How can China benefit from Elon Musk's acquisition of Twitter?

In 2021, China will become the largest source of car production for Tesla and is likely to be the second largest source of sales for the company

The world is awaiting the fallout from Elon Musk 's takeover of Twitter. Meanwhile, Twitter watchers are wondering whether the deal will open the door to exercising indirect control over the social media platform given Tesla's reliance on its Shanghai factory and local suppliers for its profits.

After rejecting Musk's initial overtures, Twitter's board announced Monday that it would accept Musk's $44 billion bid to buy the company, ending a weeks-long saga over whether the company would accept Musk's unsolicited offer.

"Freedom of expression is the bedrock of a functioning democracy, and Twitter is the main digital arena in which matters vital to the future of humanity are discussed," the controversial businessman explained in a statement.

China..Tesla..Twitter

In 2021, China will become the largest source of production of Tesla cars and is likely to be the second largest source of sales for the company. And because production costs there have fallen, including for battery cells, materials and workers' wages, China is also the source of profit for the electric car maker "by far," Wedbush equity analyst Dan Ives told Forbes recently.

China, which does not tolerate public criticism, banned the Twitter platform in 2009, according to Michael Forsyth of The New York Times, a longtime reporter covering news in the country. Forsyth said in a tweet that the country's negligible influence on Twitter "may have just changed" with Musk's deal.

The deal also caught the attention of Amazon founder Jeff Bezos, who asked, "Has the Chinese government gained some influence in the digital key arena of freedom of expression?"

Interesting question. Did the Chinese government just gain a bit of leverage over the town square? https://t.co/jTiEnabP6T

— Jeff Bezos (@JeffBezos) April 25, 2022

Tesla was the first foreign automaker in China to be allowed to own an entire auto assembly plant there. Previously, global giants including General Motors, Volkswagen, Ford and Toyota had to partner with local Chinese companies, which usually own a majority stake in joint venture plants.

Funding to build the factory included $1.3 billion in loans from local banks including China Construction Bank, Agricultural Bank of China, Shanghai Pudong Development Bank, and the Industrial and Commercial Bank of China.

Observers believe Tesla got a special exemption as the government hoped the company, which was formerly based in Silicon Valley, would stir up competitive sentiment among Chinese automakers, and drive them to upgrade its products to compete with the brand. The plan seems to have worked, as local companies including BYD and NIO have become Tesla's rivals with a host of attractive and compelling new electric cars.

China..Musk

Musk, the world's richest person with a fortune of $268.2 billion, has demonstrated his willingness to comply with the wishes of the Chinese government in a way he does not often do in the United States. His response to COVID-19 health rules is an example of his apparent different reaction. When the pandemic began in early 2020, Musk was alarmed by a stay-at-home policy by local officials that temporarily suspended production at the Tesla plant in Fremont, California.

He expressed this at the Tesla earnings conference in April 2020 saying: “To force people not to leave their homes, arrest them if they do, is not democratic, this is not freedom, give people back their freedom.”

However, when the company was forced to halt production at its Shanghai plant for three weeks, starting in late March, due to the Chinese government's zero-tolerance approach to stopping the spread of the omicron mutant, Musk remained silent. Tesla began building its Model Ys and Model 3s last week, under strict protocols that included making workers temporarily live in the factory and not return home.

And early this year, Tesla opened a showroom in China's Xinjiang province, a region where the government is accused of carrying out persecution programs and running concentration camps for Uyghurs and other Muslim minorities. Musk has not commented on the decision, which was announced by China's Tesla unit in January in a post on Weibo, China's popular Twitter-like social media platform.

Chinese communication policy

Deputy News Correspondent Melissa Chan asked in a tweet, "Elon Musk owns a Tesla factory in China and wants to sell more cars there, as many state watchers have noted. What would happen if Beijing contacted him about a Uyghur or Hong Kong activist account?" Or about Chinese disinformation bots that take advantage of this platform?"

"If Elon Musk believes that being the richest man in the world can deter Beijing if you ask him things about Twitter, he will find out how much the Chinese state can gobble up the Shanghai Tesla factory," Chan wrote in her tweet.

Also, Tesla shares fell less than 1% to $998.02 on Monday on the Nasdaq. Twitter's stock rose 5.7% to $51.70.