As months of pro-democracy protests play out in Hong Kong and a growing list of American brands and public figures find themselves swept up in debates about free speech and Chinese government censorship, a glaring light is shining on a tangled web of political, social and corporate challenges.
Yet, even the most controversial issues in public discourse tend to have some areas where it’s not difficult to find common ground.
One: Democracy, free speech and equality are tenets of American values and culture.
Two: American consumers increasingly expect brands to take a stance on the social and civic issues that their consumers are passionate about.
Three: China’s authoritarian government and the rules it enforces regarding free speech run counter to many core Western principles.
But that might be where the simple nature of the core conversation ends.
In the four decades since China embarked on a string of transformative economic reforms, which opened up the country to international business relations and investment, scores of American firms have fully embraced the multibillion-dollar potential of the Chinese economy.
Shoe companies, which flooded China’s manufacturing sector with orders, were certainly no exception. More recently, a growing Chinese consumer appetite for branded wares and a burgeoning middle class with disposable income have presented new opportunities for global corporations to tap into China’s retail market.
Now in one fell swoop (or tweet) it seems years of China-American business dealings are being called into question. The National Basketball Association, superstar athlete LeBron James and global athletic behemoth Nike have all shouldered overwhelming criticism for what social media users and some political figures view as their kowtowing to Chinese censorship in order to maintain business relations.
But beyond the headlines, long-term solutions and next best steps have been hard to come by.
On one hand, there are those like Dan Gainor, VP of business and culture at the conservative Media Research Center, who believe U.S. corporations were ill-advised to do business with China in the first place. “All the companies are bad about this: Anybody who is doing business in China right now has made compromises normal people wouldn’t make,” Gainor said.
Still, many who share Gainor’s view also acknowledge that capitalism — similar to values like free speech — is an integral part of the United States ecosystem.
And China represents big business.
“There are [upwards of] 300 million people in the U.S. and there are four times that in China, so if you can get China interested in the NBA, of course, that’s what you want to do if you’re the NBA,” Gainor added. “But if you partner with autocrats who locked up a million people, you’re going to suffer for that.”
Perhaps this is the crux of the problem: Decades of business dealings have finally run up against a crucial “cultural clash,” as Matt Priest, president and CEO of the Footwear Distributors & Retailers of America, put it. “I’m of the mind-set that the more American companies are active globally, the more our values will be exported around the world: American companies should have a presence in China,” Priest said. “[However], now we’ve found ourselves at a crossroads where we’re trying to grapple with a broader geopolitical issue that ultimately comes head to head with a brand’s ability to continue to provide opportunities for self-expression to its consumers and for its identity while, at the same time, wanting to make sure it still has the opportunity to sell product in a society.”
While many Western companies are likely shouldering this challenge amid the Hong Kong pro-democracy protests, few are as connected to the business and marketing perils it presents as Nike is. The athletic behemoth is both the leading athletic company in China (with a 22.1% market share, according to a 2016 Euromonitor report) and the exclusive on-court uniform provider to the NBA.
Greater China — which includes mainland China, Hong Kong, Macao and Taiwan — has driven double-digit revenue growth for the brand over 21 consecutive quarters, including 27% growth last quarter. Meanwhile, its leadership has looked to further fortify the brand’s position through targeted efforts, including the launch of the Nike app this year.
At home, Nike has staked its claim as a provocative marketer and staunch supporter of athletes everywhere and the sometimes-controversial causes that drive them, notably in the cases of Colin Kaepernick and Black Lives Matter.
However, these recent events — and Nike’s purported silence about the Hong Kong-China situation — has led both consumers and politicians to question the authenticity of Nike’s marketing.
“The consumer has told us that they want brands to take visible stands on social issues. They’ve made that very clear. And while there is some risk in the U.S. of brands taking a stand — because not all consumers are going to agree with them — if they understand their own consumer well, they’re going to support stances their consumer supports and [likely end up successful],” explained Matt Powell, VP and senior industry advisor at The NPD Group. “But when you get outside the U.S., it gets murkier.”
Still, acknowledging that things can get testy for companies that do business overseas is not a “get out of jail free” card for those firms.
“I don’t think brands can back down from the transparent position that they’ve established here in the U.S., and that’s why we’re seeing this backlash,” Powell added.
It’s a tale of two objectives, according to Gainor, who said Western companies can’t expect to “have it both ways.”
“Companies have an obligation to their shareholders,” he explained. “It’s a two-edged sword: On one hand, people say you’re responsible for making money. On the other hand: In the West, there’s a massive [expectation] for companies to become social-justice oriented.”
But because American brands like Nike and organizations such as the NBA are so deeply rooted in China, FDRA’s Priest points out that, should companies take a stance, another social or human crisis could easily surface, not the least of which is a loss of American jobs connected with the China business.
“Brands have to make a decision about what’s important to them and what their brand identity is,” added Priest. “We’re not going to solve every single geopolitical flare-up that happens among countries. But as Americans, we believe in the ability to sell product, grow business, provide opportunity and expand and meet the needs of consumers all over the world — and, thus, support American jobs. If we have that opportunity cut off, that will create challenges for growth.”
And while Nike has been criticized for its current silence, Powell suggests that approach might be the way to go — at least in the short term.
“This is not NFL fans saying they’re not going to buy Nike anymore because of the Colin Kaepernick situation. This is serious. This is not just about people — this involves government,” Powell said. “A brand needs to spend a lot of time thinking about what their response should be and, at the same time, recognize the legacy of what they’ve had to say about other issues. I think Nike is right to be somewhat circumspect.”