What to Watch: Contending With China’s Clout
Damned if you do, damned if you don’t.
That’s the uncomfortable state of affairs countless companies doing business in China have found themselves in. The issues may shift — Hong Kong protests, Xinjiang cotton, Tibet or Taiwan — but one thing that remains steadfast is Beijing’s willingness to use its economic might to bend companies to its world view.
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Previously it may have been an option for companies to sidestep geopolitics by avoiding setting up in China itself, instead catering to the Chinese when they shopped overseas. But closed borders caused by the pandemic took that option off the table and as H&M, Nike, Adidas, Versace and, most recently, Walmart and Intel have found, the consequences of breaking with Communist Party ideology can be swift and harsh. As further proof, look at China blasting Walmart’s “stupidity and shortsightedness” over allegedly removing products made in Xinjiang from the online site and shelves of its warehouse club.
For a time it looked like that no matter what viewpoint China pushed, companies fell in line in order to retain access to the market even as concerning reports piled up about its human rights record in Hong Kong and Xinjiang. But a comprehensive American ban issued in December on all imports from Xinjiang — where the U.S. and several European legislatures consider a genocide to be taking place — will force companies further to define their position.
Now, complying with the laws of the world’s largest economy on the matter is to directly antagonize the second largest, as chipmaker Intel quickly discovered. Its request of suppliers to avoid Xinjiang in order to be compliant with U.S. legal requirements drew major criticism in China from media and consumers alike.
This development and the global reaction to Peng Shuai — the tennis star who disappeared and is suspected still now to be under duress despite reemerging into public view — could signal a shift in attitudes toward China is afoot.
“The WTA [World Tennis Association] had a stronger response, immediately suspending all tournaments in China, forgoing millions in revenue,” pointed out Joanna Chiu, author of the recently published book “China Unbound: A New World Disorder.” “That’s in contrast to many of the world’s biggest companies, including the world’s largest luxury brands or other sports associations like the NBA. I think the next company that reacts to Chinese government criticism or Chinese nationalistic consumers’ criticism with an over-the-top apology may get a larger backlash from its international consumers for not standing up for its values.”