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In May 2019, Emory University in Atlanta summarily terminated Li Xiaojiang and his wife Li Shihua, U.S. citizens of Chinese origin who had been employed by Emory for 23 years.  They were internationally recognized for their work on using genetically engineered mice and pigs to study Huntington’s disease.  The Emory administration closed down the laboratory and gave four Chinese postdocs working there 30 days to leave the country.  The charges? The couple “who were named as key personnel on NIH grant awards to Emory University, had failed to fully disclose foreign sources of research funding and the extent of their work for research institutions and universities in China.” They are just two of a dozen or more biomedical researchers of Chinese origin who have recently been charged with failing to report conflicts of financial interest or conflicts of professional commitment on NIH grant applications.  In May 2020, Li Xiaojiang was convicted for filing tax returns that omitted the income he received from his work abroad. He had to repay more than $35,000 to the IRS.

The Trump administration does not disparage international scientific collaboration. It is well aware that innovation and creativity flourish in an open, free-wheeling intellectual environment.  Time and again, Bill Priestap, the Assistant Director of the FBI’s Counterintelligence Division until 2018, has emphasized the enormous intellectual, financial, and cultural contribution that 1.4 million international students bring to the U.S. each year.  He notes that in 2017 they contributed $36.9 billion to the U.S. economy and supported 450,000 jobs. By paying full tuition, they also help an underfunded higher education system balance its books. In fact, Priestap insists that the “vast majority” of foreign nationals poses no threat to their home institutions, fellow classmates, or to their research fields.

Why, then, has the current administration taken a particularly aggressive approach to potential abuses of international academic collaboration with China? Is this just another aspect of the general deterioration of relations between Donald Trump and Xi Jinping, fueled by technological and economic rivalry between the two countries?  Or are there also deeper, structural changes at work that are reconfiguring relationships between two countries? I will argue that the access that thousands of Chinese students and researchers have to advanced academic research in science and engineering, which is tightly coupled to American economic and military power, lies at the heart of the emerging confrontation between them.    Whether or not one agrees with President Trump’s responses to the challenge from Beijing (and a majority of people, be they Republicans or Democrats, do see China as a major threat), the fact of the matter is that any U.S. administration — and the U.S. research system — will have to deal with a China that has every intention of becoming a leading scientific, technological, and economic power by the mid-21^st century, in competition with the United States. The traditional values enshrined in the U.S. research system are engaged in that competition and will not emerge unscathed.

The paper has three main sections. First, I briefly place international academic collaboration between the U.S. and China in historical perspective.  By comparing the responses to a similar challenge to the U.S. research system in the Reagan era, I can highlight the specific features of the current conflict that set it apart from the situation that faced the government 30 years ago.   That conflict, I argue, arises because America’s economic security, which is fostered by an increasingly commercialized academia, is being threatened by scholars who do cutting-edge research in the U.S., and who are being attracted (back) to China by Beijing’s talent recruitment programs, where they help strengthen the Chinese innovation system. After briefly analyzing the historical roots of this situation, I will conclude by drawing attention to the policies that have been adopted, or that are being considered, to regulate U.S.–China academic exchanges, and their implications. 

A Quick Look Back to The Soviet Challenge in the 1980s

There is an uncanny resemblance between the wave of anxiety that swept through the Reagan administration in the 1980s and the fears aroused by China’s legal and illegal efforts to acquire advanced scientific and technological knowledge today.  The scale of Moscow’s effort at the time emerged in the so-called Farewell Dossier, a collection of 4,000 KGB documents handed over by a defector to French authorities in 1981.   They revealed that the Soviets had built a vast technology acquisition system that was “well-organized, centrally directed, and growing….”  Secretary of Commerce Lawrence Brady remarked in March 1982 that, “Operating out of embassies, consulates, and so-called ‘business delegations,’ KGB operatives have blanketed the developed capitalist countries with a network that operates like a gigantic vacuum cleaner sucking up formulas, patents, blueprints, and know-how with frightening precision.”  He complained bitterly that the Soviets were able “to exploit the ‘soft underbelly’” of American openness, including “the desire of academia to jealously preserve its prerogatives as a community of scholars unencumbered by government regulation.”

These charges against academia were laid to rest by a Panel on Scientific Communication and National Security established by the National Academies complex in consultation with the Department of Defense. Its report, published in October 1982, made two major contributions. First, it exonerated universities from any significant responsibility for sensitive knowledge leaking to the Soviet Union.  Second, it stipulated that “to the maximum extent possible, the products of fundamental research should remain unrestricted.” Fundamental research was defined as “basic and applied research in science and engineering, the results of which ordinarily are published and shared broadly in the research community….”             Nationality was not a criterion for active participation in fundamental research as long as it was not classified or of proprietary interest. It remains the formal definition of academic freedom in the practice of research on American campuses, even though it has been challenged repeatedly over the last decade or more. As a matter of fact, it is being challenged today. The rest of this paper will explain why.

The Trump Administration’s Assault on Sino-American Scientific Collaboration

As of 2018, there has been a sharp uptick in Congressional hearings, reports by Congressional committees and by Washington think tanks, as well as news articles, discussing the challenges posed by U.S. scientific and technological collaboration with China.  The tenor of the debate was set in a joint hearing of two subcommittees of the Congressional Committee on Science, Space, and Technology in April 2018. Its title, Scholars or Spies? Foreign Plots Targeting America’s Research and Development, implied that scholars were indeed agents of foreign governments acquiring America’s R&D.   This charge had been made by Christopher Wray, the Director of the FBI at a hearing of the Senate Intelligence Committee in February 2018. Asked by Senator Marco Rubio to comment on “the counterintelligence risk posed to U.S. national security from Chinese students, particularly those in advanced programs in the sciences and mathematics,” Wray replied that in his view, “The China threat is not just a whole-of-government threat but a whole-of-society threat on their end, and I think it’s going to take a whole-of-society response by us.” Speaking to the Council on Foreign Relations in April 2019, he asserted that everyone was in on it, including the thousands of Chinese students and researchers who work and study in the U.S. every year. “Put plainly, China seems determined to steal its way up the economic ladder at our expense.” Wray also deplored “the level of naïveté on the part of the academic sector about this…. They’re exploiting the very open research and development environment that we have, which we all revere, but they’re taking advantage of it,” targeting “our information and ideas, our innovation, our research and development, our technology.”  To make matters worse, when fundamental research was funded by federal agencies liked the NSF or the NIH, American taxpayers were unwittingly funding technological advancements and innovative breakthroughs that helped foreign nations to gain a competitive advantage over the U.S.

Wray’s charges resonate strongly with the Reagan administration’s narrative in the 1980s as regards academia. In fact, many commentators speak of a new “Cold War” in the making. The similarities should not be exaggerated. The Soviet leadership did not prioritize economic modernization in the 1980s. It enhanced its military footprint with the deployment of SS-20 missiles targeting Europe and the invasion of Afghanistan in December 1979. By contrast, the Chinese leadership explicitly seeks to acquire a dominant place in global markets by 2049. Trade relationships between the U.S. and the Soviet Union were tightly controlled in the 1980s (while America had a trade deficit of $345 billion with China in 2019).  And there was relatively little intellectual exchange between the superpowers either (while there were some 365,000 Chinese students in American institutions of higher education in 2019). This is not (yet) a clash between two military systems.  It is a competition for economic power that is underpinned by ceaseless innovation in which university training and research in science and engineering play a crucial role. In what follows, I will highlight a few important developments in both the U.S. and in China that have brought matters to a head today.

The U.S.: Economic Security and the National Security Innovation Base

Economic security is national security, and it lies at the heart of American prosperity.   This is the view of President Trump himself in the Executive’s National Security Strategy statement released in December 2017. The importance of “economic security” can be traced back to the growing conviction in the late cold war that military power based on ceaseless technological innovation would not ensure America’s capacity to maintain a global Pax Americana. It needed to be combined with economic strength to protect key strategic industries from ruthless competitors — including allies — in global markets. As two leading members of the Washington establishment put it in 1990, “International competition has eroded the once commanding U.S. advantage in technology…when it comes to advanced technology national security can no longer be viewed in exclusively military terms: economic security and industrial competitiveness are also vital considerations.”

Leading in research, technology, invention, and innovation is key to achieving economic security. The National Security Strategy document of 2017 sees university research as a central player in securing that leadership. The FRE specifically distinguished between basic and applied research in universities and colleges, and classified research in national laboratories like Los Alamos, as well as proprietary research in industry.  These distinctions are now dissolved. Universities are included in a so-called National Security Innovation Base, “the American network of knowledge, capabilities, and people — including academia, National Laboratories and the private sector — that turns ideas into innovations, transform discoveries into successful commercial products and companies, and promotes and enhances the American way of life.”

And here we come to the second key feature of the current conflict: this blurring of the boundary between universities and the private sector that results from the commercialization of academic research.   The Bayh-Dole Act of 1980, and subsequent revisions, gave universities patent and intellectual property rights over the results of research funded by the federal government. In doing so, it liberated the entrepreneurial energies of the academic community. As a result, according to an official report in 2012, “Today, American research universities are closer to the marketplace than they have ever been, with a focus on translating and transferring research discoveries to industry.” (Lieber’s CV states that he has no less than 65 awarded and pending patents.) In short, as universities have become key sources of innovation for industry, so the boundary between basic and applied research, protected by the Fundamental Research Exclusion, and the development or commercialization of research results, protected by patents, has become increasingly blurred. For someone like Lawrence Tabak, the principal Deputy Director of the NIH, it has virtually disappeared. “Even something in the fundamental research space, that’s absolutely not classified, has intrinsic value,” he says.  This “pre-patented” material “is the antecedent to creating intellectual property. In essence, what you’re doing is stealing other people’s ideas,” he claims. The implication is that all research covered by the FRE is so pregnant with commercial possibilities that it has to be treated as if it were patentable and protected, or else it will be “stolen.”

