The billionaire owner of the Brooklyn Nets made his fortune in China. He started his company in an apartment and was described as "Amazon on steroids" by the commissioner.
The NBA-China relationship brings in billions of dollars but requires the league to do business with an authoritarian government and look past the kind of social justice issues it is fighting at home.
Hundreds of millions of dollars are given to fight racism and discrimination in the United States. The U.S. government blacklists companies for their support of a campaign of oppression, mass arbitrary detention and high-tech surveillance.
Some of China's most controversial policies have been defended by Tsai. He defended a law used to imprison scores of pro-democracy activists in Hong Kong, and claimed that most of China's human rights are good.
According to sources close to him who spoke on condition of anonymity, a former college lacrosse player with investments in the WNBA, Major League Soccer and professional lacrosse sees himself as a bridge between two cultures. He believes that China's restrictions on personal freedoms have paved the way for economic development that has improved the lives of millions of its citizens.
A bipartisan group of U.S. officials, human rights activists and academics focused on China criticized his positions and association with companies implicated in human rights abuses.
Matt Pottinger, a former deputy national security, said that Joe Tsai is an example of U.S. sports and business figures who are critical of American imperfections, but who make excuses for human rights atrocities committed in China, where he makes money.
Tsai didn't want to be interviewed for the story.
The NBA's global ambitions come in conflict with its commitment to social justice according to an analysis of the league's record and China investments. The league is faced with political land mines as it navigates the tension between values and value.
The NBA still hasn't recovered from Morey's now-infamous tweet. Banned from state TV for most of three seasons and ostracized by some sponsors, the league operates under sanctions that have cost hundreds of millions of dollars and years of goodwill, according to an American coach who spent years in China.
Within two months of taking control of the Nets, Tsai inserted himself into the controversy. A behind-the-scenes drama that reached the White House and was not previously disclosed was believed to be the reason why Morey was fired by the NBA. An open letter was published by Tsai that accused Morey of supporting a movement.
The NBA and the Nets denied that Tsai tried to get Morey fired or that he pushed the NBA to apologize.
After Morey saved his job with the help of powerful supporters who supported his right to free speech, the Nets quietly refunded his purchase of a suite. According to a person who was scheduled to attend, Morey believed that he had been disinvited. A source close to the Nets said that Tsai was unaware of the decision.
Morey didn't comment on the story.
NBA owners are exposed in China.
Strategy Risks, a New York-based firm that quantifies corporate exposure in China, was hired by Disney to examine the portfolios of 40 NBA owners. Micky Arison is the chairman of Carnival cruise lines, which has a joint venture with a Chinese shipbuilder facing U.S. government sanctions. Hornets owner Michael Jordan earns millions through Nike's China business, which makes up 19% of the company's revenue. One of the most popular soccer programs in the country is broadcasted by the state-run China Central Television, which is a partner with the owner of the Nuggets.
The NBA, owners and players avoid positions on issues they otherwise embrace in the United States because of the investments. According to Strategy Risks, no owner reflects this tension more than Tsai, who has more than half of his $8.7 billion net worth linked to China through his ownership of the Nets. The NBA has expanded its partnership with Alibaba since Tsai became an owner, allowing fans to view content and purchase gear across the company's platforms.
The U.S.-China conflict is becoming more and more about sports. The United States boycotted the Winter Olympics in Beijing and the Women's Tennis Association suspended play in China to protest the treatment of a player.
The story was reviewed by Strategy Risks, as well as interviewing current and former NBA employees, human rights monitors, U.S. policymakers, academics and others in the United States, Hong Kong.
Tsai is a Canadian citizen who was born in Taiwan. During the Communist takeover of China, his parents fled. Paul Tsai was the first student from Taiwan to earn a J.S.D. degree at Yale Law School and later returned to Taiwan to start a prominent law practice and serve in the Ministry of Economic Affairs. At 13, Joe was sent to the United States, attended a private high school in New Jersey, earned undergraduate and law degrees at Yale, and went on to work in private equity. He considers himself Chinese because he speaks fluent Mandarin.
