If history is a guide, China’s boycott of H&M, Nike, and other Western brands may blow over

March 30, 2021, 11:08 AM UTC

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Hong Kong’s South China Morning Post reported Monday that Chinese efforts to mobilize a nationwide boycott against Nike and Adidas already seem to be “losing steam.”

The two Western sports apparel giants were among the slew of global brands targeted for condemnation—on China’s social media, in state-owned press, and by dozens of Chinese celebrities—last week after the Communist Party’s youth wing blasted Swedish retailer Hennes & Mauritz for stating last year that it would no longer purchase cotton from China’s northwestern province of Xinjiang because of concerns about forced labor.

The Communist Youth League’s post, published Wednesday, triggered a tsunami of nationalist outrage—and quickly engulfed other international fashion brands that have made similar statements. Among the victims: Burberry; Calvin Klein; Spain’s Inditex, owner of Zara; Swedish home furnishings giant IKEA; and Japan’s Fast Retailing, the parent company of Uniqlo.

State broadcaster China Central Television stoked consumer ire: “For enterprises that touch the bottom line of our country, the response is clear: don’t buy!

H&M products promptly disappeared from China’s major e-commerce platforms including Alibaba and JD.com. The locations of H&M’s more than 500 retail outlets in China were erased from map services offered by Alibaba and Baidu, China’s leading search engine. Landlords in at least six lower-tier cities forced H&M to close their stores.

And yet in the major cities, H&M stores remain open. And by Sunday, the Post reports, Nike and Adidas products were widely available on all major Chinese e-commerce platforms. Meanwhile, China’s premier, Li Keqiang proceeded as scheduled with a visit to the plant of a German-Chinese joint venture that makes chemicals used by both brands.

Nike, like H&M, has said it doesn’t source cotton from Xinjiang. Michael Schuman argues in Bloomberg that the U.S. sportswear maker is getting lighter treatment than H&M because its products are so popular—accounting for more than a fifth of the Chinese sportswear market. He suggests the controversy over Xinjiang cotton will eventually blow over.

“The reality on the ground,” Schuman writes, “is that Beijing can’t afford to toss so many foreign companies out of China over Xinjiang cotton or anything else. The leadership still likes to appear open to foreign investment, and the employment, capital and technology it brings, and can’t risk scaring off the international business community at a time when global attitudes towards China are already souring.”

There’s some precedent for that view. In 2016, China tried to strong-arm South Korea into rescinding a decision to deploy a U.S. missile defense system China considered a security threat by punishing Korean businesses. Beijing orchestrated a boycott of autos, electronics, tourism—and even scuttled tours of popular K-Pop bands. China eventually abandoned the campaign, though a primary corporate target, the Lotte Group, was forced to retreat from the China market.

Similarly, Japanese auto and electronics manufacturers were swept up in Chinese consumer boycotts—and a wave of violent anti-Japanese protests—in 2012 after a series of confrontations between the two nations involving disputed islands in the East China Sea. Eventually tensions eased, and Japan’s largest manufacturers, including Toyota, Nissan, and Sony[/hotline], continue to operate large and successful joint ventures in China. (Notably, Japan is the only member of the Group of Seven nations not to call for sanctions against China over human rights violations in Xinjiang.)

And then there’s the case of the National Basketball Association, which provoked nationwide indignation in 2019 after the Houston Rockets then-general manager Daryl Morey tweeted—then deleted—a picture expressing support for Hong Kong democracy protestors. NBA games were yanked from Chinese television, and NBA merchandise disappeared from Chinese stores, jeopardizing the league’s $4 billion business in the country. A year later, CCTV announced that it had resumed streaming NBA games.

As Schuman argues: “The NBA is simply too popular, and too lucrative, to obliterate over a tweet.”

But a similar argument could be made for the West’s economic dependence on China. Editors at the Economist contend the notion of the West fully disengaging with China is a fantasy because it would impose steep price increases on Western consumers and depress crucial U.S. and European industries including tech, autos, banking, and luxury goods. “Engagement with China is the only sensible course,” editors conclude, “but how does it avoid becoming appeasement?”

Increasingly CEOs and investors, not just politicians, must grapple with that question. In an opinion piece for the Wall Street Journal, Matthew Pottinger, former deputy national security adviser in the Trump administration, concurs that “wholesale decoupling” of the U.S. and China is impossible. Instead, he advocates a “selective decoupling” focused on the technology sector—and urges U.S. CEOs to get with the program.

“The Communist Party’s leaders are right about one thing,” Pottinger warns. “American CEOs, their boards and their investors have to decide which side they want to help win.”

More Eastworld news below.

Clay Chandler
– clay.chandler@fortune.com

This edition of Eastworld was curated and produced by Eamon Barrett. Reach him at eamon.barrett@fortune.com



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$20 billion

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