The Bayh-Dole Act was signed into law when most foreign nationals on U.S. campuses were from allied countries.  Today the situation is very different.  American universities award about 5,000 PhDs in science and engineering to Chinese students every year. The shift in the focus of university research toward the development-end of the R&D spectrum, and a culture that encourages its commercialization, introduces them to know-how and knowledge that are close to the market. While the greater majority stay in the U.S., an increasing number return to their homeland, where they are joined by experts temporarily recruited by China’s Thousand Talents and similar state-sponsored programs.  Let’s look more closely at these developments that are of immense concern to the FBI and the federal funders of fundamental research.

China’s Talent Recruitment Program and Its Innovation Development Strategy

What is the scale and scope of China’s innovation system today?  The National Science Board’s 2020 report on science and technology indicators provides one with a time-sensitive picture of the stunning rise to prominence of the Chinese innovation system. It notes that while gross domestic expenditures on R&D in the U.S. almost doubled between 2000 and 2017, China has experienced a tenfold increase over the same period to reach about 90 percent of the U.S.’s figure. In 2015 China awarded 32,000 PhDs in natural science and engineering, bypassing the U.S.’s 30,000. China’s S&E publication output has risen tenfold since the year 2000 so that China’s output in terms of absolute quantity now exceeds that of the U.S. This has been accompanied by a growth in quality, as measured by the citation rates of papers published by authors in China. China has also become a desirable partner for the American research community: in 2018, 39 percent of scientific papers published by an author based in the U.S. were co-authored with someone in another country.  More than a quarter of these (about 56,000) were with partners in China, more than with any other nation. This collaboration is facilitated by overseas Chinese living and working in the U.S. who are imbued with what historian of science Zuoyue Wang calls a spirit of “cultural nationalism,” expressed through their “identification with the developmental aspirations of their country of origin.”  The administration often presents U.S.-Chinese scientific cooperation as a one-way transfer of knowledge and technology from this country to China, as happened with the Soviet Union in the late 1970s and early ‘80s.  The picture that emerges here is of a dumbbell, not a vacuum cleaner, with two equally weighted communities at each end joined by a bridge of mutual respect.

China’s official talent recruitment programs were devised to compensate for the “brain drain” of gifted scholars to foreign countries. As of 2013, no less than 84% of Chinese students who received Ph.D. degrees in science or engineering stayed in the United States for at least five years.¹ Talent programs sought to take advantage of the intellectual assets of overseas Chinese, and of foreign scholars, to inject new ideas and expertise into the indigenous innovation system. It is the participation by Charles Lieber at Harvard, by Li Xiaojiang and his wife Li Shihua at Emory, and many other U.S.-based researchers who are funded by the Thousand Talents Program (TTP) that is being targeted by the U.S. administration today.

The TTP was established in 2008. A recent authoritative study estimated that by 2018 the program had recruited about 7,000 well-educated and highly skilled researchers.² Participants in the program have several options to choose from, including short-term, long-term and entrepreneurial fellowships. The program recruits established scholars, young professionals, and “top-notch talents and teams.” A short-term contract requires a three-year commitment to spend at least two months a year in China. The long-term contract will usually be for people under 55 years of age willing to work in China on a full-time basis. They must have full-time professorships in prestigious foreign universities or R&D institutes or have senior titles from well-known international companies or financial institutions. Salaries and benefits are generous and go along with substantial start-up funds — RMB1million (about US$150,000) for established scholars.

A close reading of the official Thousand Talents Program website shows that it involves far more than what one usually finds in an international exchange program.³ China is not simply interested in people with outstanding intellectual track records. As the program’s “History and Background” statement puts it, when gifted recruits “go (back) to China, they are playing a positive role in the scientific innovation, technological breakthrough, discipline construction, talent training and hi-tech industry development, as an important force in the construction of the innovative country.”

These government-funded talent projects are embedded in an overall agenda that seeks to transform China into a global economic power by the mid-21^st century.  The Made in China 2025 plan, launched in 2015, has singled out ten key sectors in which the PRC seeks to secure a dominant share of the global market. Theyare central to the so-called fourth industrial revolution, integrating big data, cloud computing, the Internet of Things, and other emerging technologies into global manufacturing supply chains. Some of their foci — artificial intelligence, robotics, autonomous vehicles, augmented and virtual reality, financial technology, gene editing— will be generic so that many applications or end-use technologies can be built upon them. They are part of a technology-driven innovation strategy that sees investment in innovation as contributing to nation-building.

China regards its talent recruitment programs as a legitimate instrument for economic and military modernization. The FBI insists they are platforms to advance “China’s […] economic dominance over us,” using “economic espionage and theft of intellectual property.” For the U.S., protecting economic security involves defining policies to control transnational flows of knowledge to China from a university research system that is increasingly integrated into the commercialization of new products and processes that enhance American prosperity.

Dealing with the Threat Posed by Fundamental Research to Economic Security

The pressure to protect intellectual property will gradually transform the culture of international collaboration on American campuses, aligning it more closely with what we find in corporate laboratories.  Many international collaborations in fundamental research continue to treat the knowledge produced as a common good, shared by all in the interests of advancing scientific understanding. As the FBI’s Priestap put it to a Senate Judiciary Committee, “Unlike in the corporate world, university researchers are rarely required to sign nondisclosure agreements or terms of collaboration, which many professors view as volatile of the spirit of academic openness.”  This “contractual paucity” that pervades academia, Priestap went on, “makes proving foreign intellectual property theft challenging.” This is because “U.S. economic espionage law requires the victim of the theft to demonstrate that he took reasonable precautions to protect the secret stolen” — precisely what does not happen in the informal, free-wheeling climate of most university research laboratories.  

It is not illegal to participate in Chinese talent recruitment programs if both parties respect each other’s intellectual property rights. It is the violation of those rights to the U.S.’s disadvantage that is the issue here.  Granted the difficulty of convicting researchers of economic espionage, those rights are being strictly enforced in federal contracts awarding grants.  The NIH has taken the lead in using this instrument to mitigate and prevent the possibility of IP acquisition before it happens, rather than seeking to criminalize it afterward. InNovember 2019, Jodi Black, Director of External Affairs, reported that the NIH had identified “at least 120 scientists at 70 institutions,” not all of them ethnic Chinese, who had committed unacceptable breaches of trust and confidentiality — this out of 300,000 grantees who receive $31 billion annually in medical research through 50,000 competitive grants.  The numbers are small.  But the integrity of the whole research process that depends on openness, trust, and transparency is being jeopardized. And all the more so when researchers use U.S. taxpayer dollars to finance innovation in a competitor whose political system is orthogonal to their own.

Non-state actors have also begun to impose pre-emptive controls on knowledge circulation in grant applications.  In April 2019, MIT announced a new process to assess research proposals involving collaboration with China, Russia, and Saudi Arabia. They had to be vetted internally before they were even submitted for external support to see if they posed an “elevated risk” related to “intellectual property, export controls, data security and access, economic competitiveness, national security, and political, civil and human rights […]”

New regulations are also in the pipeline to limit foreign access to the academic research system. The Trump administration has reduced the duration of visas for graduate students from China from five years to just one year, renewable, in robotics, aviation, and high-tech manufacturing.  All three are priorities in the Made in China 2025 program. The State Department’s new visa application form requires applicants to disclose all the names that they have used on any of 20 social media platforms for the last five years, including Twitter, Facebook, LinkedIn, and Instagram.  U.S. researchers who have participated in foreign talent programs may soon be denied any further federal government support for their research, so striking a particularly serious blow to Chinese-American researchers who have fostered co-ethnic links with colleagues on the mainland. There is talk of “updating” the FRE by specifying areas of sensitive fundamental knowledge to which it does not currently apply.

Looking Forward

Today, more than ever, economic security is national security.   The wave of new restrictions on U.S. academic collaboration with China is a reaction — some insist an overreaction — to the threat posed to U.S. economic security by Beijing’s talent recruitment programs, combined with its stated ambition to be a major economic player in strategic markets by 2049. Trade wars are not only about steel and soya beans.  They are also about controlling the global circulation of emerging technologies, knowledge, and know-how that will define the international distribution of economic and political power by the mid-21^st century.

Academic labs are central hubs in that system.  We still do not know how profoundly the administration’s confrontational approach to China will transform academic life.   Many prospective Chinese students are reconsidering their plans to study in the U.S. for fear of being discriminated against ethnically, of being denied access to certain fields of study, and of being obliged to leave the country immediately after they graduate.  The crisis surrounding Covid-19 has increased their anguish.   They resent the President’s labeling of SARS-Cov-2 as the “Chinese virus.” They will be discouraged by new steps being taken to preserve jobs for American nationals to deal with an unprecedented number of local unemployed.  Universities whose business models are based on having large numbers of fee-paying foreign students face serious financial difficulties.  High-tech firms like Google and Apple, which recruit large numbers of talented Chinese graduates in science and engineering, face a shortage of skilled “manpower.”  As for life in the laboratory, it is likely that the free-wheeling, spontaneous sharing of know-how, preliminary research findings, and research materials that fosters the production of cutting-edge knowledge will be circumscribed to protect intellectual property. Academic freedom will be jeopardized by government intervention in university labs that are increasingly administered like corporate R&D facilities. As one official from Washington put it recently at a meeting of university administrators and researchers, “If you behave like a business, we will treat you like a business.”  He was referring to the possible invocation of export controls on knowledge-sharing in academia that would require a license from the government to teach foreign nationals from China in certain topics, or for them to use certain kinds of experimental equipment. There is a high price to pay for the commercialization of academic research in a global world in which the U.S. is not the only major player, and in which highly trained scientists and engineers are sought after by competing universities, corporations, and governments.  But then the stakes are high, too.  As the Central Committee of the Communist Party of China and the State Council put it, “The important reason for the backwardness and beatings of China in modern times is that it has lost contact with previous scientific and technological revolutions.”  This will not happen again.  “Innovation drive is the destiny of the country,” and through it we will “realize the Chinese dream of the great rejuvenation of the Chinese nation.”  The Chinese authorities are determined to overcome a historical legacy of foreign oppression from the 19^th century onward, dislodging the U.S. from its dominant position in the world order.  The Trump administration is determined to stop that from happening.

