In A Historic Reform, Elected Civilians Will Now Help Oversee Chicago’s Police Department

By Mariah Woelfel, Becky Vevea
Wednesday, July 21, !
The plan that got final approval from the City Council Wednesday will allow for more robust civilian oversight of the Chicago Police Department. Manuel Martinez / WBEZ


Chicago aldermen reached a major milestone in police reform Wednesday by passing a long-awaited measure to implement elected civilian oversight of the Chicago Police Department.

The ordinance, passed 36 to 13, is a compromise between two previously competing proposals from Chicago Mayor Lori Lightfoot, who campaigned on beefing up civilian oversight of the police in the years following Laquan McDonald’s killing, and community activists who’ve been pushing for several different iterations of police oversight for years.

Wednesday’s historic vote came after nearly two hours of comments from Chicago aldermen who’ve had a hand in crafting the proposal, and from those who oppose it. The chamber broke out in applause after it passed.

“While I wish that we would have been further along … and that this ordinance would be stronger, we should be proud, because this is a strong, transformative and robust ordinance, because this is a balanced ordinance,” said co-sponsor Ald. Carlos Ramirez-Rosa, 35th Ward.

Lightfoot said the ordinance is a step toward rebuilding trust between communities and police.

“If the communities do not trust [police] because they’re not legitimate to them, they will not be effective in their most core mission, which is serving and protecting every single resident of the city,” Lightfoot said.

The new plan will create a two-tiered system of oversight. There will be both a seven-member commission and 22 elected district councils, one for each police district. The new commission will play a key role in hiring future police superintendents and will have unilateral power to hire and fire the head of the city agency that investigates allegations of police misconduct.

It would also have the authority to draft, review and approve new policies, and it would be authorized to start the process of removing a superintendent by adopting a resolution of no confidence.


Members of the inaugural commission will be selected by aldermen. Future commissioners will be selected by a committee made up of the publicly elected delegates from the 22 district councils. The first election would be in 2023.

“I have a lot of confidence in the public,” said Ald. Leslie Hairston, 5th Ward. “I think that we have to allow them as they create this to say, ‘This is what we need and this is what we don’t need.’”

Giving everyday Chicagoans some ability to police the city’s police department has been debated for many years. Various oversight boards have existed and been dissolved over time, but the push for a civilian oversight body ramped up after police officer Jason Van Dyke killed teenager Laquan McDonald. Competing proposals have floated through City Hall, but never came to a vote.

Ald. Chris Taliaferro, 29th Ward, chairs the Council’s Committee on Public Safety where many of the competing versions of civilian police oversight have been debated the past decade. He’s also a former cop and supported the compromise proposal that passed Wednesday.

“I love policing and I loved being a police officer,” Taliaferro said. “I’m very proud to have served with them. But I’ve also seen things that I know that need to be reformed in our department. If we don’t take these bold steps now, we will be having a future in this city that none of us will be very proud of.”

Ald. Ray Lopez, 15th Ward, who often stands in support of Chicago police, voted for the measure and said he believes it will help repair police morale.

“The second-guessing by everyone because of the system that exists now is eroding [police officers’] ability to be the heroes in the communities that we know they are.”

Many progressive aldermen who were elected on the issue of police reform spoke in support of the new oversight plan.

“Some of us got voted in and got elected to do something and I’m really proud of everyone here that came together to talk, even those of us who didn’t agree,” said Ald. Andre Vasquez, 40th Ward. “Through negotiation, we were able to come to an agreement there and establish something that makes our city better and our city safer.”

The tensions between those who favored the plan and those who did not were evident as aldermen spoke on the Council floor before Wednesday’s final vote. Vasquez noted in his comments that many of the same Council members who vote against legal settlements that involve police misconduct are also resistant to oversight and reform.

“Taxpayer dollars are wasted time and time again, because you don’t work in an institution that clearly needs to be fixed,” Vasquez said.

Thirteen aldermen voted against the ordinance, with several saying they feel current oversight of the Chicago Police, including in the form of a consent decree from the federal government, is sufficient.

“I don’t believe that we should be pushing another form of oversight,” said Ald. Anthony Napolitano, 41st Ward.

Napolitano, also a former police officer, said communities need to be held accountable for engaging in gun violence, noting the high numbers of shootings so far this year.

Ald. Nick Sposato, 38th Ward, echoed Napolitano.

“We don’t need police reform,” he said bluntly. “We need family reform. Families need to start taking ownership and watching after their children protecting their communities. We can’t be blaming the police for everything.”

Those who voted against the ordinance include Brian Hopkins, 2nd Ward; Anthony Beale, 9th Ward; Patrick Daley Thompson, 11th Ward; Marty Quinn, 13th Ward; Ed Burke, 14th Ward; Matt O’Shea, 19th Ward; Silvana Tabares, 23rd Ward; Ariel Reboyras, 30th Ward; Nick Sposato, 38th Ward; Samantha Nugent, 39th Ward; Anthony Napolitano, 41st ward; Brendan Reilly, 42nd Ward; James Gardiner, 45th Ward.

Mariah Woelfel and Becky Vevea cover city government at WBEZ. You can follow them @MariahWoelfel and @BeckyVevea.

Another report blasts police actions during George Floyd unrest

The report is further proof of the need for massive change at the $1.7 billion city agency.

By CST Editorial Board Jul 21, 2021

Members from Chicago Police SWAT Team outside of the Chicago Police Department headquarters, at 35th and Michigan during the George Floyd protests in May 2020. Victor Hilitski/For the Sun-Times

The Chicago Police Department was so disorganized and unprepared during last summer’s unrest and mayhem following the murder of George Floyd, some cops used their own money to rent vehicles to take them to hot spots — and even spent personal cash to buy zip ties for mass arrests.

Meanwhile, peaceful protesters were verbally abused, tackled and pushed down stairs by police.

That’s the word from a 464-page report released Tuesday that blamed a lack of proper police department leadership for the confused and sometimes needlessly violent response during the tense days following the Floyd killing.

Written by Maggie Hickey, the ex-federal prosecutor keeping watch over court-ordered police department reforms, the report should alarm anyone concerned about safety in Chicago. And it’s further proof of the need for massive change at the $1.7 billion city agency.
Police lacked equipment, training

The report comes on the heels of City Inspector General Joe Ferguson’s equally critical probe released last February of the police’s response to the disturbances and protests.

