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How China’s Most Popular App Spies on Users for Beijing

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Greetings from Hong Kong. Clay Chandler here, filling in for Alan with our weekly Sino-Saturday edition of CEO Daily.

I’ve written a lot about the wonders of WeChat, the multi-functional “super app” operated by China’s Tencent Holdings. I’m not alone in considering WeChat one of the world’s most innovative digital platforms. Launched in 2011 as a messaging service similar to WhatsApp, WeChat has emerged as China’s dominant messaging app and rapidly morphed into an all-in-one platform for social networking, mobile payment, money transfers, ride hailing, food delivery and much, much more.

In February of this year, Tencent announced that WeChat had amassed more than 1 billion monthly active users. As CEO Daily readers who have visited China recently will know, WeChat (or Weixin, 微信, as it is known in Chinese) has become an indispensable part of everyday life in modern China. It’s been called China’s “one app to rule them all.”

But WeChat has a creepy dark side—one explained simply and clearly by a recent blog post from BBC Beijing correspondent Stephen McDonnell. Earlier this month, McDonnell travelled to Hong Kong to cover a candlelight vigil marking 30 years since the People’s Liberation Army was ordered to open fire on student protesters in Tiananmen Square. The event drew a record crowd this year, with some estimates ranging as high as 180,000 people. McDonnell took photos of the event with his mobile phone and posted some on his WeChat Moments account.

McDonnell reports being quickly locked out of WeChat. When he tried to log back in he received the following message: “This WeChat account has been suspected of spreading malicious rumors and has been temporarily blocked…”

McDonnell waited a day for his WeChat privileges to be restored. When he next tried to log in, he was instructed to tick an “agree and unblock” box confessing that the reason he had been blocked was for “spreading malicious rumors.” He agreed, and was then instructed to hold his phone up, take a photo of his face, and read a series of numbers aloud in Mandarin. After his face and voice had been successfully captured, he received a green tick confirming that his request to regain access to WeChat had been approved.

A recent study by the University of Toronto’s Citizen’s Lab found WeChat is not only capable of filtering keywords but can detect and block images deemed sensitive without users’ knowledge. The prospect that WeChat can not only recognize such images but then force users to add themselves to a database of suspicious users is a terrifying one—and not only for journalists. I know many senior IT executives at large financial institutions in Hong Kong who adamantly refuse to download WeChat even though (or perhaps because) they travel regularly for work on China’s mainland. Little wonder.

More China news below.

Clay Chandler
@claychandler
clay.chandler@fortune.com

Innovation and Tech

Superfast 5G. China’s three state-owned mobile network operators – China Telecom, China Unicom and China Mobile – were issued licenses to roll out 5G services this week, way ahead of schedule. Observers had expected the licenses to be issued later this year.  It seems plans have been brought forward as a show of strength to the U.S. China’s leader in 5G equipment, the embattled Huawei Technologies, says it’s “fully prepared” for the rollout. Financial Times

Chinese Buffett. Justin Sun, a 28-year-old cryptocurrency entrepreneur from China, placed the winning bid in Glide’s annual charity auction of a lunch date with Warren Buffett. Sun, who runs crypto exchange Tronix, or TRON, paid $4.6 million for a powwow with the Sage of Omaha. Sun says he wants to change Buffett’s mind about the value of cryptocurrency, which Buffett has called “rat poison squared.” Sun is not the first Chinese entrepreneur to buy a date with Buffett but his bid has set a new record. Bloomberg

Samsung slims. Samsung is cutting jobs and production at its last remaining plant in China as the smartphone giant is priced out of the market by local competitors. Samsung’s market share has declined from 20% in 2013 to just 1% now. Samsung has shifted production to Vietnam and India. However, the South Korean tech firm is still developing a semiconductor plant in China’s Xi’an province, pledging over $14 billion to phase two of its development in May. Caixin

Economy and Trade

Friends like these. Xi Jinping concluded a three-day state visit to Russia by attending the annual St. Petersburg International Economic Forum (SPIEF). In a speech, Xi called President Trump his friend and said neither China nor the U.S. want to see a “complete break” of relations. But while Xi sees Trump as a friend, the Chinese President called Vladimir Putin his “best friend.” At the same forum, Putin stuck up for his BFF and accused the U.S. of “unbridled economic egoism.” CNBC

Signed, sealed, misdelivered. China is investigating whether FedEx Corp violated the rights of its clients after Huawei reported that several packages sent through the global logistics firm had been diverted to the U.S. FedEx says the packages – some of which contained legal documents – were “misrouted in error.” Reuters

Hitting the brakes. China’s market regulator fined Ford Motor’s joint venture with Chongqing Changan Automobile $23.55 million for violating anti-monopoly laws. The regulator claims Ford Changan set a minimum resale price for its vehicles in 2013, violating local laws. Of course, some analysts view the fine as a “warning shot” from Beijing – a hint to Washington of what U.S. companies can expect as the trade war drags on. Reuters

In Case You Missed It

Lee Kai-fu’s Sinovation Ventures Opens Greater Bay HQ After Raising USD362 Million Yicai Global

In China, a Viral Video Sets Off a Challenge to Rape Culture New York Times

China Has Lots of Policy Room If Trade War Worsens, PBOC Chief Says Bloomberg

Putin stands by China, criticizes U.S., in trade, Huawei disputes Reuters

Politics and Policy

Traveler, beware. China’s ministries are warning citizens against going to the U.S. The education ministry advised students planning to study in the U.S. that visa rejections are rising – implying students might not want to waste time applying – while the Ministry of Culture and Tourism issued a travel alert warning would-be tourists of “frequent” shootings, robberies and theft in the U.S. Quartz

Taiwan tanks. The U.S. reportedly plans to sell over $2 billion of arms to Taiwan, mostly in the form of tanks as well as anti-tank and anti-aircraft weapons. The U.S. does not officially recognize Taiwan as a sovereign state but maintains a pact to equip the island for defence. The U.S. is Taiwan’s primary military supplier and periodically makes new weapons deals, but the latest sale comes as U.S.-China relations are at a new low. Reuters          

Justifying Tiananmen. This week marked the 30th anniversary of the Tiananmen Square protests and subsequent massacre. Censorship efforts kick into overdrive each year around June 4. Peculiarly, at a security summit in Singapore, China’s Defense Minister Wei Fenghe actually answered a question on Tiananmen.  Wei said that the government’s actions in 1989 were “correct” and have been justified by China’s economic growth in the decades since. South China Morning Post

 

This edition of CEO Daily was edited by Eamon Barrett. Find previous editions here, and sign up for other Fortune newsletters here.