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Although the relationship between China and Myanmar goes far back in history, the energy relationship between two countries is quite new. Myanmar became the first non-Communist country to recognize the People’s Republic shortly after its founding in 1949, but ties remained rocky until the early 1990s. Western embargoes imposed on Myanmar after its crackdown on democracy in 1988 and on China after the Tiananmen Square massacre in 1989 pushed the two nations closer together. But Myanmar’s role in China’s energy security has been driver of improved ties.

2. Importance of Myanmar in China’s Energy Security

Myanmar, a neighboring energy-rich nation, provides an overland route for energy supplies that offers China economic and strategic advantages. China currently receives 95 percent of its energy imports by sea, with approximately 80 percent passing through the Malacca Strait. Most of those supplies comes from the Middle East. Myanmar’s location on the Indian Ocean presents a money-saving alternative route and strategic geopolitical advantage by avoiding the Malacca Strait, a major international shipping lane dominated by the U.S. Navy. Energy resources can be shipped through the Andaman Sea and Bay of Bengal and transported to China from Myanmar through pipelines, cutting off 3,000 kilometers, reducing transport time by five to six days, and avoiding a potential confrontation with the U.S.¹

Myanmar also is a potential energy source for China, thereby reducing dependence on energy from the Middle East. Two of China’s top three countries for energy supplies are Saudi Arabia and Iraq. Myanmar boasts the most diverse energy resources among ASEAN members, with  a total of 104 oil and natural gas blocks, 51 of them on land with the rest in the sea.² According to 2017 data, Myanmar controls 0.3 percent (139 million barrels) of known world oil reserves, in the Salin Basin and in the seaside Yetagun Field.³ In addition, according to 2019 data, Myanmar has 0.6 percent (1.2 trillion cubic meters) of the proven natural gas reserves in the world. These reserves are located primarily in the Yadana, Yetagun and Zawtika areas in Moattama on the west coast of the country and the Shwe area in Rakhine.

In addition, Myanmar has the potential to help China decrease its dependence on liquefied natural gas imported from the Middle East. According to 2019 data, China is second in the world in LNG imports. LNG is more costly than natural gas. Shipping also presents potential dangers from bad weather, pirates, and accidents. Currently, China imports natural gas through a pipeline connecting Turkmenistan, Uzbekistan, Kazakhstan, and Russia.⁴

3. China’s Energy Security Policies to Myanmar

Myanmar plays an important role in China’s Belt and Road Initiative, the sweeping plan for infrastructure investment to link China to markets in Asia, Europe, and Africa. Energy supplies already are flowing from Myanmar to China through the Myanmar-China Natural Gas Pipeline and the Myanmar-China Oil Pipeline.

Map 1⁵

As seen in Map 1, the natural gas pipeline starts in Kyaukpyu city in Myanmar’s Rakhine State and ends in China’s Yunnan region. China and Myanmar agreed on the project in 2009,  and the pipeline went online in 2013.⁶ CNPC, China’s largest energy company, built the 793-kilometer long pipeline at a cost of $2 billion.⁷ By 2018, 3.2 billion cubic meters of natural gas had been transported from Myanmar to China, far short of the pipeline’s 12 billion cubic meter capacity.⁸

The pipeline contributes to China’s energy security by increasing energy supplies and diversifying delivery routes. It also reduces dependence on LNG. In 2018, natural gas piped in from Myanmar constituted only 2.6 percent of China’s 121.3 billion cubic meters of natural gas imports.⁹ However, operating the pipeline at full capacity would increase the percentage to 9.8 percent. The pipeline also reduces China’s dependence on sea routes through the Malacca Strait.

China, which imported 73.5 billion cubic meters of natural gas as LNG in 2018,¹⁰ has the opportunity to reduce LNG dependence by 4.3 percent with natural gas imported from Myanmar. If China uses the pipeline at full capacity and imports 12 billion cubic meters of natural gas from Myanmar, the figure may reach 16.3 percent. Importing natural gas from Myanmar also could reduce China’s dependence on natural gas from Australia, the source of 26 percent of China’s imported gas, and Qatar, which supplies 11 percent of the country’s gas. China’s diversification efforts, however, will not end China’s dependence on LNG supplied by sea. LNG imports likely will continue for the long term.

The Myanmar-China oil pipeline also has strategic value. As shown in Map 1, the oil pipeline between the two countries connects to the deepwater port of Sittwe and Kunming. In 2017,  3.87 million tons of oil was sent from Myanmar to China through the pipeline,¹¹ which has an annual capacity of 22 million tons.¹² China and Myanmar agreed on the 771-kilometer-long pipeline in 2007, and it was completed in 2015 at a cost of $2.5 billion.¹³ The pipeline provides the same benefits as the natural gas pipeline – supply and route diversification. Myanmar’s contribution to China’s oil imports currently is small – 0.76 percent in 2017. But bringing the pipeline to full capacity could increase oil imports from Myanmar to 4.3 percent of China’s total.

The pipeline provides China the opportunity to transport oil through the Andaman Sea and the Bay of Bengal to Myanmar. While China has not yet implemented this planned route, it is building the Kyaukpyu deepwater port in Rakhine State as part of its Belt and Road Initiative to accommodate oil tankers, which promises to reduce dependence on shipping oil through the Malacca Strait.

Map2¹⁴

The location of Myanmar on the land route within the scope of BRI is shown on Map 2. In May 2017, Aung San Suu Kyi signed the “Cooperation within the Framework of the Silk Road Economic Corridor and the 21^st Century Maritime Initiative” in Beijing. Suu Kyi and Chinese President Xi Jinping met in Beijing in December 2017 and agreed to extend the economic corridor to Kyaukpyu city in Myanmar.¹⁵ In November of 2018, Suu Kyi and China’s National Development and Reform Commission Vice President Ning Jizhe held further talks on the development of the corridor, a high-speed railway linking Kyaukpyu and Kunming, special economic zones, and more oil and gas pipelines.¹⁶

Map 3 ¹⁷

Map 3 shows the location of Myanmar on the sea route of the BRI.

No information has been made available on when the construction of the Kyaukpyu deepwater port and the special economic zone will be completed. According to the original plan, the port will have a container capacity that can compete with ports such as Valencia in Spain or Manila in the Philippines. Based on this information, the Kyaukpyu port would have a capacity of 5-7 million TEU,¹⁸ which would place it within the top 30 world ports in terms of capacity.

The Kyaukpyu port could significantly reduce China’s dependence on the Malacca Strait. China imported 546.1 million tons of oil in 2018,¹⁹ 78 percent of which (426.1 million tons) went through the Malacca Strait.²⁰ Assuming the Kyaukpyu port will have a capacity of 60 million tons, China could reduce its dependence on the strait by 14 percent. Kyaukpyu also offers a shorter route to China. Iranian oil transported to China through the Strait of Malacca covers about 9,900 kilometers. The Myanmar route would reduce that to 5,300 kilometers or 4,600 kilometers.²¹

4. Conclusion

Myanmar provides strategic and practical benefits for China’s energy security needs. It offers an opportunity to diversify supplies, reduce dependence on imported LNG, cut shipping times, and reduce dependence on supplies from the Middle East. The deepwater port being developed in Myanmar offers China the potential to avoid the Malacca Strait. Energy infrastructure linking Myanmar to China is relatively new, but plans for expansion are ambitious and the relationship between the two countries should be watched closely.

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Business Angels (BAs) are typically high net worth businessmen and women who invest both their personal money and time in high-growth potential, unlisted, early-stage ventures.  The BA investment ecosystem became very well developed in the United States during the 1970s. It was credited with playing a significant role in supporting, at the early-investment stage, high-tech start-ups such as Apple, Google, and Facebook.  BA investing has been spreading into developing countries, including China, in the 21^st century.  According to Chinese researchers Jiani Wang, Yi Tan, and Manhong Liu, BA investing in China is still a relatively recent phenomenon to the extent that there is a dearth of empirical analysis related to developing a BA investing ecosystem in China.  We recently completed a two-year field study of Chinese BA investing.

In this article, we first provide a brief introduction to BA investing in China, followed by an overview of our field research analyzing the current BA investing ecosystem in China. In 2017 and 2018, we completed 21 interviews of Chinese BAs located in Beijing, Shanghai, Ningbo, Hong Kong, Shenzhen, Qinhuangdao, and Xian/Guizhou.  Nineteen of these BAs were individual private-equity investors, while two BAs were part of an angel group (AG) that represents a relatively new organizational investment model operating both globally and within the Chinese BA community.  We present a profile of the 19 BA investors (15 males, 4 females) and analyze their investment strategies.  Based on our discussion of the development of AGs and a case study explaining this new type of BA investing organizational strategy, we argue that Chinese BAs are active, hands-on investors who report positive investment returns despite investing in an emerging country. Investors in China face significant challenges because of underdeveloped legal and financial institutions. However, the Chinese BA investment ecosystem is evolving from a market characterized by individual investors and informal and invisible groups to formalized syndicates and professional groups, which play a positive role in nurturing new BAs and consolidating angel capital to invest in start-ups.

