American Brands Are Trying To Play Both Sides of the NBA-China Dispute. Good Luck

It is difficult to find a compromise position when consumers on both sides view capitulation as the only acceptable option. JL


Terry Nguyen reports in Vox:

As major companies find themselves mired in the conflict, they’re forced to make a choice. Brands are struggling to weigh the loss of customers from China’s vast market against supporting traditionally American, pro-democracy values. It’s a paradox in which espousing the principles of capitalism could mean losing out on profits. For now, that trade-off doesn’t appear to be good for business.

Hong Kong’s massive anti-government demonstrations began in June, when protesters rallied against an extradition bill that could bring Hong Kong residents into mainland China’s legal system. Since then, the conflict has escalated, leading to violent confrontations between protesters and police, major transportation shutdowns, and ongoing unrest.

Protesters are fighting to determine the democratic future of Hong Kong, which means challenging the Beijing-backed local government and China itself. (Hong Kong’s chief executive is chosen through an election committee that’s composed mostly of Beijing loyalists.)

Hong Kong has historically been seen as a Western-friendly hub for American business interests, spanning back to the mid-19th century. The region was a British colony until 1997, when its sovereignty was transferred back to China’s Communist Party under the terms of the Sino-British Joint Declaration.

Under the agreement, Hong Kong was to maintain a free market system and liberal trade policies — key points of interest for the US, according to a 1996 memo written by Richard Mueller, former US Consul General to Hong Kong. The memo also expressed the US’s vested interest in Hong Kong’s autonomy and its development into a democracy.

At a United Nations meeting in September, President Donald Trump backed Hong Kong and said he expects China will “protect Hong Kong’s freedom, legal system, and democratic ways of life.”

The protests have since taken a violent turn during the week of China’s 70th anniversary celebration of its Communist regime. An 18-year-old was the first protester to be shot by Hong Kong police, and the government issued a ban on face masks. These escalations have captured overseas attention, and American businesses — some operating in both Hong Kong and China — have found themselves entangled in the standoff.

It kicked off, as things do these days, with a tweet. On October 4, Daryl Morey, the general manager of the Houston Rockets, tweeted a pro-democracy message in support of the Hong Kong protesters. He was subsequently subtweeted by his boss and was forced to delete his tweet and apologize.

The National Basketball Association has distanced itself from his views in an effort to appease Chinese fans and their government. But the damage had already been done: The Chinese Basketball Association announced it will suspend work with the Rockets and the team has lost at least two Chinese sponsorships. Lawmakers from both parties also swiftly condemned the NBA on Twitter for its stance.

On Tuesday, Activision Blizzard, one of America’s biggest gaming companies, suspended a professional Hong Kong-based player for vocally supporting his country’s liberation movement. As Vox’s Zack Beauchamp points out, Blizzard’s userbase is “overwhelmingly non-Chinese,” but declining overall. He explains that the company “is counting on expansion in the very large Chinese market to reverse the downward momentum.” How successful that play will be remains to be seen.

These are just two examples of the dilemma companies are facing. Businesses could align with the US to back Hong Kong’s pro-democracy protesters and risk alienation from China, the world’s biggest economy. Or, they could sweep the issue under the rug, as the NBA and Blizzard have opted to do, through actions that range from ignoring the conflict to censoring employees’ political opinions.

As major companies find themselves mired in the conflict, they’re forced to make a choice. Brands are struggling to weigh the loss of customers from China’s vast market against supporting traditionally American, pro-democracy values. It’s a paradox in which espousing the principles of capitalism could mean losing out on profits. For now, that trade-off doesn’t appear to be good for business.

Digital giants Apple and Google have removed Hong Kong-related protest apps

Apple and Google have both pulled apps related to the Hong Kong protests from virtual stores this week.

On Wednesday, Apple removed HKMap.live, a real-time crowdsourced map of the city’s protests that was launched by volunteers in early August. In a company-wide memo on Thursday, CEO Tim Cook said that Apple received credible information from the Hong Kong Cybersecurity and Technology Crime Bureau and users in Hong Kong that the app was “being used maliciously to target individual officers for violence and to victimize individuals and property where no police are present.”

In a company statement, Apple determined that the app “has been used in ways that endanger law enforcement and residents in Hong Kong,” which violates its guidelines and local laws. The HKMap.live app was reportedly the most downloaded app in the travel category for Hong Kong, according to the Guardian.

The decision follows the tech giant’s September 30 decision to remove the Quartz News app from China’s App Store because it featured content illegal in China, according to a note Quartz received from Apple. Apple has also received public blowback from The People’s Daily, a newspaper of China’s Communist Party, for “protecting rioters” in keeping the app up. (The company made the decision to remove the HKMap.live app of its own accord, Recode reported.)

The Chinese newspaper also criticized Apple for having the song “Glory to Hong Kong,” an anthem adopted by the anti-government protesters, available for download on the iTunes store, Bloomberg reported.

On Twitter, the developers of HKMap.live countered Apple’s claims, saying that a majority of the user reviews in the App Store said it “improved public safety, not the opposite.”

On October 3, local Taiwanese news sites reported that Apple removed the Taiwanese flag emoji in its recent iOS 13 update for phones sold in Hong Kong and Macau. (The flag had been previously removed for phones sold in China.)

Google removed a mobile game called The Revolution of Our Times from its Google Play store, the Wall Street Journal reported. The game allows players to role-play as a Hong Kong protester and partake in fictionally recreated protests.

The anonymous developer told the Hong Kong Free Press that 80 percent of funds earned from the game would be pledged to Spark Alliance, a legal fund for detained protesters.

