China faces its own hurdles if it’s to target US brands
As a trade war looms, one of Chinese President Xi Jinping’s biggest weapons could be boycotts of American brands.
But Xi would be risking collateral damage at home. The China operations of all-American brands ranging from Coca-Cola and McDonald’s to Walt Disney are co-owned by state-backed Chinese firms.
One of Coke’s main China partners is Governmentbacked COFCO. Shanghai Disneyland is part owned by a local consortium, and McDonald’s franchisee in the country is controlled by statebacked conglomerate Citic Ltd and private-equity firm Citic Capital Holdings.
“The perfect Stars-and-Stripes corporate victim doesn’t exist,” said Tom Orlik, chief economist in Beijing with Bloomberg Economics. “The number of big clean wins in terms of striking against the other guy — without accidentally punching your own guy in the face — is extremely small.”
Even when Chinese companies don’t have direct ownership links with US brands, Orlik said, boycotts or other non-tariff retaliation would hit the local partners of those American companies.
Early shots in the trade war are set to be fired tomorrow, with the US scheduled to impose tariffs on US$34 billion ($50b) of Chinese exports. Beijing has said it will place levies on an equal value of US goods, a move that Trump said would lead to additional penalties.
Unlike overt actions like tariffs, boycotts by Chinese consumers appear suddenly and usually follow angry rhetoric by Governmentcontrolled publications and social media. In earlier conflicts with foreign countries, Chinese citizens inflamed by nationalistic news coverage, boycotted highprofile international brands like Toyota and Hyundai, hurting corporate profits and boosting Chinese leverage.
“No US product sold in China, or US company invested in China, can be considered safe from its retaliation,” said Yanmei Xie, a China policy analyst for Gavekal Dragonomics in Beijing.
Besides boycotts, Beijing could consider creating costly administrative bottlenecks for US imports or impose punitive measures against US companies.
If political ties deteriorate sharply, many Chinese looking to do their part probably won’t be too concerned about who owns what, according to Bruno Lannes, a Shanghaibased partner with consultancy Bain & Co.
“I’m not sure Chinese consumers have a real understanding of the ownership structure of companies that do business in China,” he said.
“If they’re told this is a US company or a US product, then they would accept that, even if the majority share is owned by a Chinese company.”