BA Research in China

In 1986, the Chinese government introduced two programs that attempted, but failed, to play a pivotal role to support BA financing in early-stage ventures.  The programs failed primarily due to China’s status as an emerging economy, lacking both financial and legal institutions necessary to adequately support private equity investing such as venture capital (VC) and BA investing.  Wang and Scheela, in a recent book, have shown how China has been able to significantly improve its private equity ecosystem during the past decade by developing more supportive legal and financial regulations, which have specifically created investment opportunities for VC and BA investing.  While BA investing has improved dramatically in China, Wang and Scheela show that the investment climate is still institutionally challenging but economically emerging. The positive characteristics are the large size and consistently strong growth of the economy and a commensurate increasing development of high-technology sectors.  Since 2011, foreign and Chinese academicians are beginning to take notice by conducting substantive research and publishing scholarly papers in Western journals that have generated empirically-based policy recommendations to support BA investing in China.

Only six academic papers focusing on Chinese BAs have been published in established Western scholarly journals beginning in 2011 (see Wang & Scheela, 2020 for an overview of the six papers).  Cumulatively, these articles confirm that China is aggressively developing an entrepreneurial ecosystem that is increasingly supportive of a vibrant private equity format to include both VC and BA investing.  While these six studies presented interesting findings about BAs’ profiles and the challenges and opportunities of investing in China, many of the papers suffered from small, non-random sample sizes using Chinese students as proxies for BAs or focusing on investment deals, but not the actual BAs who made these deals.  We answered the call, in three of the six articles, for further in-depth research focusing specifically on Chinese BAs.  A major challenge when attempting to interview BAs, in both developed and developing countries, is to find them.  BAs prefer to maintain a low profile to the extent that they have been referred to by many researchers as being an invisible population.  While Chinese BAs are no exception to preferring a low profile, it is common for them to have active websites and participate in public forums, and are willing to be contacted via social networking.  In 2017 and 2018, we used social networking to develop a purposive judgment sample of the 21 BAs active investors in new ventures.  Each interview averaged 62 minutes, with the majority of the interviews occurring in Beijing.

Profile of Chinese BAs

In Table 1 we develop a profile of the 19 individual BA investors in our sample.  Similar to our research on ethnic Chinese VCs, the 19 BAs are highly educated with almost all of the BAs attending college and attaining at least an undergraduate degree.  Almost 75 percent have earned master’s degrees or above; with more than 25 percent attaining a Ph.D.  All of these BAs have significant business experience and have been fairly long-term investors averaging almost 11 years of investing in early-stage ventures.

Table 1.  China Angel Investor Summary Profile

These BA investors have typically sourced their investment capital from their personal savings, much of which flows directly from their private equity returns as angel investors.  The BA’s individual investment fund represents money already invested in a company and money available for future BA investing.  Only 18 of the BAs divulged the size of their respective funds; one BA preferred to keep this information confidential for personal reasons.  The amounts of the investment funds were wide-ranging, from $150,000 to $75 million (represents only one BA); the latter amount is an outlier and is typically larger than many smaller VC investment funds that focus their investments in early-stage companies.  Because of the unique size of the largest reported investment fund compared to the other 17 BA investment funds (range from $150,000 to $44 million), the median of $3.25 million is a better descriptor of this sample’s fund size of 19 BAs than is the mean of $10.8 million.  Collectively, these 18 BAs report having access to $195.35 million, adding in the median amount of $3.25 million for BA 19 approximated a total investment capacity of almost $200 million for the BAs in our sample, which is a very impressive amount for BAs investing in an emerging country characterized as an institutional void.

The 19 BAs have invested in 291 companies during the past two-to-26 years of investing, ranging from one-to-70 deals per investor.  Because two BAs have been very active investors and each invested in 40 or more deals, we again use the median (10 investments/BA) as the best descriptor of the typical BA investor in this sample, indicating a very active investing culture for BAs in our sample.

So, what kind of investment results have these 19 BAs experienced during their, on average, 11 years of investing?  We specifically asked each BA to evaluate the performance of their respective investment funds compared to their expectations when they began investing.  As shown at the bottom of Table 1, only 10 percent of the BAs were disappointed with their investing results (reporting “not meeting expectations”) and 90 percent believe they are “meeting expectations” (53 percent) or “exceeding expectations” (37 percent).  This is a quite surprising self-reported outcome for BA investing in an emerging economy, which still lacks the fully developed legal and financial institutions necessary to effectively support private equity investing.  Even in developed countries, BA investing in early-stage ventures is perceived as high-risk.  Of course, much more research is needed to externally validate these very early results. Still, it appears there is increasing support over the past decade for substantive BA investing as a viable ongoing investing option in China.

Business Angel Investment Strategies

In Table 2 we show the different components that make up an investment strategy for each of the 19 BAs.  We analyzed each component based on the BA’s responses to eight separate questions ranging from “Do you have an investment strategy?” to “Do you have a geographical focus for investing?”  All 19 BAs indicate they have investment strategies, which we asked them to describe in one sentence.  The 19 strategies are each unique in their focus, yet extremely diversified in their broad investing landscape. Collectively, the strategies initially appear to not follow any type of investing patterns as these BAs invest in a wide range of industries, products, locations, and amounts of money per deal. Each strategy provides a well-articulated path for each BA’s equity investments in unlisted SMEs. However, as we will explain below, when operationalizing their investment strategies, clear patterns begin to emerge that suggest a robust networking strategy for BA investing in China as a way to offset the lack of institutional support for PE investing.

Table 2. Investment Strategy

We asked each BA if they had exit strategies in terms of cashing in their investments.  More specifically, we wanted to know what it is (listing on a stock exchange via IPO, management buyback or trade sale), how many years investee companies typically held until exiting, and how many exits they have made.  The typical exit or planned exit strategy was a trade sale (selling to/being acquired by) another company after holding an investment in an investee company for an average of 5.7 years.  Nine of the BAs reported exiting a total of 37 companies for an average of about four exits for those BAs who had experienced an exit. Based on earlier research on BA investing in Asia, exiting an investment has been a very difficult process (see Scheela, 2014).

Ten BAs indicated a narrow Beijing-only geographical investment preference as part of their investment strategy. Only one BA was open to investing in investee companies located outside of China.  Strategically, most of these Chinese BAs prefer investing close to home, which compares favorably with most BAs investing in the United States and other developed countries.  Also, similar to American BAs, the 19 Chinese BAs prefer to invest and work with relatively young companies.  They invested a median amount of $45,000 in 291 companies composed primarily (93 percent) of seed- and early-stage companies, five percent growth-stage, and only one percent invested in late-stage companies.  This overwhelming early-stage focus, combined with a close-to-home investee-company preference, would actually represent a significant but unstated (not clearly stated in their actual investment strategy) investing pattern we found in our analysis of the components of the respective19 investment strategies.

These BAs can be categorized as fairly active, hands-on investors (including the very active, active, and moderate categories as shown in Table 2) by analyzing the amount of time each BA spent weekly providing value-added activities (typically strategic planning, forming the board of directors, and introduction to suppliers and customers), besides money, to their respective investee companies.  Each BA spent an average of 24 percent of his/her time every week working with their investee companies.

One way for a BA to more effectively operationalize an active, hands-on investor strategy is to negotiate, during the investment process, for a board seat on the investee companies’ board of directors.  In our sample, 13 BAs took at least one board seat with their 10 (median, Table 1) investee companies.  While six BAs preferred not to take board seats with any of their investments, three of them were still actively providing value-added activities to their investee companies on an ongoing basis.  One reason not to take any board seats or not to take board seats on all investee companies is that most of these BAs (16) co-invested, on average, with 3.6 other BAs when doing a deal.  Most likely, at least one of these co-investors would be the lead investor who would take a board seat to represent the investment team composed of four-to-five BAs.  Hands-on investing combined with extensive networking appears to play a key part in an effective investment strategy of most of the BAs in our sample resulting in positively perceived investment returns. Previously published BA research has suggested that a hands-on, networking investment strategy is also effective in emerging ASEAN economies (Vietnam – Scheela et al., 2018; Philippines – Scheela & Isidro, 2009; Thailand – Scheela & Jittrapanun, 2012 and Malaysia, Harrison et al., 2018).

Development of Business Angel Groups

From our interviews, BAs often seek deals from their acquaintances, and they like to co-invest with others, especially the members of the same AG. More and more Chinese BAs began to work together. Within the last ten years, the Chinese BA ecosystem has seen rapid growth, particularly in organized AGs and business angel networks (BANs).  This increasing collaboration is a natural evolution of the growth and maturation of individual angel investing. Challenges always exist for individual investors, particularly accessing a higher number of better deals. BANs are forming as a way to facilitate matchmaking between potential angel investors and entrepreneurs.  Besides, some BAs may not be able to effectively help and mentor their invested companies because of the lack of experience and resources. Even a sophisticated angel may be limited in capital size and industry experience. AGs, by pooling their resources and knowledge of their members, can overcome many limitations for solo investing. By pooling investors’ capital, they can make larger investments; by investing in more portfolio companies or syndicating investments, they share the risk.  AGs can also provide more efficient deal screening, due diligence, and post-investment management arising from increased numbers of investors and a diversity of knowledge about market, management, and technology.  Forming AGs can also improve the visibility and efficiency of the market by making it easier for BAs and entrepreneurs to find each other.  AGs also allow experienced BAs to share and exchange investing experience with new angels and to contribute to the creation of new and better government policies.

International experience shows that government policies can encourage angel investing, including tax incentives, co-investment funds, support for angel associations, networks or groups, and training and development of angel investors (see OECD, 2011). Similarly, the Chinese government offers significant public support to AGs and BANs (see State Council, 2016). The last five years have witnessed a rapid growth of AGs/BANs in China. Driven by these policies that increasingly support entrepreneurship and innovation, more and more BAs are working together. Dozens of AGs/BANs were founded in many first- and second-tier cities, including Beijing, Shanghai, Hangzhou, Suzhou, Nanjing, Wuhan, etc. Many of them are affiliated with government agencies or large enterprises, but some groups come from alumni associations. In 2018, Angels Association of China（中国天使投资人联盟), led by China Venture Capital Association （中国创投委), was co-founded by more than 20 AGs. This new community is an umbrella organization, aiming to cultivate and strengthen BAs and facilitate networking among AGs. According to their survey in 2019, there are 62 AGs/BANs in China, and 46 of these organizations have disclosed information publicly.