In 1999, Jack Ma introduced Tsai to him and he worked out of a small apartment in the city of Hangzhou. The businessman seemed like a character from a novel, according to Tsai. He gave up his $700,000-a-year job to translate the vision of Ma into a legitimate enterprise. Ma's right-hand man and alter ego was incorporated by Tsai.
The company grew into the largest ecommerce company in China, eventually expanding into cloud computing, financial services and entertainment. The $25 billion IPO was the largest on record at the time. According to the company's annual report, Tsai holds 1.4% of the shares. Forbes listed him as the 254th-richest person in the world.
The Chinese government has been trying to exert more control over the country's tech industry over the past two years. The government canceled a $37 billion IPO for a financial technology spinoff after Ma criticized banking regulations.
According to a recent study on the company, it is effectively state-controlled.
According to a 2020 congressional report, under Tsai's leadership, companies that helped China build an intrusive, inescapable surveillance state that uses emerging technologies to track individuals with greater efficiency were funded by the Chinese government.
More than 1 million Uyghur Muslims and other ethnic minorities have been forced into re-education camps in the western region of Xinjiang, which has been described as a "genocide".
There was no record of Tsai publicly addressing China's repressive policies in Xinjiang or the funding of companies whose technology was used by the government in the abuses. China experts hold him accountable.
The International Republican Institute, which promotes democracy around the world, said that if Joe Tsai thought it was important to extricate Alibaba, it would have happened.
The U.S. Department of Commerce added 28 Chinese organizations, including Megvii and SenseTime, to theEntity List, which imposes trade restrictions on people or institutions engaged in activity.
Tsai oversaw the investment committee while he was the executive vice chairman. Three major investment rounds were held for Megvii. SenseTime raised $620 million, making it the world's most valuable artificial intelligence startup at the time. According to recent financial documents, 29.4% of Megvii and 7% of SenseTime are controlled by the companies affiliated with Alibaba.
Half of China's Artificial Intelligence Dragons are government-backed companies. The companies promote tools for businesses and the public sector, but their facial recognition technologies have surfaced in connection with China's ubiquitous surveillance network.
China's efforts to control the Uyghur population is a policy that the government says is necessary to stop terrorism and maintain stability. According to a report in 2020, American coaches at an NBA training academy were harassed and surveilled. One coach said he was stopped three times and compared the atmosphere to World War II Germany.
The NBA ended the academy program after an investigation found that the centers did not meet NBA standards, a source familiar with the decision said.
In a report titled "The Rise of Digital Authoritarianism", China was identified as the worst abuser of internet freedom.
One of the things that makes China distinct is that it is designed to meet the needs of the government, according to a senior analyst with the Australian Strategic Policy Institute.
There is a type of cooperation between companies that is on the face normal but abnormal in a political context.
A series of reports linked Megvii, SenseTime and other tech firms to the abuses in Xinjiang. One instance in which Megvii worked in cooperation with security services was when its facial recognition software was used to send a Uyghur alarm to the police.
SenseTime relies on the largesse of the party-state, particularly its investment in two government projects linked to public security surveillance as well as the surveillance state in Xinjiang that have benefitted from an estimated $7.2 billion worth of investment in the past two years.
The New York Times and Human Rights Watch both reported that Megvii and SenseTime were companies that built software that enabled the government to track the Uyghur population.
A source close to Tsai said that the concern was caused by Megvii and SenseTime being placed on the Entity List. The company made sure that it didn't hold board seats in the companies, that it wasn't directly involved in operations, and that executives were reassured that they weren't targeting Uyghurs. The source said that the company chose not to sell because of its responsibility to shareholders.
The source said that many U.S. investors hold stakes in Megvii and SenseTime.
According to a research firm, there is more evidence about Megvii and SenseTime in 2020 and 2021, as well as instructions on how to use software to identify Uyghurs.
The company said that it never intended for the technology to be used in this way.
