Mirror, Mirror, on the Wall
Despite the presence of Chinese negotiators in Washington last week, there has been more buzz about a different facet of the relationship—the National Basketball Association (NBA) tweet that produced a major Chinese backlash. You are probably familiar with the story, but in brief, the Houston Rockets general manager, Daryl Morey, posted a tweet, since deleted, that supported the protesters in Hong Kong. This caused the Chinese government to flip out and stir up its population against the NBA. There were some apologies from various U.S. parties along the way and ultimately a defense of free speech from NBA commissioner Adam Silver. Then it got more complicated, as Bloomberg explains:
The National Basketball Association, Activision Blizzard Inc. and now one of its most important portfolio companies, Fortnite proprietor Epic Games Inc., have all sparked political controversy at a time of increasingly assertive Chinese nationalism online.
A tweet by an NBA executive expressing support for Hong Kong protesters drew the ire of Beijing, throwing into question the billions Tencent has invested in the U.S. sports league. Then Blizzard, partly owned by Tencent, banned a gamer for endorsing Hong Kong’s pro-democracy movement, triggering a boycott of the company’s games for its apparent kowtowing to China. Most recently, Epic Chief Executive Officer Tim Sweeney tweeted his disagreement with the Blizzard action, eliciting calls for a boycott of its Fortnite game among Chinese players incensed by the perceived slight . . .
Blizzard’s stern reprimand of the pro-Hong Kong player was popular in China, but drew outrage from the U.S. to South Korea. Online, gamers called for a boycott of the company and proudly posted their cancellations.
This is not the first case of China throwing its economic weight around to achieve political objectives. Airlines and hotels have been subject to Chinese displeasure over the way their maps and other materials identify Taiwan—the Chinese want it to be clear that it is a province of China and not an independent country. Movie producers have long had a complicated relationship with Chinese censors determined that movies only reflect a positive view of China. One semi-amusing side effect of that has been the tendency to identify Asian villains as North Korean rather than Chinese, which will probably continue to be an effective strategy at least until the next Trump-Kim rapprochement.
These incidents, and others, provide some insights into Chinese policy. First, everything is related. Things don’t stay in a single lane. Politics is economics and economics is politics.
Second, China is not reluctant to use the power of its enormous market. Being able to access that market is critically important to many businesses who know that even a small slice of it can be quite lucrative. I have heard business representatives say that a company cannot be truly multinational unless it has a presence in China. However, this is turning out to be a double-edged sword for China. Tencent, along with Alibaba, which removed Houston Rockets merchandise from its online stores, are taking an economic hit as will the NBA.
Third, the effects of China's demands often reach beyond its borders. The movie censors are concerned about what the Chinese people see, but the changes they insist on will be seen by everyone watching the movie. Airline and hotel informational materials are distributed globally. The result is that millions of non-Chinese are being exposed to the Chinese Communist Party line.
Fourth, and most troubling, these demands put businesses in impossible positions. Generally, companies try very hard to avoid political controversy because of the risk of offending customers. The worst case is when they are pressed to take a side they don’t believe in or to abandon principles that are important to them. As the NBA case demonstrates, companies find themselves in the position of being attacked no matter what they do. Even worse, not taking a position can lead to attacks from both sides simultaneously.
It is tempting in this situation to tell everybody, “Take a pill and chill out. The NBA and video games are not the most important things in the world.” Unfortunately, the time for that has passed. Outrage over real or perceived slights or injustices is the new normal. In this more contentious world, the right response for businesses might be to take a stand. Believe it or not, companies are not soulless automatons. They are run by actual human beings who have opinions. If you run a company and believe freedom and democracy are important values, or you oppose forcibly putting people in “reeducation” camps, then saying so, or in the case of climate change doing something about it, might be the best economic strategy. You will lose some business, but you will gain some as well. More important, you have stood up. You can look at yourself in the mirror in the morning and think, “I did what I believed to be right.” And that, it turns out, is no small accomplishment. If more people did it, we would all be better off.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
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