An Angel Group Case Study: Angel 100（中关村百人会天使投资联盟）

Angel 100, founded in 2013, is the first business angel organization approved by the Beijing civil affairs department. The sponsors and co-founders are mainly first-generation entrepreneurs in Beijing’s high-tech Z-park or EMBA alumni from China Europe International Business School (CEIBS), Cheung Kong Graduate School of Business, Peking University and Tsinghua University. The members are mainly BAs who are entrepreneurs over 40 years old. There are currently more than 500 angel members, 70 percent of whom are entrepreneurs and 30 percent are professional investors. Members span more than a dozen popular industries, and in each industry, there are dozens of expert investors. Its unique co-investment model of “experts leading and members co-investing” provide powerful leadership from the “entrepreneurial mentor group” for entrepreneurial projects.

We interviewed Mr. Qiao Qian, the Chairman of Angel 100, twice (in May 2013 and July 2017). Mrs. Hu Xueqin, the Secretary-General, also joined the interview in 2017.  Mr. Qiao Qian has 25 years of experience related to the science and technology industry. In 2010, Qiao founded an investment company focused on investing in innovative and early-stage enterprises, helping people realize their entrepreneurial dreams.

Running a business is not easy. When he realized that entrepreneurs needed more resources, Qiao came up with the idea to unite more people to make investments. He believed that if there were more angels, then entrepreneurs could get more help. As a result, he promoted the concept of “Angel 100.”  The idea was to collect 100 people’s wisdom to help entrepreneurs realize their dreams. We asked Qiao, “What are the most important qualities that an angel investor must possess to become a member of Angels100?” Qiao said each BA should have three qualities. One was that he or she should get prepared mentally to understand that all his/her money might go for nothing, and therefore be able to bear the financial risks. Another quality was that he or she should be willing and motivated to be a BA and invest in start-ups. The last one was that he or she should have at least ten years of business experience because this guaranteed that he or she probably had started a business or had been a senior manager and thus developed deep insights into the development and future of a particular industry. In other words, Angel 100 was an organization covering many industries whereby its members had different industrial backgrounds and the number of members from the same industry should not exceed five. In this way, people could share diverse experiences. These qualities alone would be greatly helpful for entrepreneurs. Qiao also emphasized that based on its members’ qualities as well as the group’s intention to help entrepreneurs, “Angel 100” was positioned principally as a “non-professional angel investor.” That is, each member had his/her full-time job and making investments was just a hobby. Being an AG member, investors have a chance to make investments together. Therefore, those angels without experience would also get the courage to make investments and entrepreneurs could get better assistance from this angel group.

Based on Qiao’s experience both in China and abroad, he believes group investing is difficult: the challenge is how to organize members to effectively make investments.  Qiao says he plans to launch 100 activities annually to nurture the cohesive power among members. There would be four kinds of activities in general. The first is to offer a dinner meeting each Friday (about 40 times a year). These meetings are principally open to the members of Angel 100. On these Fridays, a member would invite 10 to 12 people to join the meeting and these people may communicate with each other about an investing deal or an industry opportunity. The second is investor pitching (monthly). Several entrepreneurs are invited to give a presentation during an investment screening meeting, followed by a Q&A session. Interested members can make co-investment intentions and then initiate the due diligence process. By 2017, Angel 100 has made 25 co-investment deals, for a total amount of more than 80 million yuan.  According to the interview, investment performance is very positive:  80 percent of deals with investee companies are meeting or exceeding their expectations after approximately five years of investing. The third is visiting enterprises (about ten visits per year). Initially, members of Angel 100 recommend which start-ups to visit. For each visit, 10 to 15 members would be invited to the enterprise to discuss the development of the potential investee company during the visitation. The fourth is meetings with famous investors (about ten meetings per year). Since all its members are non-professional, they need to learn from professional investors and famous institutional investors (VCs) about their experiences of successful investments. In other words, the activities double as training courses for the members.

Angel 100 continuously develops new business opportunities and services. Hu told us the first Angel 100 Seed Fund was founded in 2016. More than 70 members subscribed with the fund, raising a 30 million yuan investment fund. This fund is legally structured as a typical limited partnership that can co-invest with other group members. By March 2019, the Angel 100 Seed Fund has invested in 13 deals. These portfolio companies have shown consistently positive development, 30 percent of which are likely to exhibit significant growth. In 2017, a series of training and education activities were launched for group members.  An Angel 100 Investment Institute was founded in 2019 and members use case studies to discuss experiences and lessons from their deals. In the first half of 2020, 10 professional committees were founded to focus on different industries and help start-ups become successful. After years of effort, Angel 100 has developed into one of China’s most active and influential AGs. Particularly, the trust among members, the development of powerful industry mentors, and their novel co-investing mechanism are impressive.

Conclusion

Chinese BAs are highly educated, very experienced businessmen and women who are experienced, private equity investors. They form informal institutions by actively networking with other angel investors to find deals for co-investing and together practice a hands-on, value-added post-investment strategy. AGs and BANs have become a generalized global phenomenon (see May and Liu, 2015). Similar formal networking developments are evident in China. Globally and in China, the BA investment ecosystem is evolving from a market characterized by individual investors and informal and invisible groups to formalized syndicates and professional groups that play a positive role in nurturing new BAs and consolidating angel capital to invest in start-ups. 

References

Harrison R., Scheela, W., Lai, P.C. & Vivekarajah, S. 2018. Beyond institutional voids and the middle-income trap: The emerging business angel market in Malaysia. Asia Pacific Journal of Management, 35: 965-991.

Liu, M., Wang, J., & Chen, S. 2017. Angel investing in China. Singapore: World Scientific Press.

Morrissette, S. 2007. A profile of angel investors. Journal of Private Equity, summer: 52-56.

May, J., & Liu, M 2015. Angels without borders: trends and policies shaping angel investment. Singapore:World Scientific Publishing.

OECD, 2011. Financing High-Growth Firms: The Role of Angel Investors.

http://www.oecd.org/sti/ind/financinghigh-growthfirmstheroleofangelinvestors.htm

Scheela, W. 2014. Venture capital in Asia: Investing in emerging countries. New York: Business Expert Press.

Scheela, W. & Isidro. E. 2009. Business angel investing in an emerging Asian economy. Journal of Private Equity, 12: 44-57.

Scheela, W. & Jittrapanun. 2012. Do institutions matter for business angel investors in emerging markets? Venture Capital: An International Journal of Entrepreneurial Finance, 14: 289-308.

Scheela, W., Nguyen, T.T.T. & Nguyen, T.K.A. 2018. Business angel investing in Vietnam: An Exploratory Study. Journal of Private Equity, summer: 1-11.

The State Council, PRC. 2016.Several Opinions of the State Council on Promoting the Sustainable and Sound Development of Venture Capital（国务院关于促进创业投资持续健康发展的若干意见）

Wang, J., Yi T. & Liu, M. 2016. Business angels in China: Characteristics, policies and international comparisons. In H. Landstrom & C. Mason (eds.), Handbook of research on business angels: 201-232. Cheltenham, UK: Edward Elgar.

Wang, J. & Scheela, W. 2020. Profiles of Chinese business angels, in D. Klonowski (ed), Entrepreneurial finance in emerging markets: 213-231. New York: Palgrave Macmillan.

Wang, J. 2020. A Survey on Business Angels Organizations in China（中国天使投资组织调查研究). Pioneering with Science & Technology Monthly（科技创业月刊)，3:56-61

Wechat Official Accounts of Angel 100: tianshibairenhui（天使百人会）

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Xu was born and raised in the FAW. His father, Xu Zuoren, was a founding member and deputy director of the company. Xu Jianyi was born in 1953, the same year that FAW was founded. His father named him Jian (build) Yi (first) after the First Automotive Works. As a “second-generation FAW,” he got promoted quickly through the ranks after starting to work at the company in 1975. Xu spent at FAW for 36 years, his entire working life except for four years when he worked as a mayor in local government. From 2010 to 2015, he was the president and party secretary of the FAW Group. Instead of receiving compliments on Hongqi’s success in the new era, the man who was born to rule FAW was placed under Party detention and investigation in March 2015. He must have wondered where it all went wrong.

The story of Xu Jianji and the automobile maker he helped build is more than an epic tale of rise and fall and personal sacrifice. It is a window into how state-owned enterprises have evolved through the historic upheavals that have marked China from the founding of the People’s Republic until now. This essay then offers a brief introduction to the history of Hongqi from Mao to Xi.

Former chief Hongqi designer Chen Zheng also was swept away by stormy political winds. Inspired by fashionable Italian cars, Chen made the 1962 Hongqi CA72 model slimmer, flatter, and sportier by virtue of exterior design changes. The new look, however, only brought him misfortune. His father, Cheng Ke, had been mayor of Tianjin before 1949.  Cheng Zheng was a car enthusiast and an artist who bought a secondhand motorbike and rode around the countryside, finding inspiration. But his family background helped earn him a conviction for designing a “flat belly car” that was “a vicious attack and mockery of the Great Leap Forward movement and the great famine.” He was also criminalized for being a “hypocritical person living the Western lifestyle.” He and his sample car were paraded through the FAW and subject to public criticism. His wife very publicly divorced him because of the political pressure, and he was sent to the assembly line as a cleaner.