According to the newest report, police and protesters described scenes of utter disorganization and pandemonium during protests.

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Officers said they were often deployed to areas but had no sense of what to do or who was in charge, once they arrived.

Hickey’s investigation found the department even had problems sending the right number of properly equipped officers to the correct locations.

“Many officers were deployed without their equipment, including radios, body-worn cameras or protective gear and also without provisions for their basic needs, such as transportation or access to rest periods, restrooms, food or water,” the report said.


Protesters said police “pulled their hair; struck them with batons, fists, or other nearby objects; hit them after they were ‘kettled’ with nowhere to go or after being handcuffed, and sprayed them with pepper spray without reason,” according to the report.

“We heard from many community members who expressed new fears, frustrations, confusion, pain and anger regarding their experiences with officers during protests,” the report said.

In response to the report’s release, Mayor Lori Lightfoot spoke up for the police department.

“We saw peaceful protests hijacked by vigilantes,” she said. “And then we saw looting.”

“We had not seen anything like that — on that scale across so many neighborhoods in Chicago — maybe ever . . . So we prepared for a large-scale protest. What we got was something very, very different.”

But that isn’t quite the defense that Lightfoot perhaps thinks. Read between the lines of her explanation and it’s an admission that police — despite their training and intelligence-gathering capabilities — were caught absolutely flatfooted and ill-prepared for the events that transpired.

And Hickey’s report bears that out.

“Even if the city and the CPD had predicted the level of protests and unrest after the death of George Floyd on May 25, 2020, the city and the CPD did not have the policies, reporting practices, training, equipment, community engagement or inter-agency coordination required to respond timely and efficiently,” the report said.
Echoes of the past

The report is sobering when viewed in the light of history.

In 1968, the National Commission on the Causes and Prevention of Violence issued the Walker Report following the “police riot” at the Democratic National Convention held in Chicago that year.

The findings are eerily similar to those in Hickey’s report released this week.

“There is no question but that many officers acted without restraint and exerted force beyond that necessary under the circumstances,” the Walker Report said. “The leadership at the point of conflict did little to prevent such conduct and the direct control of offices by first line supervisors was virtually non-existent.”

We've known the problem for at least a half-century.

Now, it’s time to fix it.

Send letters to letters@sutimes.com.

In a First for the Continent, Pfizer COVID-19 Vaccine Will Be Produced in South Africa

WEDNESDAY, July 21, 2021 (HealthDay News) -- The Pfizer COVID-19 vaccine will be produced for the first time in Africa by a South African firm, Pfizer announced Wednesday.

The Biovac Institute in Cape Town will produce the vaccine for distribution across Africa, which is in desperate need of more COVID-19 vaccines as cases surge, the Associated Press reported.

Biovac will receive large-batch ingredients for the vaccine from Europe and will blend the components, put them in vials and package them for distribution. The company will begin production in 2022, and the objective is to make more than 100 million doses a year.

This is "a critical step" in increasing Africans' access to an effective COVID-19 vaccine, according to Biovac CEO Dr. Morena Makhoana, the AP reported.

The Johnson & Johnson COVID-19 vaccine is already being made in South Africa and being distributed across Africa, the wire service said. Plans are to deliver 200 million J&J doses across the continent, the AP reported.

South Africa is relying on the Pfizer vaccine in its mass vaccination drive. It has purchased 40 million doses of the Pfizer vaccine, which are arriving in weekly deliveries.

More than 5.5 million of South Africa's 60 million people have received at least one jab, with more than 1.4 million fully vaccinated, according to official figures released Wednesday, the AP reported. South Africa's goal is to vaccinate about 67% of its population by February 2022.

Across Africa, vaccination levels are still low, with less than 2% of the continent's population of 1.3 billion having received at least one shot, according to the Africa Centers for Disease Control and Prevention.

More information

Visit the U.S. Centers for Disease Control and Prevention for more on COVID vaccines.

SOURCE: Associated Press

Here are the code words anti-vaxxers are using to evade Facebook bans

Matthew Chapman

RAW STORY
July 21, 2021

Photo via AFP

Under mounting pressure to stop the spread of medical disinformation, Facebook has announced that it is banning the use of the #VaccinesKill hashtag — fully two years after it banned the same hashtag on Instagram.

But sensing a crackdown, anti-vaccine groups are adapting to evade detection — and according to NBC News' Ben Collins and Brandy Zadrozny, they are developing their own coded language to discuss anti-vaccine propaganda that moderation cannot detect.

"Some anti-vaccination groups on Facebook are changing their names to euphemisms like 'Dance Party' or 'Dinner Party,' and using code words to fit those themes in order to skirt bans from Facebook, as the company attempts to crack down on misinformation about Covid-19 vaccines," said the report. "The groups, which are largely private and unsearchable but retain large user bases accrued during the years Facebook permitted anti-vaccination content, also swap out language to fit the new themes and provide code legends, according to screenshots provided to NBC News by multiple members of the groups."

According to the report, the sites even post their list of code words — which include "Pizza" for Pfizer, "Moana" for Moderna. Their members openly boast about how they've been able to evade Facebook's content restrictions.



The report comes as President Joe Biden has suggested Facebook's lack of moderation for anti-vaccine propaganda is "killing people," and just after Rep. Marjorie Taylor Greene (R-GA) received a temporary Twitter suspension for repeatedly posting misinformation.

GOP Rep Marjorie Taylor Greene rages at 

Dr. Fauci for 'creating' COVID-19 with 'disgusting evil science'

David Edwards
July 21, 2021


Real America's Voice/screen grab

Rep. Marjorie Taylor Greene (R-GA) suggested on Wednesday that Dr. Anthony Fauci is responsible for using "disgusting evil science" to create the COVID-19 pandemic.

Greene made the remarks after Sen. Rand Paul (R-KY) grilled Fauci during a Senate hearing on Tuesday.

"We all know he's lied," Greene told Real America's Voice host Steve Bannon. "He's the one that has been running his own personal human experiment with COVID-19 because gain of function [research] is his baby and then he paid for it with our tax dollars."

