Why Elon Musk's Twitter takeover may benefit China

·3 min read
Elon Musk.
Tesla is the first foreign automaker to open an independent factory in China, called Gigafactory 3, in 2019. (Source: Reuters)

Elon Musk and China share a mutually beneficial yet complicated business relationship.

Following the billionaire's takeover of Twitter, concerns over how the Musk-China bond might benefit the country started to grow louder.

For example, Tesla's vast operations in China could complicate Musk's plans to make Twitter a hub for free speech.

Former Amazon CEO Jeff Bezos questioned whether China would rely on Musk’s Tesla business to thwart criticism of Beijing on Twitter.

These apprehensions are not entirely unfounded as there is a possibility that China might leverage the business relationship with Musk to influence how it is represented online, which Twitter is a significant part.

Why China is important to Musk

While Twitter is banned in China the country is critical to Tesla as it is a key source of Musk's wealth.

Tesla became the first foreign automaker to open an independent factory in China, called Gigafactory 3, in 2019.

The Chinese government welcomed Tesla in Shanghai and provided Musk with cheap land, loans, tax breaks and subsidies worth billions of dollars.

Chinese banks have loaned the company approximately $1.4 billion to fund the project. Tesla also secured a $1.8 billion investment from Tencent, one of China’s largest tech companies.

It has also benefited from significant tax breaks in setting up the Shanghai facility, which is its first overseas plant.

The company has been reaping lucrative benefits with a quarter of the revenue in 2021 coming from China.

Shanghai recently chose Tesla as one of the 600 businesses that could be reopened during a COVID lockdown in the city, according to NBC News.

China is not only Tesla’s second-largest market in terms of sales but it is also responsible for producing nearly half of Tesla's vehicles.

There is a fear that if China were to pressure Musk to filter how it is being portrayed on Twitter, or if the Chinese government tries to peddle its own propaganda or misinformation, then Musk might be in a tight spot.

Tesla Model 3 cars.
In 2018, when the US tightened technology exports to China, President Xi pledged to make China the world’s future innovation and industrial center. (Source: Getty)

Why Musk is important to China

China's ambitions of becoming the world's future innovation and industrial centre were thrown off course in 2018 when the US tightened technology exports to China.

In the wake of this move, Chinese President Xi Jinping took a different approach and allowed foreign companies sole ownership of auto ventures, with Tesla being the first to wholly own its local operations.

Elon Musk operates Tesla in China within the confines of Chinese laws and under the scrutiny of Chinese authorities.

The government of China has a reputation for making it difficult for companies that don't tow its political lines.

With Tesla at the helm, China's bargaining power with Musk could be stronger and subsequently its intentions of spreading information or misinformation through Twitter might grow.

Tesla, which has until now been favoured by President Xi, has been facing an increasingly tough business environment in China.

It has earned the wrath of domestic rivals who believe Tesla has been given preferential treatment.

The country has been pressurising foreign companies to adhere to its stringent policy on data security on account of which Tesla might be forced to seek permission of authorities before updating certain software on cars in China.

To earn brownie points, Musk has been singing praises of China’s ruling Communist Party and this is a weakness China might try to capitalise on unless Twitter puts stringent rules in place applicable globally which again might cripple Musk's intention of effecting 'democracy in town square'.

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