Consecration: Hongqi and FAW from 1956 to 1984

The First Automobile Works was the first major state-owned automotive manufacturing company in China. Its purpose was to manufacture military and industrial trucks. In July 1956, the first Jiefang (Liberation) truck rolled off the assembly lines. Chairman Mao was pleased after the presentation of the truck in Beijing and said, “It would be great if one day we could ride in our Chinese manufactured saloon car to attend meetings.” It was the beginning of the consecration of FAW and the Hongqi model.

In 1957, the Chinese central government ordered FAW to manufacture a saloon model for the national leaders. After collecting information on the most advanced modern luxury saloon cars available in the 1950s, FAW chose to reverse engineer the Simca Vedette and the Mercedes-Benz model 190. The result was China’s first indigenous saloon car; the Dongfeng CA71 manufactured in 1958. The model was named Dongfeng (East Wind) based on the quote from Mao’s speech in Moscow: “The east wind prevails over the west wind.” Initially, the Dongfeng’s nameplate used the Roman alphabet, but Beijing urged FAW to change it to Chinese characters handwritten by Mao and add a company logo to the side of the car written by Mao. In 1958, FAW top managers Rao Bin, Shi Ruji, and Li Lanqing took the Dongfeng CA71 to Beijing to present it outside Huairen Hall, Mao’s residence. All national leaders were summoned to view the car.

During the presentation, Premier Zhou Enlai opened the hood and asked, “I heard this engine is copied from Mercedes-Benz model 190, right?” Shi Ruji answered, “Yes.” Zhou said, “All major automotive brands copy from each other. But we need to do it cleverly, and we have to make some changes; if we copy the engine exactly, they would be unhappy. For example, we can change the shape of the valve chamber cover.”

This was the moment of consecration of FAW and service to Mao directly. The marriage made FAW – and later the Hongqi model – sacred, a political symbol of the state-owned economy. FAW managers, engineers, and workers were not only manufacturing cars, but they are the direct servants of Mao. These were not mere cosmetic honors but actual political assets that had brought personal advancements and tragedies to FAW managers and engineers.

From 1953 to 1956, FAW sent around 500 engineers to the Soviet Union. Many of these engineers were promoted to important positions later on. Two eventually became top party leaders. Li Lanqing served as Vice Premier of China from 1998 to 2003. Jiang Zemin became the Party General Secretary and the President of China from 1989 to 2003. During Jiang’s 15-year presidency, he paid official visits to FAW three times. He often called himself  “an FAW man.” He took countless official photos in the same spot beside Chairman Mao’s handwritten inscription stone of FAW.

Only 30 Dongfeng CA71 model cars were ever manufactured. As a vehicle for Mao himself, the model used the best possible material, such as silk brocade seats, velvet ceilings, wool carpeting, lacquer-wood control panels, carved ivory switches, and cloisonné smoking utensils. However, it was not a reliable car. It broke down frequently. The reverse engineering methods used to make it were crude, reflecting China’s lack of technological and manufacturing knowledge. But the Dongfeng laid the foundation for the development of the Hongqi model. At the height of the Great Leap Forward movement in 1958, FAW announced a plan to build a more luxurious saloon car 90 days after the first Dongfeng CA71 model was manufactured. The idea was to produce a completely new model with better performance and reliability within a month. FAW engineers based the design of Hongqi model on a 1955 Chrysler Imperial bought from the Yugoslav Embassy in China and borrowed from the Jilin Institute of Technology. The most challenging part of making the Hongqi model was reverse-engineering the V8 engine.

Soviet experts had told FAW engineers to give up on the V8 engine design because even the USSR could not produce an eight-cylinder engine in 1958. This inspired FAW managers and engineers, and they set out to prove they could do what the mighty Soviet Union could not. The plan: hand-cast 100 engine blanks based on the Chrysler engine, choose the three best ones and assign each to a team of engineers and craft workers, who labored day and night for two weeks to hammer out a prototype. The best one was picked to put in the experimental CA72-1E model. In August 1958, after 33 days of intense work, the first Hongqi model was manufactured. It was named Hongqi (Red Banner), meaning the car was designed and built “holding the great red banner of Chairman Mao’s Thoughts up high.” Within two months, FAW produced a convertible version of the CA72 model for the 10th national day military parade. These were abnormal model development time frames with unusual methods of production. It was a lavish sacrifice to support Mao’s Great Leap Forward movement.

Engineers at FAW had spent a year testing and upgrading the design of the CA72 based on two other advanced saloon models, the Cadillac Fleetwood and Lincoln Continental. The finalized version was manufactured in August 1959. The design of the CA72 model was classic with strong Chinese elements. The design was a mixture of imperial residuals and Communist political symbols, such as the fan-shaped grille and the Chinese royal lantern-shaped taillight. There were five little red flags representing worker, farmer, merchant, student, and solider on the side of the car. In 1960, FAW designed a three-row CA72 model that carried three little red flags representing the General Path, Great Leap Forward, and People’s Commune, representing Chairman Mao’s three key political philosophies in 1960.

In September 1964, the Hongqi model was declared China’s “National Car.” It became the official vehicle for national events, diplomatic missions, and national leaders. However, the Cultural Revolution severely curtailed the production of Model CA72. Only 206 units were ever produced. In 1965, a new Hongqi CA770 model was designed by Jia Yanliang, who was just 25 years old. It contained a redesigned exterior and engine. The new engine was based on Cadillac V8 engines with two-speed automatic transmissions. Party leaders directly participated in the design of the car to add more luxury features. In 1966, the first 52 units of the Hongqi CA770 model were transported to Beijing and distributed to national leaders with interior colors of their choosing. In 1969, the first Hongqi CA772 bulletproof model was manufactured. The development team was led by Mao Weizhong, from the Central Security Guard Bureau of national leaders. Other team members included military experts in bulletproof armor. The model contained 6mm bulletproof armor, 65mm bulletproof windows, and tires that could run 100 miles after bullet penetration. The car weighed 4.92 tons and was regarded as the safest car in the world in its time. The Hongqi CA772 model earned an infamous part in Chinese history as Chairman Mao’s appointed successor, General Lin Biao, fled in it to the airport in 1971. Bullets fired by guards only scratched the surface of the armor.

It was the height of glory for Hongqi. However, just like CA72 and its designer Cheng Zheng, the sacred status of Hongqi also brought tragedies to its designers. The initial design had three red flags on the side of the CA770 model representing “Mao’s General Line, Great Leap Forward and People’s Commune.” Beijing Mayor Peng Zhen suggested that FAW change it to one big flag representing “Mao Zedong Thought.” During the Cultural Revolution, the single-flag design became the basis for one of Peng Zhen’s criminal charges and evidence that he had attacked “Great Leap Forward and People’s Commune.” Hu Yuyong, the general manager of FAW, and Jia Yanliang himself were publicly criticized for cooperating with the criminal Peng Zhen. Jia was expelled from the position of chief designer of Hongqi until 1972.

The development of Hongqi CA773 model started in 1968. However, the FAW saloon car development team was abolished during the Cultural Revolution, and all engineers were sent to work in the factory as assembly workers. Workers on the assembly line took over the job to develop the Hongqi CA773 model. These barefoot doctors of the factory floor demonstrated the foolishness of favoring “red” over “expert.” The Hongqi CA773 model was in production from 1969 to 1976, but due to various design faults and quality issues, only 291 units were produced in seven years.

Hongqi development resumed in 1972. FAW engineers began designing the CA774 model. The development team was led by Jia Yanliang, the designer of the CA770. The idea was to catch up and overtake the most advanced saloon car in the world. To achieve that, Jia designed four sample models in 1975 with bold changes from previous Hongqi models. The new design was advanced and modern and included the use of arc-shaped side windows to improve aerodynamics. The car body was made of high-strength steel sheets to reduce weight. It was the first time a Chinese automaker had used a modern monocoque body frame design. However, the design conflicted with some functions of the car. The aerodynamic shape was regarded by some officials as lacking in solemn status compared to the old square shape. There were safety concerns about the big, transparent car windows that overexposed passengers and officials rejected the most modern, bold Hongqi CA774 model. The attempt to upgrade the Hongqi failed. Its symbolic and sacred status as Mao’s car prevented its modernization. In 1976, FAW made an unsuccessful attempt to upgrade the Hongqi model by seeking joint development with Porsche. In 1976, Chairman Mao died. The central government ordered FAW to create a vehicle for the Chairman Mao Memorial Hall to carry the Chairman’s corpse in case of an emergency. It was the last Hongqi made for Mao.

The Weakened Hongqi in the 1980s

In 1979, FAW resumed the development of the CA774, with Cheng Zheng came back as the chief designer. After the Cultural Revolution, his design turned conservative, back to a non-bearing body system with reduced window size to comply with the government’s safety requirements. But the central government had lost interest in new Hongqi models, and Cheng’s design was never manufactured. As a highly politicalized symbol that was closely associated with Mao, the sacred status of Hongqi faded temporarily with Mao’s death.

With economic reforms undertaken by Deng Xiaoping, the technology gap between state-owned auto manufacturers and the international automotive industry became apparent. Top Party officials started to complain about the Hongqi. FAW was experiencing huge financial losses. The vehicle had high fuel consumption and poor reliability. There were moments of diplomatic embarrassment when cars broke down after picking up foreign leaders from the airport. The last straw was a serious accident caused by brake failure when the Romanian president was visiting the Great Wall. There were political reasons for Hongqi to fall out of favor, too. Modernization, the market economy, and westernization were the new trends in China. Hongqi was regarded as a symbol of conservative, bureaucratic debris that needed to be reformed. At the time, economic reform was the priority, and after Mao’s death, the glory surrounding the man was deflated.

