China’s Message to America: We’re an Equal Now

It quickly became obvious in Anchorage, Alaska, last month that Chinese President Xi Jinping’s diplomatic envoys hadn’t come carrying olive branches. Instead they brought a new world view.

As Biden administration officials expected in their first meeting with Chinese counterparts, Yang Jiechi, Mr. Xi’s top foreign-policy aide, and Foreign Minister Wang Yi asked them to roll back Trump-era policies targeting China. Beijing wanted to restore the kind of recurring “dialogue” Washington sees as a waste of time, say U.S. and Chinese officials briefed on the Alaska meeting.

Mr. Yang also delivered a surprise: a 16-minute lecture about America’s racial problems and democratic failings. The objective, say Chinese officials, was to make clear that Beijing sees itself as an equal of the U.S. He also warned Washington against challenging China over a mission Beijing views as sacred—the eventual reunification with Taiwan.

That is a big shift for Chinese leaders, who for decades took care not to challenge the U.S. as the world’s leader and followed the dictum Deng Xiaoping set decades ago: “Keep a low profile and bide your time.” Some senior Chinese officials privately—often sarcastically—called the U.S. Lao Da, or Big Boss.

Now Mr. Xi is reshaping the relationship. As far as he is concerned, China’s time has arrived.

“China can already look at the world on an equal level,” he told the annual legislative sessions in Beijing in early March, a remark widely interpreted in Chinese media as a declaration that China no longer looks up to the U.S.

The U.S. routinely describes China as a strategic rival, but Beijing has rarely if ever used such terms, emphasizing terms like “win-win” and cooperation.

“One of the more obvious changes in China’s attitude is that China now recognizes the existence of competition, which was never expressed in the past,” says Wang Huiyao, an adviser to China’s State Council and president of the Center for China and Globalization, a Beijing think tank.

The increasingly contentious relationship has created competition for allies, with American diplomats jetting to Japan, South Korea and Western Europe, while Chinese equivalents sew up deals in Southeast Asia, Russia and Iran.

Competitive relationship

Mr. Yang’s warning in Alaska on Taiwan reunification is an ominous inkling of how a competitive relationship between the world powers could lead to conflict.

The U.S. is committed to helping Taiwan preserve its autonomy under pledges including the 1979 Taiwan Relations Act, and the Biden team trumpets its plans to strengthen economic and political links to Taipei. Mr. Xi has made reunification with Taiwan, which Beijing regards as a breakaway province, a big part of his “China Dream” of national revival.

China’s Foreign Ministry says of Mr. Yang’s Anchorage warning: “The Chinese side pointed out that the Taiwan issue is related to China’s sovereignty and territorial integrity and China’s core interests.” It adds that “There is no room for compromise.”

There is little sign of imminent Chinese actions to take back the island, though there have been plenty of symbolic gestures. Soon after the Alaska meetings, Mr. Xi inspected Fujian province, across the strait from Taiwan. Chinese aeroplanes in recent weeks have stepped up incursions into Taiwan’s air-defense zone.

Days after the Alaska encounter, the White House’s China coordinator, Kurt Campbell, told a private conference hosted by the University of California at San Diego that Beijing had become “impatient” at the pace of reunification, according to participants.

Adm. Phil Davidson, who heads the U.S. Indo-Pacific Command, warned the Senate Armed Services Committee earlier in March that China could try to take control of Taiwan by decade’s end, perhaps in as little as six years. China might act rashly, says a senior U.S. official, because of an exaggerated belief that the U.S. is a declining power.

Relations between the countries plummeted during the Trump administration. After both sides fought a two-year trade war to a wary truce, the U.S. president blamed Beijing for unleashing the coronavirus. China rejected the charges and labelled Secretary of State Mike Pompeo a “doomsday clown.”

After Mr. Biden’s election, academics and officials in Beijing reached out to American contacts to try to figure out whether the new administration would change course. They were quickly discouraged.

Even before Mr. Biden took office, Chinese diplomats sought to schedule a high-level meeting between the two sides, people close to the matter say. Biden officials never approved the request and instead repeatedly talked about working with allies to confront China.

China’s concerns were reinforced in January, when Mr. Biden’s choice for secretary of state, Antony Blinken, used his confirmation hearing to declare that China had committed genocide against Uyghur Muslims in the northwestern region of Xinjiang. China has called the charge “the lie of the century.”

