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Can the NBA Split Chinese Consumers From the Chinese Government?

Photo: Kazuhiro Nogi/AFP via Getty Images

In the last few years, as consumers and workers have pressured brands into adopting progressive values and positions, we’ve seen the power of caring: The more credibly you can threaten to take your spending or your labor elsewhere, the more likely you are to get the brand to do what you want.

This is a calculus that has tended to work well for progressives in America. Progressive consumers are willing to organize to put pressure on companies, and brands are especially interested in younger, more urban, and more diverse consumer demographics that lean left. But a progressive advantage in brand activism is not a law of nature, as we see from the highly effective pressure China has applied to American brands to conform to its authoritarian concerns, with the NBA as only the latest example.

China’s big advantage is that it really cares: It is willing to severely punish and restrict companies that do not bend to its will on matters such as expressing that Taiwan and Hong Kong are really and truly part of China. But one thing that is often unclear is who in China is doing the caring: Is a foreign firm being punished in China because of genuine Chinese consumer outrage, or because of outrage among Chinese government officials?

“Sometimes people take the attitude that there isn’t any such thing as Chinese public opinion, that it’s all just the state, and state propaganda determines everything,” says Patrick Chovanec, a China-focused investment strategist at Silvercrest Asset Management and former professor at Tsinghua University in Beijing. “But there is such a thing as Chinese public opinion, and nationalist feeling and sentiment. Such things exist, and would exist under a fully democratic system.”

Chovanec argues some brand blowback in China has genuinely bubbled up from the public, especially when the outrage has little direct link to politics. He cited a Dolce & Gabbana ad from last year that was taken as mocking Chinese people as uncultured, for which the brand’s founders ended up apologizing in Mandarin as they sought to preserve their position in the Chinese market.

But Chovanec also notes that public opinion in China is heavily shaped by government action to amplify acceptable views and suppress undesirable ones, and that organizations that might be expected to make independent decisions in the U.S. are subject to control by the Chinese Communist Party. He says this applies especially in cases where the outrage is specifically related to public policy, as it is in the case of Chinese actions to restrict NBA offerings in China.

“I doubt the Chinese Basketball Association is just making a purely commercial decision here,” he said. “If the Chinese government didn’t want them to do this, they wouldn’t do this.”

We may be about to see something unusual: What happens when China’s desire to discipline a foreign commercial actor runs into Chinese consumers’ desire for a product or service? The NBA seems to have, perhaps by accident, ended up in a position of defiance toward China. How will the Chinese public feel if they lose access to NBA basketball for a significant period as a result?

Caring enough to punish a brand isn’t free. In the long run, China’s capricious punishment of businesses that break with its party line make it a riskier and less desirable place to do business, which hurts growth. This is part of a broader risk for China: Its state-directed economic model is becoming less able to sustain growth as its economy becomes more complex, and an insistence on letting the government continue to arbitrarily tell businesses what to do will cost Chinese consumers more and more wealth over time.

But with the NBA, the costs are a lot more immediate and concrete than a worry about the loss of long-run economic dynamism. Even if the mainland Chinese public tends to agree with their government about the Hong Kong protests — Chovanec says mainland public sentiment that the Hong Kong protesters are “spoiled” is quite real — how much does the Chinese public care about basketball? Are they fixated enough on politics to happily give up the Houston Rockets for an extended period? Or will Chinese officials decide punishing the NBA isn’t worth antagonizing the public in a country with hundreds of millions of NBA fans?

Perhaps by accident, we are about to learn whether American firms have more power in our economic relationship with China than we realized. Our firms very much want access to the Chinese market. But Chinese consumers also want access to our products and services. Our global-market-leading position in basketball is a negotiating advantage in this dispute.

Can the NBA Split Chinese Consumers From China’s Government?