"How dare he use our tax dollars to create some sort of disgusting evil science that has killed so many people all over the world," she continued. "This man is an enemy to our nation, he's an enemy to the world because he played a major role in creating a bioweapon, which is COVID-19."

According to Greene, Fauci "deserves to go to jail."


The Republican lawmaker also blasted Fox News because Sean Hannity and other hosts have promoted COVID-19 vaccines.

"You know what bothered me? When we saw the DOW started to tank the other day because COVID cases are rising, that's when we saw a big narrative change," she said. "You saw Fox News going crazy. 'We've got to get everyone vaccinated.' Sean Hannity: 'We've got to get everybody vaccinated.'"

"You know what that has to do with? "Wall Street!" Greene remarked. "Vaccines, guess what? People that have gotten vaccines are getting COVID again, testing positive. So here's what will work. We have to fight this government out of controlling our lives. They want full control because if they can shut you down if they can force you to vaccinate your kids, they can force you to vaccinate at work, at school, at church, and wear masks again, they're controlling you and that's how America becomes a communist country."

Watch the video below from Real America's Voice.

WATCH: Marjorie Taylor Greene bursts out laughing when asked about COVID-19 deaths

Alex Henderson, AlterNet
July 21, 2021



Rep. Marjorie Taylor Greene of Georgia recently downplayed the severity of COVID-19's impact on Georgia residents who are young and aren't obese. But Atlanta Journal Constitution reporter Tia Mitchell, this week, reminded the far-right Republican congresswoman that not everyone who is getting really sick with COVID-19 is older or overweight.

In Northwest Georgia, a five-year-old child named Wyatt Gary Gibson became infected with COVID-19 before dying in a Chattanooga, Tennessee hospital on July 16, though these kinds of cases are rare. Miller asked Greene if she feels "any responsibility" for spreading false information about COVID-19, noting that "there are children" and "skinny people" who "have died of the coronavirus." And Greene, dismissive of the question, started laughing and told Mitchell, "Gee, you crack me up. You know what, I think people's responsibility is their own."

US COVID cases triple in 2 weeks amid misinformation

“There is some anger because we know that this is a largely preventable situation”


Nathan Papes/The Springfield News-Leader via AP File photo: A Silver Dollar City employee takes the temperature of guests before they are allowed to enter the park just west of Branson, Mo.

By THE ASSOCIATED PRESS 

PUBLISHED: July 21, 2021

By Heather Hollingsworth and Jim Salter | Associated Press

MISSION, Kan. — COVID-19 cases nearly tripled in the U.S. over two weeks amid an onslaught of vaccine misinformation that is straining hospitals, exhausting doctors and pushing clergy into the fray.

“Our staff, they are frustrated,” said Chad Neilsen, director of infection prevention at UF Health Jacksonville, a Florida hospital that is canceling elective surgeries and procedures after the number of mostly unvaccinated COVID-19 inpatients at its two campuses jumped to 134, up from a low of 16 in mid-May.

“They are tired. They are thinking this is déjà vu all over again, and there is some anger because we know that this is a largely preventable situation, and people are not taking advantage of the vaccine.”

Across the U.S., the seven-day rolling average for daily new cases rose over the past two weeks to more than 37,000 on Tuesday, up from less than 13,700 on July 6, according to data from Johns Hopkins University. Health officials blame the delta variant and slowing vaccination rates. Just 56.2% of Americans have gotten at least one dose of the vaccine, according to the Centers for Disease Control and Prevention.

In Louisiana, health officials reported 5,388 new COVID-19 cases Wednesday — the third-highest daily count since the beginning of the pandemic in early 2020. Hospitalizations for the disease rose to 844 statewide, up more than 600 since mid-June. New Orleans leaders urged people to resume wearing masks indoors.

Utah reported having 295 people hospitalized due to the virus, the highest number since February. The state has averaged about 622 confirmed cases per day over the last week, about triple the infection rate at its lowest point in early June. Health data shows the surge is almost entirely connected to unvaccinated people.

“It is like seeing the car wreck before it happens,” said Dr. James Williams, a clinical associate professor of emergency medicine at Texas Tech, who has recently started treating more COVID-19 patients. “None of us want to go through this again.”

He said the patients are younger — many in their 20s, 30s and 40s — and overwhelmingly unvaccinated.

As lead pastor of one of Missouri’s largest churches, Jeremy Johnson has heard the reasons congregants don’t want the COVID-19 vaccine. He wants them to know it’s not only OK to get vaccinated, it’s what the Bible urges.

“I think there is a big influence of fear,” said Johnson, whose Springfield-based church also has a campus in Nixa and another about to open in Republic. “A fear of trusting something apart from scripture, a fear of trusting something apart from a political party they’re more comfortable following. A fear of trusting in science. We hear that: ‘I trust in God, not science.’ But the truth is science and God are not something you have to choose between.”

Now many churches in southwestern Missouri, like Johnson’s Assembly of God-affiliated North Point Church, are hosting vaccination clinics. Meanwhile, about 200 church leaders have signed onto a statement urging Christians to get vaccinated, and on Wednesday announced a follow-up public service campaign.

Opposition to vaccination is especially strong among white evangelical Protestants, who make up more than one-third of Missouri’s residents, according to a 2019 report by the Pew Research Center.

“We found that the faith community is very influential, very trusted, and to me that is one of the answers as to how you get your vaccination rates up,” said Ken McClure, mayor of Springfield.

The two hospitals in his city are teeming with patients, reaching record and near-record pandemic highs. Steve Edwards, who is the CEO of CoxHealth in Springfield, tweeted that the hospital has brought in 175 traveling nurses and has 46 more scheduled to arrive by Monday.

“Grateful for the help,” wrote Edwards, who previously tweeted that anyone spreading misinformation about the vaccine should “shut up.”

Jacob Burmood, a 40-year-old Kansas City, Missouri, artist, said his mother has been promoting vaccine conspiracy theories even though her husband — Burmood’s stepfather — is hospitalized on a ventilator in Springfield.

“It is really, really sad, and it is really frustrating,” he said.

Burmood recalled how his mother had recently fallen ill and “was trying to tell me that vaccinated people got her sick, and it wasn’t even COVID. I just shut her down. I said, ‘Mom, I can’t talk to you about conspiracy theories right now.’ … You need to go to a hospital. You are going to die.”

