Beijing Winter Olympics sponsors face a $150 billion dilemma

China denies any forced labour in the western province, calling the allegations the “biggest lie of the century.” It says its policies are lifting the region out of poverty, boosting the economy and countering extremism.

‘Sportswashing’

Human rights advocates disagree, and they say the companies that support the Beijing Olympics are helping China use sports to distract from what’s happening in Xinjiang. Human Rights Watch calls it “sportswashing.” “The Chinese government is unquestionably using the winter Olympics to hide their abuses and to imply that the world approves,” the organisation says on its website.

Firms may find it hard to stay out of the fray, no matter what they do or don’t say. “A lot of these companies have branded themselves as tolerant and diverse – they believe in Black Lives Matter, they believe in voters’ rights,” said Strategy Risks founder Isaac Stone Fish. “There’s no risk-free strategy for any of them.”

The risks of doing business in China have risen significantly, as companies have learned the hard way. In the spring, consumer companies including Nike, Adidas, Fast Retailing’s Uniqlo and Swedish retailer Hennes & Mauritz saw their China sales hit after they criticised the treatment of Muslim workers in Xinjiang.

“Companies will find it challenging balancing the sensitive needs of Chinese consumers with increasingly vigilant watchers in the West, both of whom can have a material impact on revenue,” said Mark Tanner, managing director of Shanghai-based marketing and branding firm China Skinny, whose clients include Ikea, Colgate-Palmolive and Nike.

The revenue analysis excluded the Beijing Olympics’ top Chinese sponsor, Alibaba Group, and Visa, which hasn’t been approved for bank card clearing services in the country. France’s Atos SE has several offices across China but doesn’t make public information about its revenue there. The company declined Bloomberg’s requests for more details.

COVID cover

China’s strict pandemic control measures also blunt some of the potential impact of a diplomatic boycott, said Joerg Wuttke, head of the European Union Chamber of Commerce in China. They also mean “a toned down event from the business side.”

Ordinarily, companies would use the events to entertain top clients and partners. As of now, China said it will sell tickets for the Games, but only people who live in China are allowed to attend, and that Beijing will conduct the games in a so-called “closed loop”. Those measures and others make it a lot harder – and less fun – to play host at the games. Elsewhere, China currently still requires international travellers to quarantine for 21 days upon arrival.

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Omega said that given restrictions due to the pandemic, the watchmaker is likely to “limit the number of marketing staff on-site, as well as social activities or events that could present a risk to guests and staff.”

Regardless of pandemic restrictions, sponsoring companies will still be under pressure at home to account for their Chinese operations. Legislation critical of China’s Xinjiang policies is on the docket for US lawmakers, which raises the stakes, at least for the US companies. As much as they don’t want to anger Chinese consumers, Stone Fish said, they also don’t want high-profile politicians to turn them into “the poster child for helping out the Chinese Communist Party.”

Bloomberg