Musk’s China ties add potential risks to Twitter purchase

Elon Musk’s ties to China through his role as electric car brand Tesla’s biggest shareholder could add complexity to his bid to buy Twitter.

Other companies that want access to China give in to pressure to follow Beijing’s positions on Taiwan and other issues. But Twitter is shut out by internet barriers that block most Chinese users from seeing global social media, which gives Beijing no leverage over the company, though the ruling Communist Party uses it to spread propaganda abroad.

Tesla Inc.’s ambitions in China might give Beijing that leverage to pressure Twitter to silence human rights activists and other critics or ease its rules on propaganda if Musk’s $44 billion purchase goes ahead, some experts suggest. Chinese customers bought half the Teslas sold last year. Its busiest factory and “main export hub” is in Shanghai.

“The Chinese exert tremendous leverage over businesses,” said Anne Stevenson-Yang of J Capital Research. “If you care about the Shanghai operation (of Tesla), then you’re going to put everything else in service to that.”

Musk says he sees “no indications” Beijing might use Tesla as leverage, but other companies don’t wait for government orders. Automakers, clothing brands and others take pre-emptive action to protect their access to China by changing marketing or products sold worldwide to reflect official positions such as the ruling party’s claim that self-ruled Taiwan is part of its territory.

Whether the Twitter deal will go ahead remains an open question. Musk tweeted yesterday that it can’t happen unless the company shows public proof that the number of Twitter accounts without real users behind them is below 5% of the total.

On Monday, he said at a business conference in Miami that a deal at a lower price wasn’t “out of the question,” Bloomberg News reported. That supported suggestions by industry analysts that Musk wants out of the deal or a lower price due to a fall in the value of Tesla sock, some of which he has pledged to finance the purchase.

Trying to use an investor’s stake in one company to pressure a different company outside China would be a new tactic. But foreign investors know the ruling party is increasingly assertive about defending its “core interests” worldwide and attacks global brands even when that imposes costs on China and its public.

Officials have warned companies must “respect the feelings of the Chinese people” and avoid “eating Chinese rice while smashing Chinese bowls.”

A handful have given up opportunities in China to avoid cooperating with official censorship or surveillance or suffering a consumer backlash abroad over human rights or other issues. More common are companies such as hotel operator Marriott, which in 2018 fired an employee who “liked” a Twitter post praising a customer survey outside China that called Tibet a country.

Regulators can pressure automakers by blocking them from expanding output while ordering them to stay silent about the reason. More openly, state media have called for boycotts of Japanese, South Korean and other brands during disputes with their governments.

Tesla’s sales in China rose 226% last year to 473,600 vehicles, according to LMC Automotive. That was about half of its 935,222 global deliveries.

Musk, who is Tesla’s chairman, was asked about the possibility the automaker might be used by Beijing as leverage over Twitter while appearing virtually at a May 11 event hosted by The Financial Times newspaper on the auto industry’s future.

“I’ve seen no indications to that effect,” Musk replied.

Musk said he expects China to be 25% to 30% of Tesla’s market in the long term.

The South African-born billionaire said he doesn’t see another Tesla factory in China in the near term but the company will expand in Shanghai.

The company, headquartered in Austin, Texas, didn’t respond to questions by email about its expansion plans. MDT/AP