 (USD7,266) per violation. A2 Global advises businesses and staff to ensure they are compliant with the regulations.

China – Sustained heavy rainfall forecast across Southern and Eastern China

CHINA – Natural hazard risk: High

7 July: Sustained, heavy rainfall is expected across Southern and Eastern China between 8 and 12 July, with the provinces of Fujian, Guangdong, Guangxi, Guizhou, Hunan, Jiangxi, and Zhejiang likely to be most affected. China’s meteorological authorities have forecast in excess of 180mm of precipitation in some areas, which is highly likely to lead to flooding and landslides.

Why it matters: The heavy rainfall is likely to disrupt air, road, and rail transport. A2 Global advises businesses to monitor airport and railway updates and prepare to alter or suspend travel itineraries for delays. Companies are also advised that logistics operations are likely to be disrupted and are encouraged to contact their logistics partners in advance to confirm schedules.

China & Nigeria – Chinese workers kidnapped in southern state

5 July: The commissioner of police for Benin state in southern Nigeria on 4 July confirmed that unidentified gunmen had kidnapped two Chinese workers and killed their police escort on 3 July. According to media reports, the victims are employed by an unnamed glass and aluminium company and were on their way home from work when the assailants blocked their vehicle. The incident took place near the locality of Utesi, on the road between the cities of Benin City and Auchi.

Why it matters: The modus operandi and timing of the incident – kidnappings often occur when the victims are travelling to or from work – indicates the assailants abducted the workers to extract a ransom. This underscores the continued high risk of kidnap for ransom in southern and south-eastern Nigeria. Workers from China have been more frequently targeted in recent years as Chinese companies expand their operations to countries with varying risk environments – including Sudan, Egypt, Nigeria, and Turkey since 2012 – without prior threat assessments. Security managers of staff in-country should ensure rigorous security measures are in place to minimise the threat.

China – Large protest held in Wuhan over proposed waste incineration plant

CHINA – Travel risk: Medium

5 July: Between 28 June and 5 July, thousands of people protested on streets of Yangluo district in Wuhan, the capital city of Hubei Province, in opposition to the construction of a proposed new waste incineration plant. The authorities eventually deployed riot police to disperse the protesters. Unverified photos showed small-scale violence between the police and protesters leading to an unknown number of injuries. The authorities have warned of unspecified ‘harsh measures’ if the demonstrations continue. The government says the plant is still at the proposal stage. However, residents claim construction has already begun. Located in the east of Wuhan, Yangluo district is an important reform and development pilot zone in the city.

Why it matters: Waste disposal is a topic of growing public concern throughout China and public debate has intensified following the introduction of restrictive garbage sorting initiatives in Shanghai at the start of July. While the protests in Wuhan have ended after the government vowed the project would not commence without residents’ approval, similar protests over waste-related issues are likely to occur in other cities. This would likely cause transport disruption in affected areas and potentially escalate into violence, presenting a safety and security threat to individuals caught in the vicinity.

China – WeChat bans Microsoft chatbot over alleged violation of regulation

CHINA – Political risk: Medium

4 July: Chinese multinational conglomerate Tencent has suspended US tech company Microsoft’s Chinese chatbot Xiaobing for a third time over alleged violation of a social media-related regulation, according to media reports on 4 July.

Why it matters: Although it is not clear why the chatbot – or ‘virtual companion’ – was suspended, the suspension comes amid heightened censorship in the country. Xiaobing was previously suspended in 2017 for describing its ‘Chinese dream’ – a patriotic term used by President Xi Jinping – as ‘going to the US’. In 2014, the chatbot was suspended over alleged privacy violations and ‘lewd language’. The suspension of the chatbot also follows the removal of the British cartoon Peppa Pig from the Chinese video-sharing app Douyin in 2018, as well as Marriott International’s public relations crisis following a geographical controversy. A2 Global advises businesses to ensure they comply with China’s censorship laws, as failure to do so can result in exposure to reputational and political risks.

China – Authorities installing malware on phones of tourists entering Xinjiang

CHINA – Political risk: Medium

4 July: An investigation by several international news outlets has found that Chinese authorities are planting malware on the Android devices of tourists entering the western Xinjiang Uygur Autonomous Region from the Irkeshtam border crossing with Kyrgyzstan. The application – called Fengcai or BXAQ – uploads users’ phone logs, calendar entries, and text messages to a server, and scans the device for more than 70,000 files relating to politically sensitive issues. In response, several cybersecurity firms – including Check Point, McAfee, Avast, Malwarebytes, and Symantec – have updated their products to detect the app as malware.

Why it matters: The investigation reveals that the country’s electronic surveillance in Xinjiang has been expanded not only to encompass its residents, but also foreigners entering the country, highlighting the political risks associated with Xinjiang. While it was previously known that authorities have been installing malware called Jingwang onto Muslim Uyghurs’ phones to scan for files associated with Islamist extremism, BXAQ scans for a broader range of files. A2 Global advises business travellers and staff in the region to ensure their anti-virus software is updated to include the app in its detection of malware. Cybersecurity firms are advised to update their software to detect the malware.

China – Government raises threat level to ships transiting Strait of Malacca

CHINA – Maritime risk: Low

4 July: The country’s transport ministry has raised the security threat level to shipping transiting the Strait of Malacca to its highest alert status. This is effective as of 2 July. Lloyd’s List, a key publication linked to maritime insurance, reported that the issuance of a Security Level 3 alert under the International Ship and Port Facility Security Code is intended to be applied only when there is credible information that a security incident is probable or imminent. The transport ministry offered no explanation why it instructed the country’s merchant vessels to increase their security alert status.

Why it matters: A2 Global notes that there have been no serious incidents involving shipping in the Strait for some years. However, Lloyd’s reports that an internal email alert from China’s state-owned Cosco Shipping Energy Transportation corporation suggested the threat was from Indonesia-based criminal groups. No other credible organisation monitoring piracy or other activities in the Strait have issued a similar alert, raising questions over the basis and purpose of China’s decision to do so. Nevertheless, A2 Global advises shipping companies with vessels in the area to increase vigilance as a precautionary measure.

Hong Kong – China condemns protesters, calls for criminal investigation

HONG KONG – Political risk: Minor

2 July: China’s state authorities and government-controlled media on 2 July vehemently condemned the actions of protesters who occupied Hong Kong’s de facto parliament on 1 July, as part of their campaign against proposed amendments to the territory’s extradition law that would permit extradition to the mainland. A large police contingent cleared protesters from the Legislative Council building in the early hours of 2 July after an eight-hour occupation.

Why it matters: While there were no further incidents of unrest on 2 July, the uncompromising demands by both China and the Hong Kong administration that those involved in the disturbances should be held accountable for their actions heightens the risk of further confrontations. A2 Global warns that many foreign companies and individuals operating and working in the territory will now assess how their corporate and personal security and operational interests will be affected by the likely consequences of ongoing tensions, as well as the probable introduction of the amendments. Any direct intervention by China that affects Hong Kong’s legal autonomy would prove particularly damaging to the territory’s role and function to international businesses.