His mother, who is in her 70s, has since recovered.

In New York City, workers in city-run hospitals and health clinics will be required to get vaccinated or get tested weekly as officials battle a rise in COVID-19 cases, Mayor Bill de Blasio said Wednesday.

De Blasio’s order will not apply to teachers, police officers and other city employees, but it’s part of the city’s intense focus on vaccinations amid an increase in delta variant infections.

The number of vaccine doses being given out daily in the city has dropped to less than 18,000, down from a peak of more than 100,000 in early April. About 65% of all adults are fully vaccinated, compared with about 60% of public hospital system staffers, said system leader Dr. Mitchell Katz.

Meanwhile, caseloads have been rising in the city for weeks, and health officials say the variant makes up about 7 in 10 cases they sequence.

“We have got to deal with it aggressively. And in the end, there is also a thing called personal responsibility,” de Blasio said, urging inoculated people to raise the issue with unvaccinated relatives and “get up in their face.


Back in Louisiana, New Orleans officials issued the new guidance on indoor masks, hoping to avoid the kind of virus-related shutdowns that devastated the city’s tourism economy in 2020. Mayor LaToya Cantrell stopped short of requiring masks. She said the advisory “puts the responsibility on individuals themselves.”

The announcement came as the city’s seven-day average of new cases rose to 117, the highest level since early February. It had fallen as low as eight in mid-June.

Expert view: How the Delta variant has 'changed the game' in Europe 
By Jahanzeb Hussain • Updated: 21/07/2021 - 20:26

Visitors register for COVID-19 tests at the Eiffel Tower in Paris, Wednesday, July 21, 2021. - Copyright Daniel Cole/Copyright 2021 The Associated Press. All rights reserved

COVID-19 infections have been rising throughout the month of July across Europe.
In its latest weekly surveillance summary, the European Centre for Disease Prevention and Control (ECDC) documented that case rates in the European Union and the European Economic Area were at 89.6 per 100,000 people in the week ending July 11.

The previous week, that number was 51.6.

As it stands, the ECDC predicts cases to increase to 622.9 per 100,000 people and the death rate to 10.5 per million people by the end of July.

Euronews spoke to the ECDC and Professor Daniel M Altmann from the Department of Immunology and Inflammation at the Imperial College, London, to explore the current health context in Europe.

Is Europe entering a new stage of the pandemic due to the Delta variant? If so, what is different? What are the main concerns?

Professor Altmann: "Very much so. The concerns are the altered behaviours of the new variants, currently Delta, but plenty more on the way.

"There is no doubt that Delta changes the game and resets the clock through the ability to cause breakthrough infections in those who have a poorer vaccine response, and through shifting to infection of younger people, causing a more symptomatic disease in them than we’ve seen before."

ECDC: "Based on available scientific evidence, the Delta variant is more transmissible than other circulating variants. The ECDC estimates that, by the end of August, it will represent 90% of all SARS-CoV-2 viruses circulating in the EU.

"Unfortunately, preliminary data shows that it can also infect individuals that have received only one dose of the currently available vaccines.

"The Delta variant is circulating extensively during the summer, particularly among younger individuals that are not targeted for vaccination. This could cause a risk for the more vulnerable individuals to be infected and experience severe illness and death if they are not fully vaccinated."

Are vaccines the best bet against Covid-19, especially against new variants? Do you expect the hospitalisation and death counts to continue to rise despite a wider vaccine cover? If so, what is the reason for this?

ECDC: "Having received two doses of any of the currently available vaccines provides high protection against this variant and its consequences.

"However, a significant portion of the population in the EU/EEA are still not fully vaccinated (click here for latest data). There are still too many individuals at risk of severe COVID-19 infection whom we need to protect as soon as possible.

"Until most of the vulnerable individuals are protected, we need to keep the circulation of the Delta virus low by strictly adhering to public health measures, which worked for controlling the impact of other variants."

Professor **Altmann:** "The vaccines offer rather good protection across the spectrum: infection, transmission, severity. In most people, most of the time, they’re rather effective. That is, if you’ve made a good immune response to the two doses, even with the loss of neutralisation against the variants, you’d still be in the protected zone. Yet, we’re still bearing the brunt of the exceptions to this, just due to the vast case-load."

The UK is among the most vaccinated countries in Europe but cases are rising at a worrying rate. While hospitalisations and deaths are lower, is it a wise strategy to let infections run loose like this?

Professor Altmann: "There is no evidence that this will be a good strategy, either in terms of the incremental pressure on National Health Service provision, or in terms of the long-term cost of allowing the virus to replicate in millions of lungs, with the associated consequences both for generation of new variants and future long-COVID cases."

What can governments do to maintain the vaccination drive? Is there a risk of the public losing trust in vaccines? Should vaccination be made compulsory?

ECDC: "It is very important to progress with the vaccine roll-out at a very high pace. At this stage it becomes crucial that the second vaccination dose is administered within the minimum authorised interval from the first dose, to speed up the rate at which vulnerable individuals become protected.

"Regarding mandatory vaccination, mandatory requirements can be highly effective for certain groups such as healthcare workers, although other strategies may be sufficient or more advisable. Any potentially negative effects of such policies need to be carefully considered."

Professor Altmann: "Many different answers out there, but certainly with uptake at a plateau in the younger age-groups, it would be valuable to society to link freedoms more directly to vaccine status, such as entry to pubs, clubs, etc."

What the Didi fiasco reveals about China’s fealty to markets
Business & Technology

The Chinese government’s recent moves to rein in Didi and whip the tech industry into line have been a decade in the making.

Chang Che Published July 16, 2021

Illustration by Alex Santafe


At first blush, Beijing’s probe into Didi looked like an act of political retribution. After all, Didi, China’s most popular ride-hailing app, listed on the New York Stock Exchange on the eve of celebrations marking the centennial of the Communist Party’s founding. We now know that Didi went ahead with the IPO despite regulators’ warnings about possible network security risks. That the Uber of China chose its foreign investors over its Beijing Party guardians — close to their birthday no less — amounted to an act of rebellion. The punishment was swift and severe — redolent of Ant Financial’s fate last fall after Jack Ma’s overzealous speech at the Shanghai Bund.