The Biden team shares its predecessor’s view of China as America’s greatest military, technological and economic challenger. From the new administration’s perspective, Chinese provocations never ceased. Beijing cut off imports from Australia over its call for an investigation into the origins of the coronavirus, skirmished with India over the countries’ Himalayan border and sought to intimidate Philippines and Vietnam ships in the South China Sea.

Beijing, as Chinese officials put it, sought to “duo hui hua yu quan,” or take back the narrative. China’s diplomats and state-media outlets aggressively denounced Western meddling in its domestic affairs and heralded China’s rise.

Before the Alaska meeting on March 18 and 19, the U.S. signaled a muscular approach. President Biden met online with the leaders of India, Australia and Japan. Mr. Blinken and Jake Sullivan, the national-security adviser, flew to Tokyo and Seoul to confer with security counterparts and insisted that Messrs. Yang and Wang fly to Alaska for the U.S.-China session rather than meeting in Asia. A day before the Anchorage meeting, the U.S. expanded sanctions against two dozen Chinese officials over the repression of Hong Kong’s pro-democracy protesters.

Some U.S. foreign-policy experts thought the Americans went overboard, including Jeffrey Bader, a senior China official in the Clinton and Obama administrations, now a senior fellow at the Brookings Institution. “The more you assert you’re not a declining power,” he says, “the less convincing you are.”

With cameras rolling in Anchorage, Mr. Blinken briefly criticized China’s actions in Hong Kong and Xinjiang and threats against Taiwan. Mr. Yang, a member of the Communist Party’s ruling Politburo, gave his blistering 16-minute rejoinder, which the Chinese officials say was meant to show China’s new world view.

After rattling off his country’s achievements under Mr. Xi, he said China wouldn’t follow “what is advocated by a small number of countries as the so-called rule-based international order.” He criticized the U.S. as having “deep-seated” human-rights problems and declared that “the U.S. itself doesn’t represent international public opinion.”

After the doors closed, say the officials briefed on the meeting, the Chinese laid out the differences between the nations in three categories. The first category was what could be dealt with fairly easily.

The second would require more negotiations. Issues involving both sides relaxing restrictions on diplomats and journalists belong to the first two groups.

The third category, largely concerning China’s sovereignty, was off limits.

On the second day, the diplomats addressed Taiwan. Control of the island has been a Communist Party goal since Mao Zedong’s forces drove Chiang Kai-shek’s Nationalist government there in 1949.

As he turned to the West after Mao’s death, Deng made clear that reunification could wait while China focused on developing its economy. For Mr. Xi, the wait is wearing thin. As Mr. Xi heads for an unprecedented third term as China’s leader late next year, his talk of national revival has broad support. There is little that would cement his legacy more forcefully than bringing the island back into Beijing’s fold, China watchers say.

In Anchorage, the U.S. reaffirmed its adherence to the “One China” policy, under which Washington agrees not to recognize Taiwan as an independent nation, but also reiterated pledges to help Taiwan economically and militarily.

“The Chinese are concerned about a slippery slope of Biden doing more and more on Taiwan,” says Bonnie Glaser, a China analyst at the Center for Strategic and International Studies. “They are using their ever-expanding tool kit to put pressure on Taiwan and signal the U.S. it better be careful.”

Sharp departure

Beamed back to China, Mr. Yang’s lecturing made him a national hero. It also represented a sharp departure from the policy of cooperation with the U.S. that Deng had adopted shortly after the two countries established diplomatic ties. “As we look back, we find that all of those countries that are with the U.S. have become rich,” Deng told aides in 1979, according to official accounts, “while all of those against the U.S. have remained poor. We should be with the U.S.”

That principle guided his successors. Jiang Zemin pushed through Beijing’s negotiations with Washington to get China into the global trading system in 2001. He wooed American and other CEOs to showcase the country’s greater opening to the world. The next leader, Hu Jintao, went further in following the U.S. lead. During the 2008 financial crisis, Mr. Hu signed up to a plan laid out by President George W. Bush to stimulate the Chinese economy to help lift the world from recession.

Mr. Xi started his reign on a similar path. His “China Dream” slogan nodded to the appeal of the American Dream. In late 2017, he entertained President Donald Trump at a private dinner in the Forbidden City, despite Mr. Trump’s threats to punish China.

