“We are working together with our colleagues in China to do everything we can to manage the current challenges and find a way forward,” H&M said in a statement Wednesday.
“These companies are just squeezed in the middle and there is no magic answer,” said James McGregor, chairman of consulting firm APCO Worldwide’s greater China division. “I think China’s feeling really threatened by all of these sanctions, and has decided just to hit back as strongly as they can to try to get these companies to influence their governments to kind of tone down and back off.”
A tough-but-prized market
“Accessing the internal market in China has always been the draw,” said Bonnie Glaser, a senior adviser for Asia and the director of the China Power Project at the Center for Strategic and International Studies. “Years ago, when companies first started coming to China — even if they weren’t making money for a number of years — they stayed because eventually the people are going to have more money and going to be able to spend.”
But breaking into China also means winning over notoriously strict regulators who wield vast control over who gets to enter and what they get to do.
Thrust into controversy
“They’re trying to balance between their most important market and their most important growth market, and sometimes they make ethical sacrifices,” Fish added.
The deck is stacked
Foreign businesses are almost always at a disadvantage when it comes to dealing with China.
“The Chinese have huge economic leverage,” Glaser said. “They always do this in ways that they are harming a particular sector or industry or particular company, but where China pays no cost.”
China’s strategy here is to “kill the chicken to scare the monkey,” Glaser said, using a popular Chinese idiom. “They know full well the other countries are watching what’s going on.”
Companies also appear to be learning that they can’t always act in a vacuum when it comes to China — their statements to Beijing and Chinese consumers now often gain traction with other audiences.
The NBA, for example, didn’t just anger Chinese audiences when it attempted to explain the remarks from the Houston Rockets’ Morey about Hong Kong. A lukewarm response from NBA Commissioner Adam Silver that supported Morey “in terms of his ability to exercise his freedom of expression” didn’t just infuriate Chinese audiences; US politicians criticized the organization for not taking a strong enough stand.
Pleasing no one
The Xinjiang issue has made it even more difficult to please everyone at home and in China.
“They feel like they again placated the folks back home. Now all the sudden they have a crisis in China,” Glaser said of the trouble facing such brands.
Nike and Adidas advertising dollars “are very big for Chinese sports,” he said. “There’s Chinese organizations that are very dependent on money from Nike and Adidas and the other sports brands, whereas H&M is just a retailer selling into the market.”
McGregor said that China may be conscious of upsetting the world too much ahead of that time. After all, if tensions come to a boil then the country risks tarnishing its reputation on a massive stage. But that still leaves many companies in a tough spot.
“Most of them are just trying to keep their heads down and get through it right now,” he said.
H&M’s comments on Wednesday, released days after it was swept up in the Chinese boycott, may be indicative of that pressure. The nearly 300-word statement is vague and carefully worded, and stays well clear of saying anything definitive on the enormously controversial issue that landed it in hot water to begin with.