Two days after Didi’s IPO, the Cyberspace Administration of China (CAC) placed the company under investigation for flouting data security protocols (in Chinese). It ordered app stores to remove Didi from its platform. In the following days, the probe’s scope broadened: Two more U.S.-listed Chinese companies — freight-logistics app Full Truck Alliance and recruiting platform Kanzhun — were hit with similar investigations and app freezes.

Days after the app suspensions, reports found that China’s market regulators were seeking to revise rules on overseas listings so that companies using the so-called Variable Interest Entity (VIE) structure must seek permission from Beijing before going abroad. Before 1994, Chinese state laws barred media and internet companies from access to overseas capital, so they relied on a loophole: The VIE allows Chinese companies to technically own operations in China, while all the benefits of ownership are held by an overseas entity. On Saturday, a draft rule was published that mandates a security review (in Chinese) for companies listing overseas that hold personal data of over 1 million individuals.

For over a decade, hundreds of Chinese tech companies — Alibaba, Tencent, Baidu, and Sina among them — thrived on the VIE model. The current age of “China tech” could not have existed without it and Beijing knows this. But signs of dissatisfaction arose early. In 2010, Alibaba faced a similar run-in with regulators when it spun off its Alipay business into a domestic entity, not included in its VIE contracts, in anticipation of legal trouble. The move infuriated Alibaba’s foreign shareholders. “I still don’t know what a VIE is!” protested Jack Ma in a speech at Stanford months later.

The Alipay incident brought the competing demands of foreign investors and state regulators into sharp relief. In October 2012, China’s Supreme Court rendered a contractual agreement similar to the VIE model void. The decision, as two lawyers put it, signaled a “negative attitude” by the highest court and “[clouded] the future of VIE structures.” In 2015, the State Council issued draft rules that ostensibly abolished the VIE system wholesale, with one analyst decrying the VIEs “Dead. Done. Over.” Nonetheless, the system survived. But Beijing’s actions last week suggests it is revisiting those earlier debates. Didi did not create new problems, it simply rehashed old ones.

China does not want U.S. regulators looking under the hood

Didi is not the only catalyst of last week’s events. Another source of Beijing’s anxieties lies in U.S. efforts to pry the financial books of its public companies open. Chinese state secrecy laws prohibit U.S.-listed Chinese companies from handing over some financial documents to U.S. auditors. That has led Marco Rubio, a Republican senator from Florida, to call Didi’s IPO “reckless and irresponsible.” “American investors have no insights into the company’s financial strength,” Rubio told the Financial Times last week. “That puts the investments of American retirees at risk.” In December 2020, the U.S. passed the Holding Foreign Companies Accountable Act, which would force Chinese companies to comply with auditing requirements or face a delisting after three years. (A newly passed Senate bill shortened the compliance period to two years.) A view is forming in the Beltway that Chinese companies hide their financials so as to swindle U.S. investors.

Washington’s mounting pressure toward transparency triggers one of Beijing’s worst nightmares: that foreign adversaries could abuse their leverage over companies like Didi to access its vast troves of personal data for their intelligence agencies. Financial data might seem a far cry from personal data, but Beijing has concluded that when it comes to the U.S., nothing is guaranteed. For Didi, whose data provides transportation routes of all major urban centers and the movement patterns of half a billion citizens, Beijing does not want to leave anything up to chance.

The Trump administration made a symmetrical decision last year when it banned WeChat and TikTok. The rationale was also based on data security: Given the broad powers afforded to Chinese authorities to intervene in private enterprises, there was no guarantee that the viewing habits of millions of American could be used for nefarious purposes. But China, too, has good reasons. Edward Snowden’s revelations in 2012 confirmed a long-held belief in Beijing that the United States was a bad faith actor in the international community. It engaged in offensive cyberoperations against Chinese companies like Huawei, it surveilled its own citizens, and it exploited private tech companies as “back door” channels. Didi’s data, even if it may be safe now, would be too desirable an asset for U.S. security officials not to break some rules.

“The U.S. has demonstrated its ability to put enormous pressure — national-security-risk-level pressure — on Chinese companies beyond its shores,” said Tom Nunlist, a policy analyst at Trivium. “It’s understandable that the Chinese government would want to assess all the risk scenarios, and not only the possibility of data transfer during the IPO.”

That both countries appear willing to compromise capital for national security is a stark reminder that free markets have always been a negotiation — a privilege, not a right. “Before, entrepreneurs asked for forgiveness instead of permission,” said Duncan Clark, author of Alibaba: The House That Jack Ma Built. “That game has changed.” Now the conditions for market freedom appear to be compliance with a data security law passed in June. “Chinese internet companies must step out of the comfort zone of barbaric growth,” writes former internet entrepreneur Fāng Xìngdōng 方兴东 in the Global Times (in Chinese). It must “adapt to China’s new institutional environment and the basic requirements of network governance.”

China’s move to rein in its tech firms for the good of the state may seem anathema to basic American beliefs about how companies should operate. But it was not so long ago that Americans, too, demanded a higher loyalty of their enterprises. In 1968, before the country was swept up by a new libertarian dogma, 70% of Americans agreed, in a survey, that businesses should “strike a fair balance between profit and the interests of the public.” Two years later, that number plummeted to 33%. But the more social-democratic America believed that businesses held responsibilities not just to shareholders, but also to the community, and society writ large.

In China, the higher loyalty of enterprises is to state priorities, which include the control of information flows, the protection of personal data, and respect for territorial sovereignty. Just as American executives seem cruel when acting solely in the name of profit, Chinese companies conjure the ghost of Western capitalists when they forget their political prerogatives. Now China is asking that they remember.

Chang Che is SupChina’s Business & Technology staff writer. His work has been published in The Washington Post, The Atlantic, Foreign Affairs, Nikkei Asia, and The LA Review of Books. 

Didi debacle highlights weaknesses in regulatory coordination, but it’s not decoupling

Chinese regulators' moves against car-hailing giant Didi six days after its IPO have confirmed the worst fears of some observers about the direction of U.S.-China financial ties. But while Chinese company listings on American markets now face significant obstacles, boatloads of money will continue to flow, both ways, across the Pacific.