A Google spokesman told the Journal that the app violated company policy that prohibits “capitalizing on sensitive events” in an attempt “to make money from ongoing conflicts or tragedies” through a developed game. In response to the removal, Hong Kong-based users of an online forum have accused Google of “appeasing the Communist Party,” the Hong Kong Free Press reported.

Franchise stores like Starbucks are caught in the crossfire

Starbucks, Yoshinoya, and other franchise stores have become prime targets for vandalism by protesters in Hong Kong. Franchises, which are owned by third-party retailers and not directly operated by the corporation, have become a casualty of the protesters’ outrage.

Protesters have directed their anger toward the Hong Kong-based operators of these chains, like Maxim’s Caterers (Starbucks, Shake Shack) and Hop Hing Group (Yoshinoya), who they see as compliant to the Chinese government. They believe major Hong Kong business owners have close ties with Beijing. In August, around 500 of Hong Kong’s business elite and pro-Beijing politicians attended a meeting in Shenzhen, where they discussed the state of the protests.

Protesters taped stickers on a Yoshinoya restaurant after news that the Japanese chain fired employees over a Facebook post that mocked Hong Kong police officers.

Emilio Navas/Getty Images

After rumors that Japanese beef bowl chain Yoshinoya fired employees over a Facebook post that mocked Hong Kong police officers, protesters organized against the shop, the Nikkei Asian Review reported. They taped signs denouncing the store, and at least one franchise was vandalized. Activists were already outraged at Marvin Hung, CEO of Hop Hing Group, for attending a rally for Hong Kong police, the Review reported.

At a United Nations Human Rights Council meeting in September, Annie Wu, the daughter of Maxim’s founder, defended the Hong Kong government’s treatment of the protesters. This incited outrage among protesters, who already perceive Hong Kong’s wealthy to be out of touch with the public. More than 50,000 people have signed onto a Change.org petition calling on Starbucks to cut ties with Maxim’s.

While the caterer also operates other American restaurants, like Shake Shack and the Cheesecake Factory, Starbucks is more commonly a target of vandalism, the Journal reported. This tactic could be a bid for American recognition. According to the creators of the Change.org petition, attracting the attention of the coffee giant’s relatively liberal US leadership and shareholders seemed like a better hope than the rest of Maxim’s portfolio. Maxim’s also has a nearly two-decade-long partnership with Starbucks, operating franchises in Hong Kong, Macau, and other parts of Asia.

So far, the companies haven’t issued an official response on how the protests have affected their franchises.

Fashion brands and houses have distanced themselves from the protests

From fast fashion companies to luxury labels, brands have found themselves struggling to appease customers from both Hong Kong and the largest fashion market in the world, China.

Vans was threatened with boycotts from Hong Kong customers after the skateboarding apparel brand removed a popular entry from its sneaker design competition. The design had multiple elements that referenced Hong Kong and alluded to the anti-government protests: a yellow umbrella that was a symbol for Hong Kong’s 2014 pro-democracy protests, the red five-petal flower on Hong Kong’s flag, and an illustration of protesters wearing yellow shirts, hard hats, and gas masks.

Vans issued a statement on Facebook in Chinese and English to explain why some submissions were removed. “As a brand that is open to everyone, we have never taken a political position and therefore review designs to ensure they are in line with our company’s long-held values of respect and tolerance, as well as with our clearly communicated guidelines for this competition,” the statement read.

In some cases, companies have been unwittingly roped into the conflict and needed to quickly clarify their corporate stances. On September 2, several Zara stores were opened hours later than usual on the day thousands of Hong Kong students went on strike. According to BBC, a Hong Kong-based newspaper published a photo of a sign at a Zara store, which indicated that it would be closed that day.

This led Chinese social media users to speculate that delayed openings were done in solidarity with the protesters. Zara soon apologized for the “misunderstanding” in a statement posted to Weibo, a Chinese social media site. The fast fashion brand’s parent company told CNN that “transportation difficulties” caused the late store openings.

Protesters hold open umbrellas inside a train to disrupt public transit during a September 2 protest.

Philip Fong/AFP/Getty Images

Any official or unofficial corporate behavior has the potential to be politicized. Mainland Chinese customers seized on Tiffany’s latest ad campaign, accusing it of promoting a pro-Hong Kong message. The ad, which has since been removed, featured Chinese model Sun Feifei using her right jeweled hand to cover her right eye, a pose similar to what protesters have adopted in protest. A Tiffany spokesman told the AFP that the ad was created in May and was not “intended to be a political statement of any kind.”

A number of designer fashion labels, including Versace, Coach, Givenchy, and Calvin Klein, have publicly apologized to China over references to Hong Kong, Taiwan, and Macau on their websites and items of clothing. These territories operate under China’s “one country, two systems” policy, and the brands had listed them as independent countries, which angered Chinese consumers online.

A backlash on Chinese social media sites ensued, with multiple high-profile Chinese models and brand ambassadors ending their contracts with the brands. Donatella Versace took to Instagram to apologize, writing in a caption: “Never have I wanted to disrespect China’s National Sovereignty and this is why I wanted to personally apologize for such inaccuracy and for any distress that it might have caused.”

As China emerges as one of the fastest-growing markets for luxury goods, fashion labels are realizing that an offending message could cost them their reputation and, consequently, their bottom line.

These once-unusual public apologies and statements of regret are coming from a swath of American companies. But Chinese customers are wary of official corporate statements, judging by their social media responses to Zara, Tiffany’s, and the NBA; they see these public apologies as an insincere form of damage control for a Western company that has disrespected their national identity.

At the same time, these statements can have a negative ripple effect at home: In an era when more and more US brands are showcasing liberal politics to domestic customer acclaim, coming out against citizens protesting their government is unlikely to result in good PR.