For NBA, China not a slam-dunk

US com­pa­nies walk fine line when do­ing busi­ness with Bei­jing

The Morning Call - - FRONT PAGE - By Mae An­der­son

League try­ing to man­age lu­cra­tive, yet del­i­cate, re­la­tion­ship with coun­try that of­ten ag­gres­sively goes af­ter its de­trac­tors.

NEWYORK— The furor over a tweet by the Hous­ton Rock­ets gen­eral man­ager in sup­port of Hong Kong pro­test­ers is high­light­ing the fine line that U.S. com­pa­nies must walk when do­ing busi­ness with China.

The NBA is try­ing to man­age that del­i­cate re­la­tion­ship af­ter Daryl Morey posted a nowdeleted tweet of an im­age that read “Fight for Free­dom. Stand with Hong Kong,” re­fer­ring to the 4-month-old protests in the semi-au­ton­o­mous Chi­nese ter­ri­tory. That set off an im­me­di­ate back­lash, with China’s state broad­caster can­cel­ing plans to show a pair of pre­sea­son games in that coun­try later this week.

With a pop­u­la­tion of 1.4 bil­lion peo­ple, a rapidly grow­ing mid­dle class and eas­ing eco­nomic re­stric­tions, China is ap­peal­ing to U.S. com­pa­nies look­ing for growth over­seas.

But com­pa­nies must bal­ance the po­ten­tial for growth with the po­ten­tial for pit­falls in deal­ing with a coun­try that ag­gres­sively goes af­ter its de­trac­tors.

Paul Ar­genti, pro­fes­sor of cor­po­rate com­mu­ni­ca­tion at Dart­mouth’s Tuck School of Busi­ness, cau­tions that com­pa­nies should know what they’re get­ting them­selves into when they en­ter a re­la­tion­ship with a coun­try that’s head­ing into 70 years of com­mu­nist rule.

“It has a regime that doesn’t look like the United States,” Ar­genti said. “We can pre­tend it is a democ­racy, but it’s not.”

West­ern gov­ern­ments dis­like China’s at­tacks on com­pa­nies but are un­likely to get in­volved, said David Zweig, a pol­i­tics spe­cial­ist at the Hong Kong Univer­sity of Science and Tech­nol­ogy. So it’s up to com­pa­nies to nav­i­gate sit­u­a­tions them­selves.

Most of the time that means com­pa­nies that face trou­ble quickly ac­qui­esce to Bei­jing, apol­o­gize and try to ”build bridges” in­stead of stand­ing up to China, said Jonathan Sul­li­van, di­rec­tor of China pro­grams at the Univer­sity of Not­ting­ham’s Asia Re­search In­sti­tute.

In 2018, Gap pulled a shirt with a map of China that did not in­clude Tai­wan, a self-ruled is­land that Bei­jing re­gards as Chi­nese ter­ri­tory, and apol­o­gized. Delta Air Lines, ho­tel op­er­a­tor Mar­riott and fash­ion brand Zara have all apol­o­gized to China for re­fer­ring to Tai­wan, Hong Kong or Ti­bet as coun­tries on web­sites or pro­mo­tional ma­te­rial. And Mercedes-Benz apol­o­gized for quot­ing the Ti­betan spir­i­tual leader, the Dalai Lama, in a so­cial me­dia post.

“Ev­ery­one — states and com­pa­nies — seem to ac­cept that they have to tread on eggshells when it comes to China for fear of of­fend­ing them and be­ing pun­ished,” Sul­li­van said in an email. “And they have to con­tort them­selves to do that.”

A rare ex­cep­tion of a com­pany stand­ing up to China is Google Inc., but even the in­ter­net gi­ant had its lim­its. Google shut down its main­land Chi­nese search en­gine in 2010, no longer will­ing to en­force Chi­nese cen­sor­ship by not dis­play­ing foreign web­sites in search re­sults if they were blocked by gov­ern­ment fil­ters. Years later, how­ever, re­ports sur­faced that Google was work­ing on a search en­gine that com­plies with China’s cen­sor­ship laws, dubbed “Dragon­fly,” lead­ing to an out­cry and a protest by hun­dreds of its own em­ploy­ees.

Peter Petri, a pro­fes­sor of in­ter­na­tional fi­nance at the Bran­deis In­ter­na­tional Busi­ness School, said de­spite the risks of deal­ing with China, the coun­try is hard for U.S. busi­nesses to avoid.

“Both coun­tries have huge economies and are the world’s great­est in­no­va­tors — they have too much to sell and li­cense to each other to stay iso­lated in the long run,” he said. “Es­pe­cially in high-tech prod­ucts, China will soon be the largest mar­ket in the world, and Amer­ica’s best com­pa­nies can’t stay global lead­ers with­out a strong pres­ence there.”

China is well aware of its power and in­flu­ence.

And while a tweet may seem in­con­se­quen­tial, the Chi­nese gov­ern­ment’s sub­se­quent out­rage has a chill­ing ef­fect on any­one think­ing of do­ing the same, said Alexan­der Dukalskis, a pro­fes­sor at Univer­sity Col­lege Dublin spe­cial­iz­ing in Asian pol­i­tics and hu­man rights.

“In these episodes, the Chi­nese gov­ern­ment is send­ing a clear sig­nal to other com­pa­nies that if you or one of your ex­ec­u­tives crit­i­cize cer­tain poli­cies, your com­pany risks los­ing large sums of money,” he said.

Over time, com­pa­nies that want to do busi­ness with China learn to cen­sor them­selves — and maybe even their own em­ploy­ees.

Ul­ti­mately, some com­pa­nies may find it’s not worth the pos­si­bil­ity of alien­at­ing U.S. cus­tomers or risk­ing Chi­nese ire by do­ing busi­ness in China, no mat­ter how lu­cra­tive the deals may be. Dart­mouth’s Ar­genti says they must con­sider how their busi­ness in China mea­sures up to their own val­ues and sense of re­spon­si­bil­ity and then de­cide, “Are you will­ing to go to the mat for that, or is it just lip ser­vice?”

“For most com­pa­nies,” Ar­genti con­cedes, “it’s just lip ser­vice.”

ANDY WONG/AP

A shop­per buys clothes from an Amer­i­can cloth­ing store hav­ing a pro­mo­tion sale at a shop­ping mall in Bei­jing in July.

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