Paul Triolo and Michael Hirson Published July 12, 2021

Illustration by Derek Zheng


It has become clearer over the past year that Beijing continues to be willing to scuttle, undermine, or have after the fact influence on the financing plans of leading technology companies, in part to ensure that going forward, private companies are not stepping out of political line or ignoring increasingly important regulatory issues. But the recent moves against Didi, Full Truck Alliance, and Kanzhun should not be viewed as a “crackdown.”

A number of domestic factors are at play here. So is the growing geopolitical competition between Beijing and Washington that is bleeding into all areas of the relationship, including the financial sector, once an area both sides endeavored to keep from becoming overly contentious.


In some sense, the move against Didi was a fundamental breakdown in the Chinese regulatory system, one in which financial and cybersecurity regulators were not able to come up with clear guidelines for Chinese firms seeking to list on overseas markets. In addition, over the past year, China’s tech regulators, led by the Cyberspace Administration of China (CAC), have stepped up the drafting and promulgation of laws and regulations governing data, part of a longer-term trend to flesh out data governance elements of the 2016 Cybersecurity Law. Hence companies with large numbers of domestic users — in excess of 100 million — that collect vast amounts of data were bound to come under increasingly regulatory scrutiny as Beijing rolled out new rules under legislation such as the Data Security Law, which has also strengthened the position of CAC, the primary actor in the drama unfolding over the past several weeks.

Didi and Ant are not victims of the same campaign

CAC’s terse statement (in Chinese) on Didi issued on July 2 launched the tech sector into a new period of uncertainty, but much of the analysis has been overblown, using words such as “crackdown,” and equating the move as part of a continued regulatory effort to rein in tech companies initiated by last year’s cancellation of Ant Group’s IPO. But the two regulatory moves stem from very different parts of the Chinese bureaucracy and are motivated by different political drivers.

Importantly, the Ant IPO delay signaled Beijing’s willingness to waive the concerns of investors and underwriters to ensure that private companies are listening to financial regulators, or at least not dissing them. In that sense, there are similarities between the Ant IPO delay and the post-IPO action against Didi and the other firms. But the additional factors at play in the recent actions are critical to unpack. In addition to Didi, CAC has launched public and before-the-fact cybersecurity reviews of Chinese companies listed in the U.S.: online recruiter Boss Zhipin.com, owned by Kanzhun, and truck-hailing apps Huochebang and Yunmanman — the latter two merged and are listed as one company, the Full Truck Alliance. These reviews were the result of regulations associated with the 2016 Data Security Law, but have previously been used as part of pilot programs with cloud services companies, although they were not announced publicly at the time.

This review process was formalized into a cybersecurity review regime (CRR) consisting of two parts, one involving network products and services, where concern focuses on foreign sources of critical hardware and software, and another centering on cross-border data issues. CAC has battled the Ministry of Public Security (MPS) for the past four years on who has primacy over the network products and services reviews because MPS has long had its own compliance process, the Multi-Level Protection Scheme (MLPS). Chinese regulators such as CAC, more focused on the national security aspects of data flows, and reacting in part to U.S. moves against Chinese firms in the data space, such as last year’s executive orders banning TikTok and WeChat, are keen to maintain a tough line against domestic tech firms seen as ignoring Beijing’s mandates. The firms receiving most scrutiny are those that have large troves of customer data — as in the U.S., Chinese consumers are beginning to worry about their personal data, while Beijing and CAC consider it a national security issue.

Media reports suggesting that CAC proposed that Didi conduct a self-review of its cybersecurity practices before its IPO appear plausible. The Data Security Law has not gone into effect, and CAC reached for a ready tool in the CRR, albeit one little understood outside of China or within investor circles. That Didi appears to have misinterpreted CAC’s message as an optional recommendation is significant, but this highlights the regulatory disarray on these issues, as Didi believed that other regulatory authorities had already given their tacit or formal approval — this even though foreign stock listings are a loophole that do not technically require approval from financial authorities. Beijing has moved swiftly to staunch this loophole in the past week.

The political backdrop to CAC was the timing, coming close to the 100th anniversary of the founding of the Chinese Communist Party. Regulators likely felt caught out on the issue, as large tech platforms with access to large amounts of personal and logistical data were essentially going public in the U.S. without any real oversight by regulators and they would be keen to demonstrate that they have limited tolerance for actions that may be perceived as defiant to Beijing’s control over the actions of large private sector companies. In addition, CAC has almost certainly been looking for ways to assert its primacy among other regulators in the cyber and data domains.

Another and critical geopolitical factor at play is the growing concern in Beijing about Chinese tech firms’ continued push to list on U.S. stock exchanges — last year, major Chinese electric vehicle makers Li Auto, Xpeng, and NIO launched blockbuster IPOs in New York, and there has been a steady stream of other IPO applications for U.S. markets coming from Chinese tech unicorns. But this comes as those listings are coming under growing scrutiny and criticism. The Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) are moving toward implementation of the Holding Foreign Companies Accountable Act (HFCAA), which sets out a three-year timeline to delist Chinese companies from U.S. exchanges unless the two sides can resolve a long-running dispute over audit regulation, which appears very unlikely in the current political climate in Beijing and Washington.

Under pressure from Congress to begin implementing HFCAA, the SEC and PCAOB are likely to issue rules in coming months. A report last July from the President’s Working Group on Financial Markets recommended that the SEC and PCAOB ban new listings almost immediately once new rules go into effect — meaning there would be no three-year phase for new listings. It remains unclear where the Biden team falls on the new listing issue, but the recent actions have rekindled the debate and are leading to calls from Congress to restrict Chinese IPOs.

In addition, while the China Securities Regulatory Commission (CSRC) continues to be publicly supportive of companies choosing either overseas or domestic listings, or both, there is broader discomfort with listings in the U.S. in some quarters in Beijing. Regulators appear fed up with what they view as firms continuing to make end runs around them by heading overseas. Senior leaders in Beijing are also likely focused on having to deal with major headaches that will come down the road should Chinese firms be forced to delist. If this happened suddenly in a tough political climate, it could strain the liquidity of domestic capital markets and Hong Kong, which would need to be quickly dragooned into taking on additional and large-scale listings. Over time, Beijing would also much prefer to keep flagship domestic technology and industry-leading companies closer to home, and has taken major steps to improve the capacity of domestic bourses in Shanghai and Shenzhen and Hong Kong to handle domestic firms. The Shanghai STAR market, for example, has become a much bigger player on the IPO front in the wake of mounting U.S. pressure on the auditing issue.