In 1981, FAW President Rao Bin and the General Manager Li Gang were summoned to Beijing and told of the decision to cease Hongqi production. Rao argued with Premier Zhao Ziyang over the decision in the meeting, saying, “Four people carrying a palanquin is different from 12 people carrying a palanquin. (Palanquins were enclosed sedan chairs in which officials were transported by men holding long poles.) The car is bigger and heavier, so fuel consumption is higher. Fuel consumption of the Hongqi is not much higher and foreign luxury models. The unit production cost is ten times more than a Jiefang truck. The factory is suffering a loss on the Hongqi, but it is for our national leaders, and it is a way for FAW to express our patriotic hearts.” Zhao rudely interrupted him and said, “你别打肿脸充胖子了” (“Don’t slap your face until it’s swollen in an effort to look imposing.”). The harsh Chinese proverb means someone is bragging. Rao then asked, “What about the future of our indigenous saloon cars for leaders?” The one-word reply he received was “importation.” In May 1981, the People’s Daily announced the order to cease production of the Hongqi. It was perceived as a strong signal of economic reform. National leaders started to ride in imported cars. In 1984, China had imported a large number of Toyota Crown models from Japan as official vehicles and Mercedes S-Class for national leaders.

Once Party leaders, the only customers of the Hongqi, decided to abandon it, FAW had only two choices: let the Hongqi disappear or face the mass market. FAW chose the latter. But that required cooperation with major carmakers from around the world. Two years after ceasing production of the Hongqi, the first major automotive international joint venture, Beijing Jeep, was established between American Motors Corporation (AMC) and Beijing Automobile Works (BAW) in Beijing. The Chinese automotive industry had entered a new era.

The Rebuilding of FAW from 1985 to 1995

A strategy of 市场换技术 – “give market access in exchange for technology” – policy emerged in the 1980s. It was proposed by Rao Bin, who was promoted to be Chairman of the China Automotive Company in 1982. He had a clear vision about the future of the Chinese automotive industry:  change the Soviet industry structure and shift resources from heavy industrial/military vehicles to civil passenger cars. Rao wanted the automotive industry to become a pillar of the Chinese economy. As the founder of FAW and SAW, he recognized the technology gap, and encouraged state-owned enterprises to import technology and set up joint ventures with advanced carmakers. He was involved in all the major joint venture negotiations in the 1980s, including the deals for SAIC-VW to manufacture the VW Santana model, Beijing-Jeep-Chrysler to manufacture the Jeep model, and Nanjing Automotive Corporation Group-FIAT to manufacture NAVECO.

Although there was no Hongqi model in production from 1981 to 1996, the development of the Hongqi model never ceased in FAW. Building on the experience of a failed negotiation with Porsche, FAW’s strategy was to develop the model with foreign manufacturers jointly. The goal was to bring advanced foreign technologies to FAW as a foundation to build indigenous models. Lu Fuyuan was the chief negotiator for FAW. In 1982, the company started to hold talks with international carmakers, including Nissan, Ford, Chrysler, and Audi.

Meanwhile, FAW engineers were researching the most popular sedan models of these brands as foundations to build the new Hongqi model. However, the results were counterintuitive and chaotic, as FAW reimagined the Hongqi using reverse engineering methods of the past. In 1982, the model CA750 was patterned on the Nissan 280C, using engines, gearbox, and chassis from the 280C model. In 1984, FAW engineers had installed a Ford 5.8L V8 engine in the CA770 model and redesigned the interior based on Lincoln models. In 1986, FAW engineers developed a new Hongqi model based on the Dodge 600 with Chrysler 488 engines. These three models never went into production because FAW could not reach an agreement with the car companies. Chrysler promised to sell its Dodge 600 production line to FAW in 1987 after FAW bought the Chrysler 488 engine production line. However, the American company increased the price of the Dodge production line, and FAW did not pursue the purchase. FAW was left with a Chrysler engine production line without a means to manufacture a car with it. With no international partners, some engineers in the FAW resumed the effort of redesign the Hongqi model independently. However, their efforts never resulted in production either. These chaotic efforts to build a new Hongqi model reflect the state of FAW of the time. It had lost its totem and was desperately trying to adapt to the new structure of the “profit and efficiency first” world.

FAW managers learned that it was challenging to purchase technologies from international car companies without further collaboration. In 1988, FAW established the FAW-VW with Audi and VW to produce the Audi 100 model through the help of an old comrade of FAW. Jiang Zemin worked at FAW from 1954 to 1962 in the power chain department as an engineer. Shen Yongyan, a close friend and colleague of Jiang, became the Deputy Chairman of FAW in the 1980s.

In 1986, FAW was facing financial difficulties. Geng Shaojie, the president of the company at the time, was discreetly preparing to produce saloon cars. FAW had negotiated with American and German carmakers and was ready for collaboration. Around that time, another Chinese state-owned automaker, SAIC in Shanghai, was working with the VW group to produce the VW Santana. In the summer of 1986, SAIC started to assemble an Audi model using SKD (knock-down kit) technology on the Santana production line. Geng Shaojie heard about this news and urgently ordered Shen Yongyan to go to Shanghai and meet with the then Mayor Jiang Zemin. They planned to negotiate with SAIC to help them meet the target of 65 percent domestic production rate of Santana parts in exchange for SAIC giving up on the production of the Audi model and letting FAW collaborate with Audi. They had the meeting at Jiang’s residence at night. The deputy mayor in charge of the Shanghai automotive industry was summoned by Jiang. Shen explained to Jiang that producing Santanas and Audis were two very different tasks. The factory needed new mold equipment. SAIC could assemble a few units using SKD, but it did not have the capacity to mass-produce Audis. In Germany, Santana and Audi were produced in two factories. FAW had a strong foundation with its rich experience of producing top-class saloon cars, even if the Hongqi production line was closed. If SAIC could leave the Audi production to FAW, FAW could help to manufacture Santana components domestically. This would be beneficial to SAIC and FAW. FAW could get the central government’s support to resume high-class saloon car production in China. Shen was trying to persuade Jiang and to test SAIC’s reaction. Jiang thought for a while and looked around the room and said, “That’s fine.” One year after the meeting, the central government announced FAW and Dongfeng would be the two major manufacturers of saloon cars, the critical task of SAIC was to localize the production of Santana parts. The central government would not approve any new saloon car manufacturers in China.

By the end of 1988, VW informed FAW about the availability of the Westmoreland plant south of Pittsburgh, Pennsylvania. The plant went into operation in April 1978 with an annual production capacity of 300,000 units of VW Golf models. The main plant covered 260,000 square meters and had three production lines, including body welding, painting, and assembly. These production lines and machinery represented advanced technology to FAW. Meanwhile, another Chinese state-owned car factory, SAW Dongfeng, had entered negotiations with other car companies on advanced saloon model production. FAW was in desperate need of securing these production lines from VW. To disguise its desperation, FAW chief negotiator Lu Fuyuan picked just one colleague, Li Guangrong, the deputy chief engineer of foreign relations, to form a modest two-man negotiation team to go to Germany.

Lu Fuyuan was born in a rural farming family. He self-studied English, Japanese, and Russian, as well as radio transmitter technology and computer science as a FAW worker. In his spare time, he translated instruction handbooks for imported machinery. With his excellent language skills and technological knowledge, he discovered faults in some imported machines that failed to perform to the standard in instruction handbooks. He was promoted by the FAW leadership to take charge of negotiations with suppliers and seek compensation. He was later sent by FAW to study computer programming design in Canada. In 1985, Lu was promoted to vice manager of FAW. He was put in charge of managing foreign partnerships, joint venture negotiations, and technology importation. He was constantly traveling between China, Europe, and America, and was called the “Kissinger of FAW,” and represented FAW in all major negotiations with international car companies in the 1980s. His diplomatic skills and persistent qualities were on display in lengthy negotiations, earning him a promotion to the deputy minister of the Ministry of Machine-Building Industry and later to Minister of Commerce in the 1990s.

The negotiations with VW to buy the production lines so they could be dismantled and shipped to China were difficult. Lu was given only $20 million from the central government for the deal, and Volkswagen’s asking price was $39 million. After 21 days of hard negotiations, the parties settled on $25 million. A VW representative told Lu, “We have already dropped our price from $39 million to $25 million. If we sell the factory below that price, it would be shameful for us. But we are still friends, so let’s have dinner before you leave.” During the farewell dinner, everyone relaxed, and Lu overheard two German managers chatting about their concerns about Audi. The company was losing money in Germany, and they were contemplating layoffs. Lu immediately proposed a deal. The Chinese government would import enough Audis to allow the company to break even.  In exchange, VW would give FAW the three production lines at the Westmoreland factory for free. The sides agreed, settling on China importing 14,500 Audi units for three years.

Lu made another clever move. During the celebration dinner after the contract-signing ceremony, he suddenly realized that dismantling the plant would create industrial waste. He convinced the VW representative that the German company should pay to dispose of the waste, and asked the VW representative to sign the terms on a napkin.

Lu then traveled from Germany to the U.S.  He urgently summoned all FAW trainees to guard the Westmoreland factory gate. He told the Americans on-site that, “Everything inside this factory belongs to FAW now.” After dismantling the production lines, VW representatives came to Lu to negotiate the waste charges. Lu showed them the napkin proving that VW had agreed to pay all costs related to the waste.

Lu insisted that VW representatives in Pennsylvania reopen the production lines to prove they still worked. But his real motive was to allow FAW workers to observe how the production lines worked and avoid paying VW hefty training fees. FAW had sent more than 100 Chinese engineers to the U.S. to dismantle the production lines so they could be put it back together in China. In the contract, Lu insisted on adding an unambiguous term that FAW would own “everything, except people” in the plant. When he first visited the factory, 12 cars were parked in the factory parking lot. Lu wanted to keep those cars, but the Americans on-site strongly objected. He showed the VW representatives the contract, and they finally agreed to split the 12 vehicles. The six cars that Lu secured played an important part in transporting equipment and machinery. A few of them were even transported back to FAW with the production line. Until 2009, the factory producing VW Jetta models for FAW was still using the 64 robots purchased from the Westmoreland plant. The three production lines from the Westmoreland plant became the foundation of FAW-VW.

