The tech industry turns to mask diplomacy

As the coronavirus spread from China across the world earlier this year, two friends in Sydney watched in horror. Milton Zhou is a cofounder of a renewable energy company called the Maoneng Group, which developed some of Australia's largest solar farms. Saul Khan is a former partner in an energy efficiency consultancy. They met in a Facebook group for startups, where they bonded over a discussion about using blockchain to track goods as they're shipped internationally. They had experience buying solar panels and other products from China, and they expected the medical supply chain to work, at least in the early stage of the outbreak. Instead, they watched as health-care workers ran out of respirators and other critical supplies. "We realized, okay, something is really wrong here," says Khan. "People aren't able to source things quickly." Then it occurred to them that maybe they could help.

As demand for masks, respirators, and other personal protective equipment (PPE) has skyrocketed around the world, medical supplies have become a new geopolitical flashpoint. Officials have accused each other of hijacking shipments by buying them off the tarmac or by seizing them en route. When a US buyer allegedly diverted a batch of Chinese-made respirators bound for the Berlin police, for example, a German official denounced the act as "modern piracy." But there is a bright spot. Amid the chaos, tech industry veterans have arranged shipments of high-quality goods, using both their political clout and their access to private jets. "A lot of hospitals tend to buy locally," says Khan. "They're used to local classifications and to not having to deal with import-export paperwork. People in tech are more global. They have the reach." The result is good public relations, at a moment when the tech industry desperately needs it.

Khan and Zhou set up a nonprofit called RapidWard that buys medical supplies on behalf of governments and hospitals around the world, handling all the logistics for nominal fees-in some cases chartering airplanes to ensure that they arrive on time. Until their first clients paid up, Zhou fronted the money for orders himself. In the United States, a group of venture capitalists and technologists-several of them with the San Francisco emerging-technology investment firm 8VC-have created a similar organization called Operation Masks. Both nonprofits are now in great demand. Since its inception in late January, RapidWard has taken orders for $111 million worth of goods for front-line workers in Italy, Iran, and Switzerland, among other countries. Other shipments have been arranged by Chinese tech companies and foundations looking to burnish their image outside China, including the telecommunications giant Huawei, gaming and social-media conglomerate Tencent, and the Alibaba and Jack Ma Foundations, which are both linked to Jack Ma, the founder of e-commerce firm Alibaba.

China produces the bulk of the world's PPE. In January and February, as the coronavirus tore through Wuhan and the country went into lockdown, Chinese medical supply factories ramped up production, which was supplemented by an influx of donated supplies from the United States and Europe.

Then China went back to work and its government tried to jump-start the economy. With the virus spreading throughout the rest of the world, demand for medical equipment soared to the point that factory owners in the industry began boasting that they owned yinqianji: banknote-printing machines. As orders of cars, clothes, and other consumer goods dwindled, desperate manufacturers who specialized in these products switched their lines over to make masks, gloves, and gowns. Some of them had the clean rooms and know-how needed to make PPE. Others did not.

With demand exploding, full payment up front became the norm. Fraud and counterfeit products proliferated.In early April, the Chinese government rolled out measures intended to clamp down on counterfeit PPE, and it became even trickier to ship products out of China. Buyers panicked. "No one is thinking seriously these days," says Renaud Anjoran, a manufacturing supply chain auditor based in Hong Kong. "People are wiring money into the personal account of a guy in an apartment playing middleman, for transfers of $2 million."

Speculators abound. Aku Zhang, vice president for international sales with CMICS Medical Instrument Company in Shanghai, says that he is regularly approached by traders who want to pay cash for tens of millions of KN95 masks, a high-quality Chinese respirator. He assumes that the buyers are connected to governments but adds that he has no way to know for certain.

On the other end of the supply chain are hospitals and governments, whose purchasing teams are typically conservative in their decision-making and unused to dealing with complex supply-chain issues. Before the outbreak, they relied on medical distributors. Now, with distributors overtaxed, purchasing officers wake up every morning to emails from unfamiliar brokers. "We're getting a different type of spam," says Dan Rogan, who purchases supplies for jails, juvenile facilities, and first responders in Minnesota's Hennepin County. Lily Liu, a cofounder of Operation Masks, says it's understandable that purchasers are overwhelmed: "It's as if you went from shopping in a grocery store to having to vet a cattle farm just in order to eat a steak." In the United States, a lack of national leadership on sourcing has exacerbated the problem.