“We have a thousand reasons to get the China-U.S. relationship right,” he regularly told Chinese underlings and foreign visitors, “and not one reason to spoil it.”

But as the Trump administration piled tariffs on Chinese imports and blacklisted major Chinese companies, which it argued were stealing U.S. intellectual property and helping to build up the Chinese military, Mr. Xi soured. From his perspective, the U.S. had become an unreliable partner, and he worked to make China less reliant on America, especially on technology.

In Beijing’s corridors of power, Mr. Trump was derisively known as “a great unifier”—America’s aggressive actions were unifying support in China for the party and Mr. Xi.

America’s chaotic pandemic response, followed by a summer of racial upheaval and the Jan. 6 Capitol storming, solidified his faith in the Chinese system’s superiority, Chinese officials say. In internal meetings, they say, he compares American democracy to “a sheet of loose sand” and declares that the one-party system allows him to get things done.

With Mr. Biden in the White House, China has continued a hard-line approach, signalling that companies not following Beijing’s rules will lose access to the Chinese market. Swedish clothing brand Hennes & Mauritz AB recently met with a strong social-media rage and consumer boycott in China over its stance against sourcing cotton from Xinjiang. Chinese authorities have restricted military personnel and employees of certain state-owned companies from using electric vehicles made by America’s Tesla Inc., citing national-security risks including concerns about the cars’ cameras. H&M declined to comment. Tesla, which didn’t respond to requests for comment, said last week that its cameras aren’t activated outside North America.

“Nobody has forced them to stay in China,” Mr. Yang said in Anchorage, regarding U.S. companies doing business in China.

Search for allies

Since the Alaska meeting, the competition has played out in a search for allies. Within a week, Mr. Blinken organized joint condemnation of China’s Xinjiang policy with Canada, the European Union and the U.K., which included the first EU human-rights sanctions on China since the 1989 crackdown on Tiananmen Square protesters.

Even Japan, typically wary of angering China, its largest trading partner, appears to be tying itself more tightly to the U.S. Last week ahead of a trip by Prime Minister Yoshide Suga to Washington for an April 16 summit with Mr. Biden, Foreign Minister Toshimitsu Motegi called on Beijing to improve human rights conditions for Uyghurs and stop the Hong Kong crackdown.

Mr. Wang, the foreign minister, met his Russian peer in late March, prompting the nationalist Chinese newspaper Global Times to headline, “China, Russia to break US hold on ‘world order.’ ” Then he travelled to the Middle East and signed a wide-ranging economic and security agreement with Iran.

Countries like India are trying to avoid getting caught between the two sides. Mr. Biden’s plan to hold a Summit for Democracy will sharpen the divide.

China retaliated against the EU sanctions by blacklisting European lawmakers and think tanks, although that might make the EU parliament’s ratification of a pending investment treaty with China more difficult.

“It’s a high-stakes gamble for the Chinese,” says Daniel Russel, a former Obama China official, now a vice president at the Asia Society Policy Institute, a think tank. “But it’s not a gamble they are certain to lose.”

For nearly a decade, workers in a warehouse in Seattle’s Denny Triangle neighbourhood have shipped boxes of shoes, beach chairs, Marvel T-shirts and other items to online retail customers across the U.S.

The operation, called Big River Services International, sells around $1 million a year of goods through e-commerce marketplaces including eBay , Shopify , Walmart and Amazon .com under brand names such as Rapid Cascade and Svea Bliss. “We are entrepreneurs, thinkers, marketers and creators,” Big River says on its website. “We have a passion for customers and aren’t afraid to experiment.”

What the website doesn’t say is that Big River is an arm of Amazon that surreptitiously gathers intelligence on the tech giant’s competitors.

Born out of a 2015 plan code named “Project Curiosity,” Big River uses its sales across multiple countries to obtain pricing data, logistics information and other details about rival e-commerce marketplaces, logistics operations and payments services, according to people familiar with Big River and corporate documents viewed by The Wall Street Journal. The team then shared that information with Amazon to incorporate into decisions about its own business.