All of the above uncertainty about the conditions for overseas listing has allowed CAC to launch its review despite the hit to the credibility of these firms, the broader sector, and the predictability of China’s cyber and financial regulatory regimes. While CAC is clearly attempting to assert some oversight over overseas listings around data-related concerns, the incident overall paints a negative picture of regulatory coordination within the Chinese system, and this is likely somewhat of an embarrassment for Premier Lǐ Kèqiáng 李克强 and other senior economic leaders such as Vice Premier Liú Hè 刘鹤, reflecting tensions between national-security-focused officials and those responsible for economic issues.

What does this mean going forward? Investors should assume that China’s regulators will continue to assert themselves when enforcing politically sensitive regulations against domestic tech firms, and they will probably target companies with overseas financing plans. Because many of these regulations are still evolving, particularly with respect to cybersecurity reviews and data governance issues, firms will continue to be tripped up.

The Communist Party and the State Council issued a document this week, “Opinions on Cracking Down on Illegal Securities Activities in Capital Markets” (in Chinese), which focuses more on illegal activities but also stresses the need to strengthen “cross-border supervision cooperation” and calls for establishing legal mechanisms for the “extraterritorial provisions of the Securities Law,” a nod to what will likely become a formal process for companies to seek approval from regulators for overseas listings. This is likely to translate into a process where firms seeking overseas listing will be required to seek approval from not only the securities regulator but also agencies such as CAC and those related to national security and data governance. Indeed, the document indicates that a priority is “improving data security, cross-border data flow, confidential information management and other relevant laws and regulations,” indicating their concern about overseas IPOs resulting in the potential transfer of sensitive information.

Facing new delays and tougher scrutiny on their applications for U.S. listings, more Chinese firms may opt for IPOs in Hong Kong or the Shanghai STAR market, concluding that it is politically safer to look to domestic markets, though this may not necessarily be a significantly less burdensome process.

The document also significantly stresses that China will seek to “adhere to the principles of law and reciprocity, and further deepen cooperation in cross-border audit supervision.” At least in theory, this keeps the door open for Beijing and Washington to renew long-standing efforts to bridge the still significant impasse over auditing procedures, as highlighted in the HFCAA and other recent SEC documents. Still, here the lack of trust in the two capitals, strident anti-China language coming from Congress, and the lack of a serious strategy put forward so far by the Biden administration to engage China on a host of bilateral issues means Beijing’s concerns about the “long arm jurisdiction” of U.S. regulations in other areas, such as export controls, particularly with respect to major tech firms, will only intensify. Prospects for the two sides to sit down in the near term and hammer out an agreement acceptable to regulators and political leaders on both sides remain slim.

Indeed, this bout of regulatory confusion constitutes somewhat of a debacle that will only strengthen the argument of those in the U.S., particularly in Congress, who argue that the regulatory risks on display here warrant a tougher approach to Chinese firms and more rapid implementation of the HFCAA. Shareholder class action lawsuits already launched against Didi and its underwriters will only add fuel to this growing fire.

While the Didi debacle is an important moment in U.S.-China capital market tensions, it is important to look through some of the most extreme interpretations and understand the political and regulatory nuances. For example, there is much hand-wringing in the media that Beijing’s cold shoulder to investors increases the chance that Chinese regulators will clamp down on use of the Variable Interest Entities (VIEs) — the structure under which so many Chinese tech firms have gone public — and disenfranchise foreign shareholders who have exposure to these companies through VIEs. That risk thus far seems overblown.

Finally, CAC last week released a revision to the cybersecurity review measures, which requires approval for overseas listings when a company has more than 1 million users, an attempt to put in place additional requirements for companies considering IPOs outside of Hong Kong and mainland markets. It remains unclear how much this will impact the listing plans of existing companies. Companies such as Didi and Full Truck Alliance are not likely transferring significant amounts of customer data outside of China, so they should be able to pass a regulatory process set up to ensure that data is properly protected. This particular provision of the cybersecurity review process has never really been tested, so what criteria CAC will use to approve such listings remains unclear. It does give Chinese authorities a tool to use in case there is agreement around auditing procedures, giving cybersecurity and financial regulators insight into what business-related data could be exposed to auditors. Companies will also have to get other approvals for listings from financial authorities.

The various loopholes and gray areas that regulators in both countries are addressing will make it more difficult for Chinese firms to list in the U.S., but they do not yet amount to a true “financial decoupling.” U.S. investors, after all, will still be able to invest in Chinese firms listed in Hong Kong and China. Beijing, ironically, will continue steps to attract foreign investors to its domestic markets, which it urgently seeks to globalize as the U.S. market becomes less hospitable to Chinese firms.

Paul Triolo works at Eurasia Group, where he leads the firm’s newest practice, focusing on global technology policy issues, cybersecurity, internet governance, ICT regulatory issues, and emerging areas such as automation, AI/Big Data, 5G, and fintech/blockchain. He is frequently quoted in the New York Times, Wall Street Journal, Wired, SCMP, the Economist, and other publications, and appears on CNN, CNBC, and other media outlets that follow global tech issues. Read more

Michael served for three years as the U.S. Treasury’s chief representative in Beijing prior to joining Eurasia Group, where he leads coverage of China and Northeast Asia with a focus on U.S.-China relations and China’s economic policies. He has a master’s degree in China studies and international relations from Johns Hopkins University’s School of Advanced International Studies. Read more

 

Employers Must Contend with Shrinking Population of Working-Age People

By Christopher Rugaber | July 7, 2021

 

As America’s job market rebounds this summer and the need for workers intensifies, employers won’t likely have a chance to relax anytime soon. Worker shortages will likely persist for years after the fast-reopening economy shakes off its growing pains.

Consider that the number of working age people did something last year it had never done in the nation’s history: It shrank.

Estimates from the Census Bureau showed that the U.S. population ages 16 through 64 fell 0.1% in 2020 — a scant drop but the first decline of any kind after decades of steady increases. It reflected a sharp fall in immigration, the retirements of the vast baby boom generation and a slowing birth rate. The size of the 16-64 age group was also diminished last year by thousands of deaths from the coronavirus.