The former China Director at the National Security Council, Matt Turpin, was involved in discussions over which companies to add to the Commerce Department blacklist. He said that Tsai was under pressure to be seen as doing what Beijing wanted him to do. I don't fault him. He is in an impossible position.
He said that the NBA should stop because of the support of Megvii and SenseTime and human rights abuses.
Turpin said that it was an abysmal thing to be associated with.
The U.S. Treasury Department added Megvii, SenseTime and six other Chinese companies to a blacklist that prohibits Americans from holding stock in those firms. A department spokesman accused the companies of actively cooperating with the government.
According to the China analyst, Tsai is in a difficult position because of his dependence on the government. He said that Tsai has a choice.
He doesn't have to do this. He is a Canadian citizen. He has the freedom to make that choice as long as Alibaba continues to facilitate and participate in genocide.
The NBA was introduced to China in the late 1980s by former commissioner David Stern, who presented a lot of highlight reels. NBA China is worth $5 billion. 5% of NBA China is owned byESPN.
The NBA operates in China at the discretion of the Communist Party.
The Chinese Communist Party can shut down businesses overnight. It becomes difficult for these people to navigate.
Adam Silver and the league office have not commented on human rights abuses in China. The NBA closed a training academy in China's Xinjiang region two years ago, but the league's deputy commissioner refused to say if the move was related to human rights concerns there.
The NBA is not unique. Many businesses have tried to exploit the Chinese market, only to be accused of selling out American values. Disney faced criticism from human rights activists after filming part of a live-action remake of Mulan in China. When Disney launched its streaming service in Hong Kong, it did not include an episode of The Simpsons that was critical of the Chinese government.
The NBA has a partnership with the technology giant that streams games in China. The most popular team in China, the Rockets, disappeared from the platform. When Morey left Houston to become president of basketball operations in Philadelphia, the 76ers followed. Boston games were taken off the platform after the center called the Chinese president abrutal dictator.
Two weeks ago, regular-season NBA games appeared again on CCTV. The Global Times reported that the network would show fewer games and that outside commentators would not be invited to work the broadcasts.
Turpin said that the Chinese Communist Party has mastered the art of squeezing, or threatening to squeeze, the interests of elites.
Russian billionaire Mikhail Prokhorov had a 49% interest in the Nets. NBA China, a separate entity with offices in Beijing and Shanghai, was announced by Silver six months later.
In the spring of 2015, the NBA expanded its partnership with Alibaba to create a section for the NBA on the company's platforms, giving 700 million users one-stop shopping to view NBA highlights and other content.
Tsai took full control of the Nets. The highest price for a U.S. sports franchise was paid by him. He has stakes in a Major League Soccer team, a professional lacrosse team, a lacrosse league, and an eSports team.
Chris Fenton, a businessman who serves on the board of the U.S.-Asia institute and has written extensively about the tradeoffs, said that the NBA needed more of a foothold in China.
Morey sent a message two months after the Nets became sole owner.
A former data analyst at MITRE, Morey had friends involved in the Hong Kong protests, the latest of which had followed a Chinese prohibition on masks to prevent protestors from shielding their identities.
When Morey said that Tsai was leaving for China to attend exhibition games, he meant that she was about to leave. He was contacted by deputy commissioner Mark Tatum, who told him that he had provoked a lot of anger in China. A source close to him said that Tsai thought he could play the middle man. He drafted a letter and sent it to the person who oversaw international operations. He posted it on Facebook from his private plane.
The message was an open letter to all NBA fans, and he invoked Chinese history to explain why Morey's message was so damaging.
Senior NBA officials were prepared for China to respond to the issue on social media. A former senior NBA executive in Asia who asked to remain anonymous said that they had contingencies for everything when Silver was in Japan.
Silver acknowledged that Morey's post had offended fans in China and called it "regrettable." He also noted the league's support for individuals sharing their views.
The NBA began to consider contingencies in the event a player spoke out about human rights. The political climate in Hong Kong was creating divisions and NBA officials were worried about safety. The league studied how foreign companies saved their businesses by apologizing for offending China.