A cargo flight carrying over 6 million medical items including face masks, test kits, face shields, and protective suits from Guangzhou arrives in Addis Ababa on March 22. The supplies were were donated by the Jack Ma Foundation and Alibaba Foundation and will be distributed from Ethiopia to countries throughout Africa.AP PHOTO/MULUGETA AYENE

Tech companies, with their global workforces and capital to spare at a time when most other industries are contracting, are attempting to fill the gap. "We know how to build organizations, and we have the ability to build online platforms," says Liu. (She previously cofounded Earn.com, a cryptocurrency startup that was acquired by Coinbase in 2018 for $120 million.)

The Chinese tech giants, in particular, have experience navigating complex and ever-evolving government regulations. They also need the image boost. Smartphone maker Xiaomi, which sells low-cost devices in the developing world, donated respirators to India and Italy. Tencent assisted New England Patriots owner Robert Kraft with an airlift of protective equipment that flew from Shenzhen to Boston on the NFL team's 767.

In most cases, such donations have been arranged independent of the Chinese government, which is separately rewarding political allies with PPE. In March, China began sending goodwill airlifts of supplies and teams of experts to countries it considers friendly, including Pakistan, the Philippines, and Ukraine. When a Chinese medical team arrived in Serbia, President Aleksandar VuAiA went so far as to kiss the Chinese flag. Even as American doctors pleaded for masks, and photos circulated on social media of nurses in New York wearing trash bags as protection, none of these government donations went to the United States. "That's a sign - a country that's rapidly becoming an epicenter of the pandemic and also has a desperate need for PPE actually is not receiving the donations of masks," says Yanzhong Huang, a senior fellow for global health at the Council on Foreign Relations. An article published by state news agency Xinhua in early March warned that China could use export bans and "strategic control over medical products" to plunge the United States "into the mighty sea of coronavirus."

But then Alibaba cofounder Jack Ma donated 500,000 coronavirus testing kits and a million masks to the United States. "All the best to our friends in America," he tweeted. The shipment was received and distributed by the Centers for Disease Control and Prevention in Atlanta, according to the Alibaba Group. (The CDC did not respond to a request for comment.) The Alibaba and Jack Ma Foundations have also published a handbook for global health-care workers explaining how to treat patients with covid-19 and donated medical supplies throughout the world-including to 54 African countries. (Brian Wong, a vice president at Alibaba, is among the leaders of Operation Masks. A spokesperson for the foundations declined to comment on the shipments.)

For many Chinese tech companies, swooping in as the savior is shrewd publicity. "They have the funds and the political clout, and it's good for their business mission," says J. Norwell Coquillard, executive director of the Washington State China Relations Council, a Seattle-based lobbying group helping local health-care buyers vet suppliers of PPE.

In some cases the companies also have something to prove. Before the outbreak, Huawei was bidding to build 5G wireless networks throughout the world in the face of US efforts to thwart it. The company was waging a separate battle in Canada, where chief financial officer Meng Wanzhou is under house arrest in Vancouver, pending extradition to the United States on fraud charges. In early April, Huawei raised eyebrows when it quietly donated a large stock of masks and respirators to Canada. The Vancouver Sun reported that British Columbia received hundreds of thousands of masks and respirators. Huawei has also donated medical supplies to communities across the United States, as well as to various countries in Europe, and provided free or discounted AI-driven diagnostic technologies, intended to screen for covid-19, to Ecuador and the Philippines. Joy Tan, a senior vice president for Huawei in the United States, says that the firm wants to "use our technologies and solutions to help fight the crisis," but would not comment on its donations of masks and other PPE or confirm how much the company has donated to specific countries.

At a moment when federal purchasing is in disarray, some think there's room for American companies with a presence in China to chip in as well. "Trump has basically outsourced a lot of American policy to corporations," says Coquillard. Companies that are active in China could now help the federal government procure massive orders, he adds: "I don't see why he doesn't just say, 'Hey, guys, get it done!'"

Khan and Zhou, meanwhile, sometimes question their own sanity. Even with a nonprofit that supplies only to front-line workers, they routinely hear from shady brokers, some of whom appear to be connected to organized crime. They also run into logistics issues that don't have an easy solution. They recently shipped a package to Australia that ended up in the Netherlands because of a mistake in a tracking number. "To be honest, it's a bit scary," says Khan. "We're assuming the risk."