Russia

• SecState Blinken plans to speak to Russia's Foreign Minister, Sergey Lavrov, for the first time since Russia invaded Ukraine to offer a prisoner swap. The U.S. would trade WNBA star Brittney Griner and ex-Marine Paul Whelan - both of whom the State Department says were wrongfully detained - for Viktor Bout, who was very rightfully detained and convicted for trafficking weapons to terrorists who said they planned to use them to kill U.S. citizens.
• Brittney Griner has not been convicted yet, and testified in her own trial yesterday. She said she was told to sign documents she didn't understand, and interrogated in Russian without a translator. She faces up to 10 years in jail and pleaded guilty - either hoping for leniency or in order to meet a Russian condition for a prisoner swap.
• Russian space officials qualified their threat to withdraw from the International Space Station (ISS) "after 2024," saying Russian cosmonauts would stay on the ISS until Russia's own orbiting station is completed - which is expected to be in 2028 or later.

Ukraine

• Russian attacks on southern Ukraine have intensified, and Ukraine is fighting back by using HIMARS to damage the Antonovsky bridge that Russia is using to supply its troops in the south. The Ukrainian counteroffensive has almost entirely cut off the Russian occupying force in Kherson from its supplies.
• The Biden administration estimates that 75,000 Russian troops have been killed or injured in Ukraine. That's a speculative estimate, but if it's anywhere near the true figure then Russia's "special military operation" is in bad shape: that's at least half the original invasion force. The Pentagon says losing just 10% of a military force renders a combat unit inoperable.

Iran / Iraq

• Hundreds of supporters of Shia cleric Moqtada al Sadr broke into Iraq's Parliament yesterday, protesting against a prime minister candidate Sadr opposes.
• Sadr appears to have orchestrated the demonstration, and he made a show of publicly ordering his followers to stand down after a few hours (they dutifully complied) to prove his ability to control enough followers to stir trouble.

U.S.

• The Federal Reserve raised interest rates by 0.75% yesterday, as expected. Fed Chairman Jerome Powell emphasized that he does not think the U.S. is in a recession, but warned that another 0.75% rate hike is likely in September: "we need growth to slow."

China

• A new U.S. Senate report said China made several attempts to infiltrate the U.S. Federal Reserve in order to influence monetary policy. The report also criticized the Fed for failing to cooperate with investigations into the attempts. Fed Chairman Powell raised concerns with some parts of the report, and China complained about its "Chinaphobia."
• The U.S. Senate passed a bill that would subsidize U.S. semiconductor manufacturers to help them compete against Chinese rivals. The bill now heads to the House, where it's expected to pass, and could be signed into law later this week.
• Meanwhile, the White House said Pres. Biden will speak with his Chinese counterpart, Pres. Xi today to discuss Taiwan and economic competition between the U.S. and China. Tensions have risen over both topics lately, but some China cynics suggest what's really driving the call - and China's amplified complaints of late - is Pres. Xi's desire to focus attention on outside grievances and away from domestic economic and social problems.
• The Guardian had a great article (pasted below) about how China's government bullies tech firms into compliance. It quoted an official speaking with disdain about Tencent owner Pony Ma: "No matter what kind of hotshot you are, we will always have a way of showing you who’s boss."

‘We show hotshots who’s boss’: how China disciplines its tech barons (The Guardian)
Chinese internet giants have become compliant parts of the regime they promised to disrupt. For Tencent’s Pony Ma and other tycoons the future is fraught

In April 2022, a resurgence of Covid spread seemingly unchecked through the financial centre of Shanghai. The government imposed a strict lockdown, confining millions to their homes, triggering mass-testing on a scale unseen since the initial outbreak and outraging affluent urban residents who were increasingly sceptical about China’s Covid-zero policy. In an attempt to control public opinion, the government told social media sites including WeChat – the super-app used by two-thirds of China’s population – to wipe and scrape posts deemed negative or critical of the policy.

But the censorship backfired. There was an unprecedented public outcry, which became a virtual protest. A video documenting the dire fallout of lockdown began circulating online. The six-minute clip known as Voices of April – a montage of audio recordings encompassing the cries of babies separated from parents during quarantine, residents demanding food and the pleas of a son seeking medical help for his critically ill father – resonated with the tens of millions in Shanghai and more across the country. The video was quickly marked as banned content and taken down from social media platforms in China. On the Twitter-equivalent Weibo, even the word “April” was temporarily restricted from search results.

Many deemed the video a neutral yet essential documentation of the human toll of Shanghai’s lockdown. A backlash ensued, as defiant users repeatedly shared the video in ways that could dodge web censors. Some posted the video upside down, others superimposed words or images or embedded other footage. WeChat censors tried to wipe posts sharing the video, but it was like a multi-headed hydra: no sooner did one get blocked, than another would pop up. This seminal moment embodied the dynamics between the Chinese government and the country’s giant tech companies. On the frontline was Tencent, the entertainment and tech conglomerate that owns WeChat.

For the better part of three decades, Beijing tolerated and even celebrated entrepreneurship. As the country leapfrogged into the digital age, China produced one company worth $1bn every 3.8 days in 2018, just a year after Tencent overtook Facebook to become the fifth largest company in the world. The amount of money Chinese-focused venture and private equity funds raised grew nearly fourfold to $120bn. That bounty helped China transform from industrial backwater into one of the most dynamic and coveted markets on the planet.