A year earlier, in 2019, the working age population had essentially plateaued.

It’s not entirely clear how population patterns will unfold once the pandemic fully fades. But even if the working age population resumes growing, it will almost certainly do so at an anemic pace. A continuing drop in that population, or even a tepid increase, would pose a problem for the economy. A healthy economic expansion has always depended on robust population growth to fuel consumer spending, justify business expansion and drive corporate earnings. Without a sizable influx of new workers, growth could stagnate.

‘There’s just not enough (young adults) to replace people who are leaving.’

Still, some economists foresee a silver lining for individuals: Fewer people of working age could compel companies to compete harder to hire and retain employees. And that could mean higher pay, better opportunities and other inducements to keep and attract workers, a trend already evident in the June jobs report the government released Friday. Average hourly pay rose a hefty 3.6% compared with a year ago, faster than the pre-pandemic pace.

“The workers would be doing better than the economy as a whole,” said Manoj Pradhan, the founder of Talking Heads Marco, an economics research firm, and formerly an economist for Morgan Stanley.

If wages were to rise sharply, it could also help narrow the vast inequality that has increasingly divided the most affluent Americans from everyone else and left the lowest-income households struggling to afford rent, food, child care and other essential expenses.

With population growth sluggish, economic expansion would hinge on whether companies could make their workers more productive. An increase in productivity, often made through investments in labor-saving technology, could further raise pay. Living standards would rise even if the economy struggled to grow at what’s normally considered a healthy pace.

Last year, the number of legal and unauthorized immigrants entering the United States fell for a fourth straight year to below 500,000 — less than half the level in 2016 — according to calculations by William Frey, a demographer at the Brookings Institution. The number of deaths jumped 8%, to above 3 million, reflecting largely the impact of the pandemic.

A fundamental long-term drag on the working-age population is the exit of the enormous baby boom generation from the labor force. The number of people ages 65 and over will likely jump 30% over the next decade, Frey said.

“We’ve never really been in this type of situation before,” he said. “There’s just not enough (young adults) to replace people who are leaving.”

The situation has been exacerbated this year by a spate of early retirements. Roughly 2.6 million people who were working before the pandemic now say they’re retired and not searching for a job, according to Federal Reserve Bank of Dallas. Sharp gains in stock prices and home values despite the deep pandemic recession made it easier for many older Americans to leave the workforce early.

One of them is Jeff Ferguson, a physician with Eli Lilly & Co. in Indianapolis, who retired in April at age 59 after 22 years with the company.

Having worked from home during the pandemic, Ferguson said, made the transition smoother. But he was also encouraged by his solid investment gains and by the strengthening of the local housing market despite economic uncertainty.

“I probably retired with a tailwind as opposed to retiring with a headwind,” he said. “If I had perceived a headwind, I might have delayed it.”

The pandemic also lent him a new perspective on life and retirement. Ferguson plans to travel around the country with his wife, a pediatrician, and catch up with relatives.

Gad Levanon, an economist at the Conference Board, said the drop in the working age population will be particularly evident among Americans without college degrees. As aging baby boomers retire, they’re being replaced by younger workers who are likelier to be college graduates. Blue-collar workers — anyone without a four-year degree — will become scarcer. That trend will likely create labor shortages in such industries as manufacturing, construction, retail and restaurants and hotels.

Levanon estimates that the number of college graduates will keep growing about 2% a year, despite the population slowdown, while non-college degree holders will dwindle. This could make it harder for future college grads to find jobs commensurate with their education levels. Companies may also inflate their job requirements, perhaps demanding bachelor’s degrees for jobs that didn’t require them before.

“The number of people who are willing to work in blue collar and manual service jobs is shrinking,” Levanon said.

Pay is already rising faster for lower-wage workers. For the lowest-paid one-quarter of employees, hourly wages rose 4.2% in May compared with a year earlier, according to the Federal Reserve Bank of Atlanta. That’s more than twice the percentage raises that these workers received in the four years after the Great Recession, from 2010 through 2014, and higher than the richest one-quarter of workers.

Scott Seaholm, CEO of Universal Metal Products, a 285-person metal stamping company near Cleveland, is surrounded by an aging population and is trying desperately to interest young people in a manufacturing career. A study found that roughly 59% of the population in Lake County, Ohio, where he’s based, was made up of working age adults in 2015, Seaholm said. That proportion fell to 57% last year and is projected to hit 54% in 2025.

“That’s pretty shocking,” he said. “There’s nobody out there to work. It’s kind of ugly.”

More than half the workers in his three factories are over 55, he said, with fewer than one in five ages 20 to 34. He has one 81-year old employee still working a punch press.

Insurance Employment Impresses With Insurers Adding 20K Jobs During Pandemic

Seaholm’s company belongs to a group that encourages high school students to consider factory jobs. He opens his plants to high school students once a year on “industry day” and tries to get their parents to come, too.

“They want Johnny and Judy to go off to college,” he said. “That’s all locked in their heads.”

Globally, workforces in most other countries are also aging, including in China, which once seemed to offer an inexhaustible supply of workers. Japan’s population has shrunk for a decade.

Pradhan said that trend could potentially benefit American workers. Since the end of the Cold War in the early 1990s, hundreds of millions of people in China, Eastern Europe and India have joined the global workforce, thereby holding down wages for lower-skilled workers and keeping prices in check.

Now, the aging of much of the world could reverse those trends, Pradhan and Charles Goodhart, formerly an economist at the Bank of England, wrote in a book last year titled, “The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival.”

Pradhan notes that in Japan, whose population has declined about 1% year for a decade, economic growth has averaged just 1% annually. But that means growth per person has been 2%.

If the United States could achieve that level of efficiency while its population grows just 0.5% a year, its economy could still expand at a healthy 2.5% annually, Pradhan said.

Still, over time, he and other economists worry that sluggish population growth could mean less consumer spending and a less dynamic economy.

“Workers generate innovation and ideas —they invent things,” said Kasey Buckles, an economics professor at the University of Notre Dame. “When you have a dwindling working-age population, you have fewer people doing that.”

AP Business Writer Anne D’Innocenzio contributed to this report from New York.