BIG IDEA | ‘Western executives in China cannot shake an unsettling fear that this time is different.’

‘Their lucrative Chinese operations are at rising risk of tumbling into the political chasm that has opened between the West and China.’

‘Boycotts of foreign brands are so common in China that managers have a ready-made playbook when caught in a storm of nationalist outrage.’

• ‘Start with an apology. Then stay mostly quiet, perhaps expressing respect for Chinese culture. Wait for the anger to subside.’
• [Boycotts have been in the Chinese, not just Chinese Communist Party’s, toolkit for a long time: I am currently reading A Study of Chinese Boycotts, with Special Reference to Their Economic Effectiveness, published in 1933.]

‘Over the past week the list of companies consulting the manual has grown.’

• ‘Chinese consumers, egged on by the ruling Communist Party, vowed to shun some of the world’s biggest clothing companies, from Adidas to Zara.’

‘In the eyes of the boycotters, the firms erred by declaring concern over allegations that China’s cotton industry includes the forced labour of Uyghurs, a mostly Muslim ethnic minority in the north-western region of Xinjiang.’

• ‘Their bosses hope that the controversy will fizzle out.’

‘But they and other Western executives in China cannot shake an unsettling fear that this time is different.’

• ‘Their lucrative Chinese operations are at rising risk of tumbling into the political chasm that has opened between the West and China.’

'H&M, a Swedish fast-fashion retailer, faces the most immediate trouble.’

• 'As of March 30th, a week after it was attacked online, its garments were still unavailable on China’s most popular e-commerce apps. Its stores have disappeared from smartphone maps. Landlords in several shopping malls have terminated its leases.’
• 'Its Chinese business, worth $1bn in revenues and representing 5% of its global sales in 2020, is in jeopardy.’

‘Little by little the social-media mob has dwindled amid signs that government censors were reining it in, perhaps to lower the heat.’

• ‘The share prices of foreign firms entangled in the boycotts have clawed back most of their initial losses.’

‘Foreign executives, however, remain on edge.’

• 'The issue at the heart of their current problems—China’s human-rights violations in Xinjiang, and the West’s newfound willingness to punish them—is one for which the tried and tested playbook is ill-suited.'
• 'It may also be more expansive, seeping into many other corners of their business dealings in the world’s second-biggest economy.’

‘Mei Xinyu, a researcher with the Ministry of Commerce, has written that cotton is the “entry point” for America’s strategy of using the Xinjiang allegations to suppress China, which denies any forced labour is taking place.’

• ‘China’s only choice, he says, is to fight back forcefully.’

‘The Communist Party is confident of its abilities to do so, thanks to what it calls the “powerful gravitational field” of its market.’

• ‘American-listed firms which regularly report their revenues from China or Asia, and can thus be assumed to have larger exposure to the country, have outperformed those that do not in recent years (see chart above).’

‘An apology, the first step in mending fences, is untenable this time.’

• ‘Many people inside foreign companies “recognise the moral gravity of what’s happening in Xinjiang”, says Scott Nova of the Worker Rights Consortium, a labour-monitoring organisation.’
• ‘Those that do not must still comply with the American ban on cotton imports if shipping to America.’

‘This earns them little sympathy in China.’

• ‘Foreign firms have found it virtually impossible to get audiences with Chinese officials to explain their legal obligations in America, says a government-relations expert.’