Amazon is the largest U.S. e-commerce company , accounting for nearly 40% of all online goods sold in the U.S., according to research firm eMarketer. It often says that it pays little attention to competitors , instead focusing all its energies on being “customer obsessed.” It is currently battling antitrust charges brought last year by the U.S. Federal Trade Commission and 17 states, which accused Amazon of a range of behaviour that harms sellers on its marketplace, including using anti-discounting measures that punished merchants for offering lower prices elsewhere.

Workers filled orders at an Amazon fulfillment center in Garner, N.C., in 2021. PHOTO: JEREMY M. LANGE FOR THE WALL STREET JOURNAL

The story of Big River offers new insight into Amazon’s elaborate efforts to stay ahead of rivals. Team members attended their rivals’ seller conferences and met with competitors identifying themselves only as employees of Big River Services, instead of disclosing that they worked for Amazon.

They were given non-Amazon email addresses to use externally—in emails with people at Amazon, they used Amazon email addresses—and took other extraordinary measures to keep the project secret. They disseminated their reports to Amazon executives using printed, numbered copies rather than email. Those who worked on the project weren’t even supposed to discuss the relationship internally with most teams at Amazon.

An internal crisis-management paper gave advice on what to say if discovered. The response to questions should be: “We make a variety of products available to customers through a number of subsidiaries and online channels.” In conversations, in the event of a leak they were told to focus on the group being formed to improve the seller experience on Amazon, and say that such research is normal, according to people familiar with the discussions.

Senior Amazon executives, including Doug Herrington , Amazon’s current CEO of Worldwide Amazon Stores, were regularly briefed on the Project Curiosity team’s work, according to one of the people familiar with Big River.

Some aspects were more Maxwell Smart than James Bond. The Big River website contains a glaring typo, and a so-called Japanese streetwear brand that the team concocted lists a Seattle address on its contacts page. Big River’s team members list Amazon as their employer on LinkedIn—potentially blowing their cover.

The LinkedIn page of Max Kless, a former eBay executive who led Big River in Germany before moving to a senior role on the team in the U.S., says that he “developed and led a research subsidiary for Amazon in Germany that prototyped and researched new experiences for Small Business sellers and developers.” Kless didn’t respond to requests for comment.

“Benchmarking is a common practice in business. Amazon, like many other retailers, has benchmarking and customer experience teams that conduct research into the experiences of customers, including our selling partners, in order to improve their experiences working with us,” an Amazon spokeswoman said. Amazon believes its rivals also carry out research on Amazon by selling on Amazon’s site, she said.

Focus on Walmart

Virtually all companies research their competitors, reading public documents for information, buying their products or shopping their stores. Lawyers say there is a difference between such corporate intelligence gathering of publicly available information, and what is known as corporate or industrial espionage.

Companies can get into legal trouble for actions such as hiring a rival’s former employee to obtain trade secrets or hacking a rival. Misrepresenting themselves to competitors to gain proprietary information can lead to suits on trade secret misappropriation, said Elizabeth Rowe, a professor at the University of Virginia School of Law who specialises in trade secret law.

Amazon for years has had what it calls a benchmarking team that sizes up rivals to ensure the best experience for people who shop on its site. The team has placed orders on websites such as Walmart.com for delivery around the U.S. to test things such as how long it takes competitors to ship. Other companies also have teams to compare themselves to rivals.

In late 2015, Amazon’s benchmarking team proposed a different sort of project. The business of hosting other merchants to sell their products on Amazon’s platform was becoming increasingly important. So-called third-party sellers on Amazon’s Marketplace, which the company started in 2000, surpassed half of the company’s total merchandise sales that year, and rival retailers had started similar marketplaces.

Amazon wanted to better understand and improve the experiences of those outside vendors. The team decided to create some brands to sell on Amazon to see what the pain points were for sellers—and to sell items on rival marketplaces to compare the experiences, according to the people familiar with the effort.

The benchmarking team pitched “Project Curiosity” to senior management and got the approval to buy inventory, use a shell company and find warehouses in the U.S., Germany, England, India and Japan so they could pose as sellers on competitors’ websites.

The benchmarking team reported into the chief financial officer, Brian Olsavsky , for years, but this year changed to report to Herrington, the consumer chief. Olsavsky and Herrington didn’t respond to requests for comment made through Amazon.

Once launched, the focus of the project quickly started shifting to gathering information about rivals, the people said.

