What to Watch: Contending With China’s Clout
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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.”
“It also reflects an increasing international public awareness about human rights issues in China,” she added. “That people can disappear in China has been a news story for years and years — there were the disappearances of the Hong Kong booksellers, the two Canadian Michaels who were detained over Huawei, and with the National Security Law in Hong Kong now there are even examples of American citizens being arrested there. But Peng Shuai’s level of popularity and being a known face changed the pattern in which many people still did not care.”
The willingness to push back may reflect the sharpened frustration with the country over its initial handling of the COVID-19 pandemic. A 2020 study by the Pew Research Center found that unfavorable views of China reached their highest point in many countries since Pew began polling the topic more than a decade ago.
The next major flashpoint could happen at the Beijing Winter Olympic Games. Due to kick off in February, the Games has already been subject to diplomatic sit-outs from the U.S., U.K., Canada and Australia over Xinjiang. Japan also stated it would not send an official government delegation to the Games but stopped short of calling it a boycott.
“It’s overdue to understand — not just in China — forced labor concerns all over the world,” said Chiu. “One way to more diplomatically manage the situation is to make these systems more secure so that they apply across the board rather than just in response to legal obligations for Xinjiang. Companies should be committed to weeding out forced labor whether it is in Xinjiang, Bangladesh, or any region.”
Related:
U.S. Senate Approves Wide-Ranging Uyghur Forced Labor Bill
U.S. Boycott, Multiple Reports Point to Persistent Xinjiang Cotton Crisis
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