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Asia300

Can multinational retailers remain politically neutral in greater China?

HONG KONG -- China's vast population with its rising spending power is courted by retailers and international brands all over the world. But the recent controversy around French cosmetic-maker Lancome's cancellation of a concert featuring pro-democracy Hong Kong singer Denise Ho underscores the complexity of corporate diplomacy in an increasingly China-centric marketplace.

Pressure has been mounting on Lancome to reconsider its decision to call off the concert since the row broke out on June 6. Lancome's cancellation came after Chinese state mouthpiece the Global Times censured Ho for allegedly endorsing separatism of the former British colony on microblogging site Weibo. Lancome's move was seen as "kowtowing" to Beijing at the expense of freedom of speech, equality and justice.

"If a company is forced to choose between Hong Kong and China, Hong Kong will surely lose out," said Kin-ming Liu, a veteran journalist turned public affairs consultant. "This is not an ideological choice, but a commercial one. International companies just can't afford to upset the mainland Chinese market."

While Hong Kong and French supporters of Ho called for a boycott of all products made by Lancome's parent L'Oreal, netizens in mainland China, the second largest market for the French group, are boycotting all brands that sponsor Ho, including mouthwash Listerine and its parent Johnson & Johnson.

The fury of the Chinese has even descended on the businesses of the wealthiest man in Hong Kong, Li Ka-shing. Music app Moov -- owned by PCCW which is run by Li's son, Richard -- said earlier it would "permanently employ" Ho. As Chinese netizens called for a boycott of all businesses owned by the Li family, the younger Li was prompted to proclaim his staunch opposition to "the independence" of the city.

But Ho and Li aren't the first to come under pressure. The Chinese government is aware of its commercial clout and has always been ready to wield it as a weapon against what it perceives as offenses.

Long grudge

"We have had a well-documented boycott on us since 2004 after the Article 23 issue," said Mark Simon, a senior executive of Next Digital, which runs Apple Daily, an acerbic anti-establishment newspaper in Hong Kong. Simon was referring to a contentious law the Hong Kong government tried to pass in 2003 to criminalize perceived subversion against the Chinese government.

Article 23 drove hundreds of thousands of people to the streets on July 1, the foundation day of the special administrative region. In the run-up to the demonstration, publications under Next Digital, then called Next Media, relentlessly campaigned for the rally, while giving out free protest accessories such as posters and stickers.

"We have since that time been boycotted by all China companies, airlines, banks, travel and all [state-owned enterprises]. We were also put out by local real estate companies," recalled Simon.

In the autumn of 2014, Standard Chartered Bank, HSBC, and Bank of East Asia pulled out of Apple Daily after having advertised in the paper since its inception. "I was personally told by two that it was politics of the 'Umbrella,'" said Simon, referring to the 79-day sit-in against the meddling by the National People's Congress in Hong Kong's electoral system in 2014. "The Chinese made no secret we were not China-approved in ways much much more overt than [in the case of] Denise Ho."

Simon said multinational retailers had yet to pull advertisements from Next Digital, but he was not surprised by the pressure heaped on Ho by Lancome. "China has done worse to others," said Simon, comparing Ho with Taiwan-born Korean popstar Chou Tzu-Yu, who in January was forced to apologize over brandishing the flag of Taiwan on a South Korean television show. "Ad boycott or canceled concert, same driver -- fear of China," said Simon.

Some public affairs specialists point out that mainland China will always hold sway over multinationals. Some shops had certainly shown a preference for mainlanders over Hongkongers. For example, in 2012, a crowd of over 2,000 protested outside a prominent Dolce & Gabbana branch after security guards allegedly banned Hongkongers from taking shopfront photos but allowed mainlanders to. In the same year, a cafe owned by France-based Agnes b. caused an uproar when it printed menus only in English and simplified Chinese, which is used on the mainland but alien to Hongkongers who use the traditional form.

Public affairs consultant Liu said the different value systems across greater China meant that multinationals had to be cautious with their communications strategy and think beyond any local markets. "I really doubted Lancome was unaware of Denise Ho's doings outside her performance career," said Liu, referring to Ho's arrest during the Umbrella Revolution and subsequent visit to the Dalai Lama, the religious leader seeking Tibet's independence from China. "It's possible that Lancome hired Ho because of her political deeds, which somehow appealed to the Hong Kong market."

In a similar vein, the Hong Kong arm of U.S.-based razor-maker Schick posted on Facebook a satirical cartoon of bearded pro-democracy activist Ken Tsang with a tagline: "Is it fair? Got beaten up in spite of my nicely grown beard." The caricature alludes to his videoed assault by seven policemen in a dark alleyway during the Umbrella Revolution and earned thousands of "likes" in just a few days.

Liberte, egalite, fraternite?

Some French natives in Hong Kong are incensed by the Lancome-Denise Ho incident. "This is outrageous," said a French language teacher at a community college in Hong Kong, who claimed she had signed the petition launched by retired philosophy professor Beatrice Desgranges on Change.org to press Lancome to repeal its decision. As of June 14, the petition has garnered more than 83,000 signatures.

"Government meddling in business is obviously not right," said a Hong Kong-based French businessman running a global home decoration chain. "But retail brands, especially those targeting the mass market, should be apolitical anyway."

Others said big companies should be a positive influence. "Many multinational consumer brands have placed the bulk of their attention on market share growth and winning consumers over when developing their communications strategy. Some may be less cognizant of the latest sociopolitical sensitivities," said Clara Shek, managing director at Ogilvy Public Relations. Shek said that in today's interconnected, global society, the better option would be communicating universal values that are "inclusive" and "positive."

Lancome Hong Kong's public relations is now handled by L'Oreal's headquarters in Paris. Apart from paying damages to Ho, the group has thus far remained reticent on the subject. Its international media relations manager declined to comment on any of the questions raised by Nikkei Asian Review in an email.

In an interview with U.K.'s BBC on June 8, Ho said: "I am quite shocked that a global brand such as Lancome, they would succumb to the pressure from the Chinese tabloid, news, the Chinese market. Actually in Hong Kong, these two years, we have been going through really rough times. Most of the celebrities, we wouldn't dare to speak out for ourselves."

Since that interview, L'Oreal's shares have shed more than 4% to 161.40 euros ($181.18) apiece as of June 13.

"International brands that think they can play a sophisticated political or diplomatic game and navigate treacherous waters without consequences are deluding themselves," said David Schlesinger, founder of Tripod Advisors, a media consultancy. "They basically have a choice: either take a principled stand and accept the consequences, or studiously stake out a strictly apolitical line in terms of statements, actions, spokespeople and events."

"Lancome seems to have chosen the worst possible middle way: neither principled nor apolitical," said Schlesinger.

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