In the U.S., the Big River team started by scooping up merchandise from Seattle retailers holding “going out of business” sales. Some of its first products were Saucony sneakers from a local retailer that was closing. The company registered for a licensing agreement with the popular Marvel superhero franchise to sell Marvel-branded items, and bought items including Tommy Bahama beach chairs from Costco to resell.

In the pitch, Project Curiosity leaders identified online marketplaces that they wanted to sell on, including Best Buy and Overstock.

The top goal was Walmart, Amazon’s biggest rival. But Walmart had a high bar for sellers on its marketplace, accepting only vendors who sold large volumes on other marketplaces first. Big River initially couldn’t qualify to be a Walmart Marketplace seller, but it did sell on Jet.com, which Walmart acquired in 2016 and later closed in 2020. And in India, it sold on Flipkart, the giant Indian e-commerce marketplace in which Walmart owned a majority stake.

In order to meet Walmart’s revenue threshold, the Big River team focused on pumping products through Amazon.com to bolster its overall revenue, some of the people said. Big River’s goal wasn’t to do massive amounts of volume on the competing platforms, but to simply get on them and gain access, they said.

The Amazon spokeswoman said that in 2023, 69% of Big River revenue worldwide was on Amazon.com.

In 2019, Big River finally got onto Walmart’s website. This month, Big River had around 15 products listed on Walmart.com under the seller name Atlantic Lot, including Tommy Bahama beach chairs, cooking woks and industrial-size food containers. In 2023, Big River had more than $125,000 in revenue on Walmart.com alone, according to a person familiar with the matter.

Walmart wasn’t aware that Amazon ran the seller accounts on the Walmart and Flipkart sites before the Journal told it, according to a person familiar with the matter.

Rivals’ logistics services

Atlantic Lot is listed as a “Pro Seller”—a distinction Walmart says is for “top-performing Walmart Marketplace sellers.” Listings show that Walmart Logistics, another Amazon rival, handles storage and shipping for it.

Amazon at the time also was building up its logistics business to store and ship items for sellers for a fee to compete with FedEx and United Parcel Service . The business has boomed over the past decade. Amazon’s total revenue from what it calls third-party seller services has grown nearly twelvefold since 2014 to $140 billion last year, accounting for nearly a quarter of Amazon’s total.

To get information about rival logistics services, the Big River team stored inventory with companies including FedEx. Other targets, according to an internal document, included UPS, DHL, Deliverr and German logistics company Linther Spedition.

FedEx in 2017 launched FedEx Fulfillment, a competitor to Fulfillment by Amazon, for offering logistics to sellers. Big River was accepted into the FedEx Fulfillment program as an early customer, and the team received early details about pricing, rate cards and other terms as a result of the partnership, according to the people. FedEx had several phone calls and email exchanges with Big River team members who represented themselves as Big River employees and didn’t disclose their employment at Amazon, according to some of the people.

The team presented its findings from being part of the FedEx program to senior Amazon logistics leaders. They used the code name “OnTime Inc.” to refer to FedEx. Amazon made changes to its Fulfillment by Amazon service to make it more competitive with FedEx’s new product as a result of the information it learned from the partnership, according to one of the people.

For such meetings, the team avoided distributing presentations electronically to Amazon executives. Instead, they printed the presentations and numbered the documents. Executives could look at the reports and take notes, but at the end of the meeting, team members collected the papers to ensure that they had all copies, the people said.

Big River became a customer of FedEx’s fulfillment program, a competitor to Fulfillment by Amazon. Above, a FedEx facility in Queens, New York. PHOTO: GABBY JONES FOR THE WALL STREET JOURNAL

Amazon took other measures to hide the connection with Big River. Staffers were instructed to use their second, non-Amazon email address—which had the domain @bigriverintl.com—when emailing other platforms to avoid outing their Amazon employment.

“We were encouraged to work off the grid as much as possible,” said one of the former team members, about using the outside email.

Amazon’s internal lawyers reminded Big River team members not to disclose their connection to Amazon in their conversations with FedEx, according to an email viewed by the Journal.

Staffers, who worked in private areas of Amazon offices, were told not to discuss their work with other Amazon employees who weren’t cleared to know about the project. In the early days, some Big River team members had to take time away from their Amazon desk jobs to go to the warehouses to fulfill orders and pack them in boxes to send out.