One NBA source familiar with the debate said that it was examples of what other companies had been doing.
Suddenly, it was reality. The NBA would have to fire Morey and issue a public apology if it wanted to keep him.
Morey heard that one NBA owner wanted to fire him to appease the Chinese. Turpin volunteered to help Morey and became convinced that the general manager was fighting not only the Chinese government but also the other side.
Turpin said that Joe Tsai was laying out to the other owners how completely unacceptable it was that anyone weighed in on Hong Kong. The way the rest of the league lined up was colored by it.
The Nets did not agree with the idea that Tsai interfered.
The Nets did not speak to any owners about Mr. Morey after he was mentioned in a Nets statement.
Mike Bass, the NBA's chief communications officer and executive vice president, said that he never asked the league office to apologize or fire Morey.
The NBA was caught with its feet in two boats, and both were not happy about it.
The source close to him said that Tsai was worried that the games would be canceled. Jack Ma was asked to contact city officials to let the exhibitions continue. Ma was successful. According to a source familiar with the meeting, James raged to players about Morey during a meeting in China at a Ritz-Carlton. James said Morey was "misinformed" about Hong Kong.
Morey had to save his career because of the power figures like James who were against him. He deleted the post after it was posted and later said he didn't mean to offend anyone. I don't represent the NBA or the Houston Astros in my own way.
Current and former White House officials, as well as a Democratic governor, rallied around Morey. Turpin worked with Congress and the White House.
Turpin said he wanted to make it clear to the NBA that there was more to it than that.
The White House had to put a marker down, according to Pottinger. Many of us at the White House thought this was a bad precedent. We don't want American businesses to abandon values in order to follow Chinese censorship.
The NBA is acting like a wholly owned subsidiary of that authoritarian regime, according to Pottinger.
Republicans and Democrats in Congress supported Morey. A bipartisan letter signed by, among others, Sen. Ted Cruz, R-Texas, and Rep. Alexandria Ocasio-Cortez, D-New York, said it was outrageous that the NBA has caved to Chinese government demands.
Silver acknowledged his first comments and affirmed the NBA's commitment to free expression.
Morey stayed with the Astros for another year before joining the 76ers.
In a recent statement provided to ESPN, Silver said that they have always supported and will continue to support every member of the NBA family, including Morey and Freedom, expressing their personal views on social and political issues.
The NBA wouldn't make Silver available for an interview.
All government workers and major business people are expected to stand with the Communist Party when China is attacked, according to the scholar who studies Chinese elites and finance.
Over the years, I am sure business people like Joe Tsai have learned this expectation. You will learn to say "Oh, everyone is doing this" over time. When there is a negative publicity event, I know what to do.
The NBA changed their leadership in China after seven months. The CEO, who had been with the company for just over a year, resigned to join his family in London. He was replaced by Michael Ma, a Chinese national who went on to become the chief operating officer of broadcasting for the 2008 Beijing Olympics after completing the first TV deal with the NBA.
The move made sense, because you can hire someone like that with a lot of connections, and they can call up their friends who are still in government, and say, "Look, this was purely an accident." What can we do to make it better for everyone?
The league said the decision was based on qualifications.
The NBA spokesman said that Michael Ma worked at the NBA for more than a decade and helped launch NBA China in 2008 before leaving the NBA in 2016 and becoming CEO of Endeavor China.
Hundreds of protesters attended a Nets game wearing black and Hong Kong T-shirts two weeks after Tsai's post.
Nathan Law, a pro-democracy activist who won a seat in Hong Kong's legislature in 2016 at the age of 23, was among the protestors. At his swearing-in, Law protested the oath of allegiance to China, and his seat was revoked the next year. He was granted political asylum in England last spring.
According to Law, Tsai has become like a spokesman for the Chinese Communist Party, which he is not.
Law said that he is emulating the kind of Chinese authoritarianism into the U.S. with a more soft approach.
