For companies, winning in China now means losing elsewhere

WASHINGTON – Companies often go to great lengths to sponsor the Olympics because it helps their business and reflects well on their brand. But this year, with the Olympics in Beijing, Procter & Gamble has to pay even more to try to stem any negative effects associated with China’s repressive and authoritarian government.

The company, one of 13 “global Olympic partners” that make global sports competition possible, hired Washington lobbyists last year to successfully defeat a law banning sponsors. of the Beijing Olympics sell their products to the US government. The provision would block Pampers, Tide, Pringles and other Procter & Gamble products from military commissions, to protest the companies’ participation in an event seen as legitimizing the Chinese government.

“This amendment will punish P.&G. and the Olympic movement, including US athletes,” Sean Mulvaney, Procter & Gamble’s senior director of global government relations, wrote in an email to Congressional offices last August.

Some of the world’s biggest companies are finding themselves in an uncomfortable situation as they try to bridge the widening political gap between the United States and China: What’s good for doing business in an increasingly modern country? becomes a legal liability in the other country.

China is the world’s largest consumer market, and for decades Chinese and American business interests have described their economic cooperation as a “win-win relationship.” But gradually, as China’s economy and military grew, Washington took the view that a victory for China was a loss for the United States.

The decision to host the 2022 Olympic Games in Beijing has turned sponsorship, often one of the marketing industry’s most prestigious opportunities, into a minefield.

The companies that sponsor the Olympics have drawn criticism from politicians and human rights groups, who say such contracts imply implicit support for the Communist Party’s atrocities China, including human rights violations in Xinjiangmedia censorship and mass surveillance of dissidents.

“One thing that our businesses, universities, and sports federations don’t seem to fully understand is that, to beat the CCP, you would have to turn into a pig,” said Yaxue Cao, editor member of ChinaChange.org, a website that covers civil society and human rights, tell Congress in the first day of this month.

Tensions are brewing in other regions, including Xinjiang, where millions of ethnic minorities have been detained, persecuted or forced to work in fields and factories. In June, the United States will enact a sweeping new law that would extend restrictions on Xinjiang, allowing the United States to block imports made with any materials originating from that region.

Multinational companies trying to comply with these new import restrictions have faced costly backlash in China, which denies all charges of genocide. H&M, Nike and Intel all fell into public relations disaster for trying to remove Xinjiang from their supply chains.

More severe penalties may apply. Companies trying to sever ties with Xinjiang could be in violation of China’s anti-sanctions law, which allows the government to crack down on companies that comply with foreign regulations it considers discriminatory to China. Country.

Beijing has also threatened to put companies that cut off supplies to China on an “unreliable entity list” that could lead to penalties, although so far the list does not appear to have any members. which pill.

“Companies are in the midst of a rock and a difficult place when it comes to compliance with US law,” said Jake Colvin, President of the National Council of Foreign Trade, which represents companies doing international business. and China.

President Biden, though less hostile than his predecessor, has maintained many of the tough policies introduced by President Donald J. Trump, including heavy tariffs on Chinese goods and export restrictions. sensitive technology exports to Chinese companies.

The Biden administration has shown little interest in creating commercial deals to help companies do more overseas. Instead, they are recruiting allies to increase pressure on China, including boycotting the Olympics, and advertising investment in production and scientific research to compete with Beijing.

The pressures don’t just come from the United States. Companies increasingly face a complex patchwork around the globe with export restrictions and data storage laws, including in the European Union. Jim McGregor, APCO Worldwide’s Greater China President, says Chinese leaders have begun to pursue a “wolf warrior” diplomacy, in which they are trying to teach other countries to think carefully before crossing China.

He said his company is telling customers to “try to be compliant but don’t make a fuss about it. Because if you make a fuss about compliance in one country, another will come after you. ”

Isaac Stone Fish, chief executive officer of Strategy Risks, a consulting firm, said some companies are responding by shifting sensitive activities – like research that could trigger China’s anti-sanctions laws. , or audit activities in Xinjiang – out of China.

Others, like Cisco, have scaled back their operations. Some have left China altogether, though often not on the terms they would choose. For example, Micron Technology, a chip maker that was once victims of intellectual property theft in China, is shut down a chip design team in Shanghai after competitors hunted down their employees.

“Some companies are taking a step back and realizing that this is probably more trouble than it’s worth,” said Mr. Stone Fish.

But many companies insist that they cannot be forced to choose between two of the world’s largest markets. Tesla, counts China as one of its biggest markets, opened a new showroom in Xinjiang last month.

“We can’t leave China, because China represents some industries as much as 50% of global demand, and we have deep, deep sales and supply relationships.” Craig Allen, Chairman of the US-China Business Council said.

Companies see China as a strong foothold to serve Asia, Allen said, and China’s $17 trillion economy still presents “some of the best growth prospects anywhere.” “.

“Very few companies leave China, but all feel the risk and they need to be extra cautious to meet their regulatory obligations in both markets,” he said.

American politicians of both parties are increasingly inclined to force companies to choose a side.

Representative Michael Waltz, a Florida Republican who proposed a bill that would prevent Olympic sponsors from doing business with the US government, said: “For me, it’s completely appropriate to let the companies do business. This company chooses.

Mr. Waltz said that attending the Beijing Olympics sent a signal that the West was willing to turn a blind eye to China’s atrocities for short-term profit.

Mr. Waltz said the final amendment was cut from the defense spending bill last year after active and aggressive lobbying by Procter & Gamble, Coca-Cola, Intel, NBC, the US Chamber of Commerce Ky and others, Mr. Waltz said.

Procter & Gamble’s lobbying disclosures show that between April and December last year, it spent more than $2.4 million on domestic and foreign lobbyists to try to sway it. Congress on a range of tax and trade issues, including Beijing Winter Olympics Sponsor Accountability. Act.

The lobbying disclosures for Coca-Cola, Airbnb and Comcast, NBC’s parent company, also indicate that the companies have lobbied on issues related to the Olympics or “fitness programs.” sports” last year.

Procter & Gamble and Intel declined to comment. Coca-Cola said it explained to lawmakers that the legislation would harm US military families and businesses. NBC and the Chamber of Commerce did not respond to requests for comment.

Many companies argue that they sponsor this year’s Olympics to show support for the athletes, not China’s government system.

During a hearing before Congress in July, where executives from Coca-Cola, Intel, Visa Inc. and Airbnb also talk about their sponsorship, Mulvaney said Procter & Gamble is using its partnership to encourage the International Olympic Committee to incorporate human rights principles. oversee the Olympics.

“Donors,” said Anna Ashton, a senior fellow at the Asian Institute of Social Policy at an event organized by the Center for Strategic and International Studies, a Washington think-tank. The business is being judged as a bit unfair here.

The companies were contracted to support multiple iterations of the Olympics and had no say over the venue, she said. And the funding they provide is going to support the Olympics and the athletes, not the Chinese government.

“This time around, funding is hardly an opportunity for companies,” she said.