When gaining access to rival seller systems, Big River members were instructed to take screenshots of competitor pricing, ad systems, cataloging and listing pages, according to the people. They weren’t allowed to email the screenshots to Amazon employees, but instead showed the screenshots to the Amazon employees on the Marketplace side of the business in person so they didn’t create a paper trail, some of the people said. Amazon then made changes it believed improved the seller experience on its site based on the information.

The Amazon spokeswoman said the team was secretive so that it wouldn’t get any special treatment as a seller on Amazon.com.

Still, there were telltales. Registration documents filed with the Washington Office of the Secretary of State for Big River Services, while not mentioning Amazon, list a management team made up of current and former Amazon employees, including lawyers. The management team lists its address as 410 Terry Ave. in Seattle, which is Amazon’s headquarters.

Corporate filings for Big River in the United Kingdom and other foreign countries also named officials who are senior Amazon employees and lawyers. In one U.K. disclosure, Amazon is named as owning more than 75% of the company.

Amazon officials felt confident that competitors wouldn’t look up filings to see who was behind the company, some of the people said.

A Las Vegas conference

Some team members were uncomfortable with the work they were doing, according to some of the people.

Among the anxiety-inducing activities was representing themselves as employees of Big River in person while attending conferences thrown by rivals. For instance, team members attended eBay’s Las Vegas conference for sellers, according to some of the people. EBay describes the event as a way for sellers to meet with eBay management and learn of planned big changes coming for sellers and “exclusive information.”

Benchmarking-team leadership ordered up what Amazon calls a PRFAQ that would outline what to do if competitors or the press discovered the project. In the event of a leak, leadership was to say that the group was formed to improve the seller experience on Amazon.com, and that Amazon pays attention to competition but doesn’t “obsess” over it. They were also told to act like this was normal business behavior in the event of a leak, according to one of the people.

In 2017, Amazon formally changed the name of Project Curiosity to the Small Business Insights team to make it sound less cryptic, some of the people said.

The Big River team invented its own brands to sell on the competing sites, including “Torque Challenge” and “Crimson Knot.”

Teams often changed the brand name once they sold out its inventory, creating new brands when they received new products.

In India, Amazon gained access to e-commerce giant Flipkart in March 2018 with the Crimson Knot brand, around the time rumors of a Walmart acquisition swirled in local media. Walmart bought a majority stake in Flipkart in May of that year.

Crimson Knot makes wooden home goods, with its website’s “About Us” page saying: “Based in a small wood workshop in Bangalore, our dedicated team of 8 skilled craftsmen work consistently to handcraft each piece from scratch, transforming them into stunning showstoppers.”

Crimson Knot still lists products on Flipkart and stores them with Flipkart’s logistics services.

The endeavour wasn’t designed to make money. In 2019, for instance, the Indian Big River team projected revenue of $165,000 while it expected costs of $463,000, according to an internal company document.

Each of the five countries operated a little differently to better test different programs. Globally, in total, Big River gained access to rival marketplaces including Alibaba, Etsy, Real.de, Wish and Rakuten, among many other platforms. In 2019, the team set a goal to get onto 13 additional new marketplaces, according to an internal company document.

The Amazon spokeswoman declined to comment on the number of rival websites Big River operates on.

The Japanese team went so far as to create a streetwear brand with its own website and custom-designed products. They called it Not So Ape, saying it was founded in Tokyo in 2017 and “inspired by the street style we see everyday.”

Not So Ape—which isn’t related to an upscale Japanese streetwear brand called A Bathing Ape—says on its website: “Our name stems from our belief that creative expression is what truly separates us from primates.” Not So Ape has Instagram and TikTok accounts, and its site continues to offer products such as $50 knit beanies and $95 hoodies.

Not So Ape is sold on Yahoo Japan’s marketplace, Zozotown, and uses rival payment services from Shopify, Google and Meta platforms. Its U.S. website is hosted by Shopify—which was the target of a previous effort by Amazon, code named “Project Santos,” to replicate parts of its business model, the Journal has reported.

Not So Ape’s English-language site’s terms of service says it is operated by Big River and lists a Seattle contact address of “2300 7th Ave, Ste B100, Back Entrance”—a building adjacent to a main Amazon campus.