According to sources close to him, Tsai believes that a lot of the criticism he gets is politically motivated. He supports personal freedom, but believes that it can lead to instability that can affect economic growth and improve people's lives. He likes to point out that China's per capita income is less than that of the United States, and that living outside of poverty is a human right.
The source said that it was a cost-benefit analysis.
Like the NBA, Tsai has championed social justice.
Hundreds of millions of dollars have been donated by Tsai and his wife to social justice initiatives. The couple committed $50 million to create the Social Justice Fund after George Floyd was murdered. In May of last year, Tsai and others raised $250 million in response to hate crimes against Asians. The city of New York was the epicenter of the Pandemic and the Tsais donated thousands of masks and ventilators.
During a discussion at the University of California, San Diego's 21st Century China Center, Tsai said that he understood Americans because he spent most of his formative years in the United States.
Civil liberties in China have been taken a different view by Tsai. He was asked about China's academic freedoms during the San Diego forum.
China is a single-party system so there will be restrictions on academic freedom and freedom of expression. Do people like that? I think the Communist Party needs to control that in order to feel confident about pushing their policies in other areas.
The single-party system is in place because the elite in China feel that China is still a developing country and they want to make sure that the population is wealthier and doing better. They feel that dissent has to take a backseat and that they are doing the right thing.
During a panel discussion at the Milken Institute, Tsai said that it was necessary to stifle democratic freedoms in China to develop its economy.
It is important for the Communist government that there is absolute stability in the country.
The South China Morning Post, the most prominent English-language newspaper in Hong Kong, was bought by the Chinese company in 2015. The paper would provide a perspective on China missing from coverage by the Western media, but it wouldn't compromise the newspaper's editorial independence. He explained that one of the main reasons that the paper was bought was to tell the biggest story of our lifetime, which is China.
A 2020 story in The Atlantic, titled "A Newsroom At the Edge of Autocracy", detailed how editors at the paper had changed language in a story about the Hong Kong protests to show protesters in a more negative and aggressive light. The magazine cited sources as saying that the changesmplified the heavy-handed, slanted editing that became common at the paper during the demonstrations.
A source close to Tsai said that no one from the paper has tried to change the editorial policy.
At least 150 pro-democracy activists, academics, lawyers and journalists have been arrested in Hong Kong under the 2020 National Security Law. The United States and other countries have imposed sanctions.
During the Morey crisis, Tsai, who lists his business address as Hong Kong and maintains a residence there, pressed his argument that the crackdown was necessary to preserve stability.
What is this for? It is against people who want to split Hong Kong as a separate country. I want to make sure that we don't allow foreign powers to carve up our territories. Hong Kong should be seen in that context.
The source close to him said that Tsai had personal experiences in Hong Kong. rioters storming the Hong Kong legislature, vandalizing property and defacing the Chinese flag were the things he witnessed. The source said that Tsai was aware of protesters attacking Mandarin speakers and felt threatened. The source said that Tsai believes that the image of peaceful protestors is a false one.
In the CNBC interview, asked to comment on China's human rights issues, Tsai said, "You have to be specific on what human rights abuse you're talking about because the China that I see, the large number of the population."
On Chinese social media, he was credited with taking a controversial topic and turning it into positive PR.
Many activists and China experts disagree with the assertion that the Hong Kong protests are an independence movement.
Law denied that the uprising in Hong Kong was due to foreign powers. They would like to have democracy.
According to a source close to Tsai, he is convinced that self-determination for Hong Kong is part of Law.
A professor at the New York University School of Law who spent decades representing American companies in China and who was a friend of Tsai's father said that he is presenting a distorted picture.
Cohen said he appeared as part of a series of panel discussions at Yale in 2016 when the China Center was renamed to honor his dad. I named six or seven scholars who were great people who were locked up in China after leaving Yale Law School.
Cohen said that Tsai downplayed concerns about human rights in China.
Cohen said he was already anticipating the argument from the person who had just made billions of dollars on the mainland.
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