In addition to generating revenue, companies such as Tencent complied with government orders when it came to monitoring its citizens. For an authoritarian regime ruling over a population scattered across an area almost as large as the US, an app that dominates every facet of life proves enormously useful. Some say WeChat should be called WeCheck, such is its capacity for mass surveillance.

The early days of Chinese tech also saw the construction of the Great Firewall of China. One in five people on the planet using the internet access it through a filter that obscures Facebook, Twitter, Snap, Instagram, the New York Times and YouTube. In a sense, it’s a parallel universe, where nearly a billion people live and thrive – much to westerners’ surprise – on China’s equivalent of such mainstays. There’s Meituan for Deliveroo, Didi Chuxing for Uber, WeChat for WhatsApp and Facebook.

The services are often even better in terms of convenience and design. The Swiss army knife of a super-app, WeChat is the most deft at merging the functions of various western platforms, allowing people to chat, shop or order a takeaway. Domestically WeChat is known as Weixin, and the company has made a point of emphasising that it operates as two apps within and outside the mainland. China’s deficit of privacy controls means its companies and government have an edge when it comes to collecting the data that empowers the algorithms that screen, monitor, name-shame and, sometimes, imprison its citizens.

In the open-plan reading room at Tencent HQ, President Xi’s book features on the most prominent shelves
The dynamics between Chinese tech companies and the authorities are like no other. Before the pandemic I sat down once with an official and talked about the vicissitudes that startups and entrepreneurs endure. “No matter what kind of hotshot you are, we will always have a way of showing you who’s boss,” the person said, making an offhand remark about Tencent’s owner, Pony Ma. “Don’t think because you control a billion users and moved to Singapore or some overseas country that we can’t do anything about you.” The official told me that when regulators felt Tencent needed to be taught a lesson, they would step up censorship efforts, block or shut down web services till the company got the message. The tactics were not always conspicuous. Given WeChat’s overseas ambitions at the time, they would sometimes disrupt its service for global users, delaying messages or transactions for just half a minute. “That small hold-up is more than enough to drive users crazy and make people ditch the app altogether,” the person said. “That’s how you show them some colour.”

The Wall no longer resides just within China. When Chinese people travel outside the country, the Wall follows them via their telecom providers. A person using a China Mobile sim card is barred from roaming on Google. Authoritarian nations in Africa, south-east Asia and Russia see the appeal of the model. They too want to create their own intranet. As the internet splits in two, aligning itself between the American and Chinese models, Tencent’s story offers a window into an alternative vision of what the global online sphere could become.

Tencent’s products are so convenient and intuitive; yet in the back of everyone’s minds is the knowledge that their every move, location and utterance is documented and potentially scrutinised. Nowhere is this contradiction more apparent than at Tencent’s headquarters, in the heart of southern Shenzhen’s hi-tech district.

Tencent’s office building took five years and more than half a billion dollars to construct. Ma handpicked NBBJ, the architect responsible for Amazon, Google and Samsung’s headquarters. But the billionaire wanted it to be more than a statement of financial largesse. With its twin gleaming towers of glass and steel, he turned the building into one of the world’s biggest laboratories for new internet services and connected devices. It features holographic tour guides, conference rooms that adjust temperatures based on attendance, and alerts for the best parking spots before commuters arrive.

What struck me was that within the halls of a building that serves as a towering paean to futurism and commerce, the Communist party’s influence is omnipresent. In its open-plan reading room, alongside books about the cosmos and the ancient Greek and Roman empires, Chinese President Xi Jinping’s book – tabulating his speeches and thoughts about how to govern – features on the most prominent shelves. QR codes in the gym bring up links to stories documenting battle victories during the Long March.

Even these demonstrations of loyalty are not enough. Common sense would suggest that the Communist party would be supportive of companies such as Tencent and encourage their expansion overseas. But Xi has chosen to make sure the aspirations of a rising class of immensely wealthy entrepreneurs are tamed before they turn political. It was only a matter of time before he went after these national champions.

A crackdown that started with the financial technology industry in 2020, has quickly expanded to engulf every sector from online education to gaming, and ride-hailing to food delivery. With footprints in all of these sectors via its investments in some 800 companies, Tencent has felt the pinch.

Despite Pony Ma’s reputation for being the most low-key and cautious of Chinese tech moguls, Tencent has not been spared. China halted its app rollouts for about a month in late 2021, has curtailed gaming time for those under 18, ordered an overhaul of its financial units, fined it for investment deal disclosure violations and suspended new game approvals this year.

The change in approach to the tech sector is underpinned by shifts in Xi’s priorities. It mirrors crackdowns in other sectors, including property. As China’s economy slows and Xi tries to increase the nation’s birthrate, the policies underscore the Communist party’s growing resolve to respond to mounting public dissatisfaction with hoarded wealth and narrowing avenues for advancement.

A phrase that has emerged in tandem with the crackdowns is “common prosperity”, which refers to China’s goal of becoming a modernised socialist society. The implications for China’s tech industry are far-reaching, and could shape the playbook for the next few decades.

There’s a Chinese saying “Li yu tiao long men” – “a carp leaping over the dragon’s gate”. Legend has it that if the carp manages to swim upstream and vault an arch atop a waterfall on the Yellow river, it transforms into an Oriental dragon, a snake-like creature symbolising imperial power. The story of China’s internet tycoons, like Pony Ma, for the past two decades is that of a generation of carp becoming dragons. The twist, though, is that these idealistic geeks, who ventured out to change the world, are now shackled and have become part of a system they wanted to change. Once self-made dragons have achieved the level of success they have in China, the more important question seems to be: when and how do they bow out unscathed?