Why you should care

Companies are choosing not to ruffle feathers with a sensitive China. 

In February, German car company Daimler found itself having to deal with a reputational crisis in China. Its subsidiary Mercedes-Benz had used a quote from the Dalai Lama in a post on its main Instagram account.

“Look at the situation from all angles, and you will become more open,” said the post, promoting a white Mercedes. Beijing sees the exiled spiritual leader of Tibet as a dangerous separatist and the Instagram post prompted criticism on Chinese social media, even though the picture-sharing app is officially blocked in China. Daimler swiftly issued not one but two apologies, after the first was deemed “insincere” by the People’s Daily.

In April, the Civil Aviation Administration of China demanded that 36 foreign airlines change their websites to list Taiwan as a region of China rather than as a country, threatening that their operations could be disrupted if they did not comply.

A month later, U.S. clothing retailer Gap was targeted after a post on Weibo, the Chinese social media network, pictured one of its T-shirts showing a map of China that omitted Taiwan, south Tibet and the South China Sea. Although the photo was reportedly taken in Canada, Gap issued an apology.

The climbdowns by multinationals are part of a string of incidents that demonstrate global groups are finding themselves in an awkward position as they try to balance the demands of a more assertive China and potential damage to their image in their home markets if they are seen to be conceding to Beijing.

Although Beijing previously tolerated companies referring to Taiwan as a region, it is now demanding that they list it as a part of China. “They’ve taken away the wiggle room,” says Kenneth Jarrett, head of the U.S. Chamber of Commerce in Shanghai.

Chinese regulators had previously publicly reprimanded several foreign corporations, including Zara, Marriott and medical devices company Medtronic, for labeling Tibet or Taiwan as independent countries on their websites or in customer communications. In Marriott’s case the hotel group’s Mandarin-language Chinese site was temporarily shut down by authorities.

There’s a lot of fear. Companies are all trying to figure out if anything they’ve done is wrong.

Shaun Rein, China Market Research Group

Most companies targeted appear to have tried to accommodate Chinese demands by apologizing and amending references to Taiwan, for example, to read “Taiwan, China.”

“There’s a lot of fear. Companies are all trying to figure out if anything they’ve done is wrong,” says Shaun Rein, founder of China Market Research Group, a Shanghai-based consultancy. “They are looking at their websites … not just their own but also their suppliers’,” he adds.

The White House waded into the dispute in early May, calling Beijing’s demands “Orwellian nonsense,” and stating that Beijing’s demands were “part of a growing trend by the Chinese Communist Party to impose its political views on American citizens and private companies.”

Beijing responded by saying foreign enterprises operating in China should respect its sovereignty and territorial integrity.

Taiwan’s Ministry of Foreign Affairs, however, thanked the U.S. for its statement and called on the international community to stand up to China’s “unreasonable demands.”

That appears to be easier said than done. Beijing’s increased assertiveness over territorial issues coinciding with the U.S. administration’s decision to take a tougher stance toward Beijing on trade had been a “nightmare” for multinationals that had significant interests in China and the U.S., says James Robinson, managing director of the Shanghai office of APCO, a consultancy.

Companies “are facing a new type of ‘geocommercial’ risk as they become entangled in competing geopolitical and geoeconomic agendas,” he says. “Reconciling these expectations is becoming more and more difficult for companies. Failure to effectively navigate them will cause legal jeopardy and reputational damage, and could ultimately lead to exclusion or expulsion from large and important markets.”

But Tom Doctoroff, a partner at Prophet, a U.S.-based marketing consultancy, says Beijing’s intervention has so far been just a “minor irritation” to multinationals. “China has always been extremely sensitive when it comes to its territorial integrity,” he says. Recent events underlined the importance of making sure that marketing and other materials were vetted by staff with knowledge of the Chinese market, Doctoroff adds. “China is a market with a completely different worldview from the West … it’s imperative that how you go to market is localized,” he says.

Beijing’s uncompromising stance comes as discomfort grows in some quarters about China’s push to spread support for its governance model outside its borders, notably in Australia, where a debate over “Chinese influence” has grown increasingly heated.

Maya Wang, senior China researcher at Human Rights Watch, says Beijing has shown an “increasingly long-armed reach” to push self-censorship on companies, performers, organizations and governments.

“The Chinese government’s efforts to impose its worldview on other countries are very powerful and organized,” Wang says. “This is an unprecedented level of power used to impose [China’s] view on the rest of the world. It’s quite extraordinary.”

Additional reporting by Edward White in Taipei and Alice Woodhouse in Hong Kong.

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By Tom Hancock

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