Long before Daryl Morey’s fateful tweet — the one that set the National Basketball Association (NBA) on a collision course with China — the nation had a history of employing economic might to twist corporate arms in Asia.
Japanese automakers in 2012 saw Chinese orders sink during a land dispute. Two years ago, an impasse with South Korea led to the closing of South Korean-owned stores and Chinese media encouraging a boycott of Hyundai Motor Co.
Two months ago, Beijing effectively barred Cathay Pacific Airways employees who participated in Hong Kong demonstrations it deemed illegal from flying to China.
Illustration: Yusha
For Western companies, the latest incident began on Oct. 4 thanks to Houston Rockets general manager Morey. He tweeted a slogan supporting Hong Kong’s pro-democracy movement days before NBA pre-season games in China. Beijing retaliated by canceling broadcasts and Chinese sponsors instantly disappeared.
It was one of China’s most aggressive efforts yet to bend a Western company to its will, and it pins corporate officials between the imperative of profit and loyalty to open societies that nurture their businesses.
“This skirmish between American capitalism and the China model is only going to increase in the future,” University of Chicago Booth School of Business adjunct assistant professor of behavioral science John Paul Rollert said. “How American companies deal with it now will suggest how likely China is to give in on these matters or change the value system of American companies.”
After years of declining public trust, US businesses have been trying to prove that their values extend beyond the bottom line. In August, the Business Roundtable, one of the most influential lobbying groups in the US, abandoned a long-held view that shareholders’ interests should come before all else.
China will be a big test of whether that is mere talk.
For companies including Nike and Starbucks, China is a crucial market that is only growing in importance, and the attention paid to its behavior will probably increase as US politicians rail against its rising power and human rights abuses.
China’s punishment of offending foreign entities “isn’t new, but the speed and ferocity of the responses has grown,” Washington-based Center for Strategic and International Studies senior adviser Scott Kennedy said. “This is not going to go away any time soon.”
Opportunities for international incidents are increasing.
The US alone conducted about US$737.1 billion in trade with China last year, according to US federal data, and US President Donald Trump has been pursuing a bitter trade dispute for more than a year.
The Internet has allowed almost anyone — government officials, corporate officers, backroom worker bees — to send out potentially offensive messages. That is a chancy environment for entities such as the NBA, Nike or movie studios, which are lashed to entertainers and athletes who like to speak out online.
The NBA has deep ties to China, striking a TV deal in the late 1980s and now claiming that 500 million Chinese watch its programming.
The Rockets gained traction thanks to former star player Yao Ming (姚明), who now heads the Chinese Basketball Association.
From China’s perspective, it is hard to imagine worse timing for Morey’s tweet.
The nation on Oct. 1 celebrated 70 years of Chinese Communist Party rule with a massive military parade and Chinese President Xi Jinping (習近平) promised to continue its greatness. Meanwhile, a series of marches in Hong Kong protesting an extradition bill has escalated into massive demonstrations, about 1,500 arrests and the police shooting of a protester.
Morey swiftly deleted his tweet and apologized, but the damage was done.
Chinese-owned companies quickly distanced themselves from the NBA. Sponsors, including China’s largest sportswear maker, the second-biggest dairy business, a smartphone brand and a local joint venture of Nissan all pulled out. State television CCTV and technology giant Tencent on Tuesday last week said that they would not show the pre-season games.
The Brooklyn Nets — owned by Alibaba cofounder Joe Tsai (蔡崇信) — and the Los Angeles Lakers were due to play in Shanghai on Thursday last week and in Shenzhen on Saturday. Posters advertising the games were taken down.
The swift response showed China’s deep sensitivity to the way it is portrayed in the West, particularly its territorial claims to Taiwan, semiautonomous Hong Kong and Tibet.
“They are upset that others don’t show them the respect they think they deserve,” said Kennedy, who has studied China for three decades. “They are certainly proud of their achievements, but at the same time don’t think it’s gained them any international legitimacy in the West.”
The NBA’s response was wobbly.
It initially criticized Morey — drawing wrath from all points in the US political spectrum — but NBA commissioner Adam Silver later supported his right to free speech. That ignited another round of blowback, including Chinese state media alleging Silver supported violence by Hong Kong protesters.
Spurning Beijing is not as clear-cut as spurning — hypothetically — Pyongyang, Rollert said.
“The NBA can afford to walk away from North Korea,” Rollert said. “It’s harder to walk away from China and that’s why this is such a significant problem.”
The disparate responses to Chinese pressure of two video-gaming companies neatly illustrate the dilemma.
A unit of Santa Monica, California-based Activision Blizzard on Tuesday last week banned a high-profile e-sports player for one year and withheld prize money after he expressed support for the Hong Kong protests.
It issued an abject apology on China’s Sina Weibo.
“We will, as always, resolutely safeguard the country’s dignity,” it said.
Meanwhile, the chief executive of competitor Epic Games, the owner of Fortnite, said it would not have punished the player for expressing his views.
Just questioning a chief executive about the situation can be fraught.
When asked on Tuesday last week how Levi Strauss is thinking about balancing its interests in Hong Kong, Chip Bergh skirted the question.
“I don’t really want to get dragged into a political comment here,” Bergh said, laughing nervously. “We’re just going to continue to stay on top of the situation in Hong Kong and keep our employees safe, keep our customers safe, and if that means we have to close stores, we will close stores.”
That is a situational tactic for the protests in the streets, but not a coherent strategy as China wields its economic might.
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