Hongqi in the Joint Venture Era 1995 – 2005

The Hongqi model had finally resumed production in 1996, 10 years after production ceased. The initial design for the new CA7220 model was completed in 1988, based on the Audi 100 and Chrysler 488 engine. It took four years for FAW engineers to fit the Chrysler engine into the Audi 100 body. Engineers spent another four years ramping up manufacturing of Audi 100 components in FAW factories. In 1996, 90 percent of Audi 100 components were being produced domestically, and FAW could finally begin making the Hongqi CA7220. It became the most successful Hongqi model in history. FAW secured 6.6 billion RMB in profit on the model from 1996 to 2006. Its commercial success was partly based on the Hongqi brand value. The CA7220 was the first Hongqi model that regional governments, organizations, state-owned businesses, and even private individuals could buy. The model was seen as a cheaper version of the Audi 100. It was manufactured in the FAW-VW factory with the still strong status of the Hongqi name.

In 1998, the next Hongqi model CA7460 was established for the luxury car market. Developed jointly by FAW and Ford, the model was identical to the Lincoln Town Car. All components were imported from Ford USA. It was assembled in the FAW factory and powered by the Ford 4.6, V8 engine.

The model rolled out in 2000 and was a total market failure. FAW sold fewer than 100 units that year, and the model was taken out of the mass production plan and was made only for special orders. This was just the beginning of chaotic development for the Hongqi.

In 1998, FAW launched an updated model of the CA7220 named Hongqi Mingshi with more advanced features such as ABS, airbags, steering assistance, and central locking. The new CA7220 boasted of a FAW developed engine, the CA4GE, based on the Chrysler 488 engine. In 2004, the Hongqi Century Star model was launched, powered by an Audi 2.4L V6 engine. In 2005, a new Hongqi Mingshi was launched, powered by the Nissan QG18 engine. In 2005, the Hongqi HQ3 rolled out, based on the Toyota Crown Majesta. All of these models failed in the market. Customers were confused. The only connection among these models was the Hongqi badge. The market reputation of the Hongqi brand was tarnished.

From 1983 to 2005, FAW tried to keep the Hongqi afloat, but the company’s strategy had not changed since the 1950s. It was based on seeking direct technology importation from international car companies and reverse engineering existing models. With the failures in model design and inconsistencies in market positioning, the Hongqi brand lost identity and direction. FAW meanwhile was focusing management attention on establishing profitable joint ventures. During the period, FAW went from near bankruptcy to profitability and success, notwithstanding the drag the Hongqi placed on the company.

Hongqi 2005 – Present

Hongqi sales collapsed. In 2004, only 14,525 Hongqi units were sold. By 2008, the number dwindled to less than 500 units. The company kept trying, however. In 2008, FAW discontinued the Century Star and the Mingshi but developed a V12, CA12GV engine model for the Hongqi HQE. The company priced the car at eight million RMB in 2009. The exterior design was identical to the Rolls Royce Phantom, with a price tag even higher. The Chinese state media heavily criticized this staggering price. FAW also brought out a new HQ3 model for select orders only.

The company used the HQE’s engine design to develop V8 and V6 engine models and an automatic gearbox. But no Hongqi model was available for those engines. Hongqi’s myriad problems seemingly proved a famous statement in 2000, by FAW president Zhu Yanfeng about Chinese brands needing to endure loneliness for 20 years. Zhu led FAW to become a profitable, self-sufficient business based on forging joint ventures.

In 2010, Xu Jianyi returned to FAW to succeed Zhu as the president. He said FAW would develop indigenous models at all costs. The Hongqi models entered a new era.

From 2010 to 2015, FAW spent around 32.84 billion RMB on R&D to develop just two FAW models, the Hongqi L5 and H7 – money deployed from profitable joint ventures. In 2011, FAW announced that a development team of 1,600 FAW employees was formed to develop Hongqi models. The new models were aimed at the government car market. The L5 model was priced at 5 million RMB for the private market. The safety features were designed to match the U.S. President’s Cadillac. The car had anti-rocket armor, chemical and biological weapons protection, and bulletproof tires. The V12 engine could enable the car to quickly escape any dangerous scenario. There also were Chinese elements, including a jade door handle. The headrests were fashioned to look like an emperor’s dragon chair. But only 21 units were sold from 2013. The Hongqi H7 was priced much lower: 450,000 RMB. However, with new Party leadership and revised government regulations, fewer than 5,000 units of the H7 were sold in 2015.

The L5 served a diplomatic purpose. In 2013, the car was used to transport French President Francois Hollande during a state visit to China. The deployment of the car symbolically harkened back to the 1960s, when the Hongqi’s first official use to carry the visiting president of France. In 2014, the L5 was the state car for the 22nd APEC meeting.

Hongqi’s more recent fortunes have very much reflected Xi Jinping’s anti-corruption campaigns. In 2012, FAW invested 24 million RMB to build a 600-square meter flagship dealership called the “Red House” in Beijing next to the dealerships of Rolls Royce, Bentley, and Aston Martin. From 2012 to 2014, Hongqi opened luxury dealerships in nine major cities in China. In 2014, Zhang Xiaojun, CEO of the FAW passenger car sales department, told the press that only when Hongqi is successful in the private car market will FAW consider itself a real success. Not only did Hongqi flop in the market, in 2015, Zhang was arrested on corruption charges. From 2013 to 2015, a total of 80 FAW managers were arrested on corruption charges.

In 2017 Xu Liuping, the president of the state-owned China South Industries Group Corporation, a core national-defense group, was named president of FAW. He made Hongqi his top mission of reviving FAW. The result of his effort is yet to be seen.

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The history of Shanghai and of its Jewish community, in particular, are among the most exhaustively researched topics in modern Chinese and modern Jewish history, with a vast amount of literature in Chinese, Hebrew, Yiddish, Japanese, Russian, German, English, and other languages. The late Hebrew University Sinologist Irene Eber, New York’s David Kranzler, Illinois College’s Steve Hochstadt, and many other scholars have made Shanghai Jewry a major research focus. Is there anything left to be said? Do any major historical questions remain unanswered?  I would suggest there are at least four such questions. They concern Jewish participation in the China opium trade, the perception of Shanghai Jews as Communists, the predicament of many Russian Jews left in China after 1949, and the history of Chinese-Jewish mixed marriages and miscegenation. I will consider these questions in roughly chronological order.

The economics of the trade have been extensively analyzed by Carl Trocki. We are left with the unresolved question of how Jewish opium traders reconciled their business ethics with broader criticisms of the day.  An anti-opium movement coincided with popular agitation against slavery, which, like opium, was an immoral but wholly legal activity in most parts of the world.  How did Jews respond to criticism of their participation in this physically and socially destructive business?  Did they remain silent and conduct business as usual? Contemporary Jewry needs to come to grips with its associations with the China opium trade much in the way the contemporary United States is in the process of reconciling its historical associations with slavery.

While Jews as a whole did not generally assimilate into Chinese society, some Jews did intermarry, produce mixed-race offspring, and/or adopt ethnically Chinese children. There are some well-known examples.  Israeli Aluf (Vice Admiral) Eliezer (Eli) Marom (“Chayni”) (Hebrew: אליעזר “אלי” מרום “צ’ייני”), was the Commander of the Israeli Navy in the years 2007–2011. As of 2015 he served as the head of the Israel Airports Authority. His brother Moshe Marom was also a senior officer, a rear admiral, in the Israeli Navy. Their father Erik was a German-born Jew and their mother Leah (originally Chai Li) was born in China, the daughter of a Russian-Jewish woman and a Chinese man who had converted to Judaism. Their parents met when their father escaped to China as a refugee from Europe during World War II. Lev Shickman was twice married to Chinese women and had three mixed-race offspring. But what about the history of lesser-known mixed-race offspring?

Impoverished Jewish prostitutes in Shanghai were available to Chinese men, and vice-versa, and there presumably were mixed-race offspring from these liaisons. Bitter poverty must have driven these women to prostitution, as well as the fact that this profession was so prominent and public in Shanghai. George Sokolsky broke a social taboo by marrying a woman of mixed Caribbean-Chinese blood. The Baghdadi Jewish immigrant Silas Hardoon had a Chinese wife and several adopted ethnic Chinese as well as Jewish children. Israel Epstein and his Caucasian wife Elsie Fairfax-Cholmeley (1905-84) adopted two ethnically Chinese children. After Elsie’s death, Epstein, like Sokolsky, Hardoon, and the American-born Jew and Chinese immigrant Sidney Shapiro, married ethnically Chinese women.

The Jewish immigrant to China and his or her Eurasian offspring or adopted children, while a vital part of the Jewish experience, are beyond the scope of extant literature, with two exceptions. There is a single vignette in Yiddish by Joseph Fiszman, a Polish immigrant active in Der Algemeyner Yidisher Arbeter Bund in Lite, Poyln, un Rusland, commonly referred to as “The Bund.” The German play Fremde Erde (foreign soil), deals with a German refugee woman’s relations with a Chinese man. Beyond these two accounts, what was the history of Chinese-Jewish marriages and liaisons and that of their mixed-race offspring and adoptees?

By way of conclusion, I am not suggesting that these are the only unresolved questions that emerge from a century-and-a-half of Shanghai Jewish history and historical writing.  I am only proposing items for a future research agenda, alongside other issues suggested by other historians. By considering these questions, we will not be wasting valuable time, effort, and resources attacking problems that have already been resolved. We will thereby avoid the pitfall of reinventing the wheel.

Editor’s note: This is the text of a lecture prepared for delivery at the international symposium sponsored by the Shanghai Jewish Refugees Museum, October 23, 2019.

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