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Business trends

Beijing's Marriott web ban sends warning to multinationals

China's message to fall in line or risk profit loss put foreign businesses on edge

HONG KONG -- China's temporary ban on Marriott International's Chinese websites was a warning to international companies that they must comply with the Communist Party's political agenda if they want to do business in the world's second largest economy. Analysts say foreign entities must learn to walk the tightrope in China.

The authorities' tougher stance on foreign businesses was clearly illustrated last week. On top of U.S. hotel group Marriott, Spanish fashion retailer Zara and American carrier Delta Air Lines were named and shamed in China for listing some of its "inalienable regions" as separate countries. Marriott was ordered to shut down its Chinese websites for a week, and others to make public apologies. Some angry internet users even threatened to boycott those brands.

Outside of China, it is typical for companies to list Taiwan, Hong Kong and Macau -- where people hold different passports from mainland Chinese -- separately from China, but it is specifically the category of "country" under which these territories came that touches on the nerves of Beijing.

Under the leadership of President Xi Jinping, who has cemented his power to a level matching to that of previous strongmen Mao Zedong and Deng Xiaoping, the authorities have become less tolerant of any rhetoric that contradicts their political agenda and in particular, their definition of sovereignty. China's elevation on the world stage due to its size and consumption power has also lent its citizens a cloak of invincibility and superiority. Irate netizens frequently engage in online campaigns to condemn companies they deemed to have slighted China.

The dramatic responses of Beijing and internet users recently would certainly unsettle many executives of multinational companies, who are becoming cognizant of the fact that the "gold mine" could turn to a minefield anytime and a small misstep could cost a big chunk of their international revenue.

"China fired a warning shot across the bow of these companies. They succeeded in their intent," said Alan Hilburg, president and CEO at crisis management consultancy HilburgMalan. He said that "more than any time in history," global brands need an "antenna" tuned into geopolitical sensitivities and local cultural nuances.

To tackle the tougher business environment, Hilburg said international companies should be more careful about their presentation in China where their value systems might not be shared. The companies should have the wisdom to "see and respect completely different values while not judging them," he added.

Mark Rushton, senior director in strategic communications practice at FTI Consulting said that sensitivities are so heightened that it was easy to offend. He pointed to the example of foreign companies that found themselves in trouble by referring to disputed areas by the names used by one party alone. He raised the example of the Senkaku Islands, a group of uninhabited islands in the East China Sea known as Diaoyu Islands in China, are controlled by Japan, but claimed by China and Taiwan. Arunachal Pradesh, referred by India as one of its 29 states, is home to a major area claimed by China as "South Tibet."

Another common political misstep is the use of widely accepted maps that are considered by Beijing to incompletely represent or mislabel part of China, he added. "However, the ability for companies to be sensitive to such political issues becomes significantly more difficult when considering the range of external communications developed at headquarters or elsewhere outside China," he said.

Tightening internet restrictions imposed by Beijing make it even more challenging for big bosses at overseas headquarters to understand the complex political issues in China.

Indeed, the imposition of the so-called "Great Firewall" has led to a more difficult business environment in China, according to half of the respondents surveyed by the European Union Chamber of Commerce in 2017. The body said in an email that a significant number of European companies in recent years have reported reduced productivity in the office, difficulties exchanging data with headquarters and customers, and the inability to carry out research effectively.

"Access to the worldwide web has become a major frustration for companies operating in China. The solutions provided by the government are not working," said Mats Harborn, president at the chamber, referring to the provision of government-approved virtual private networks.

Pulled in two directions

But when multinationals bow to the demands of Chinese authorities to access the markets, some find themselves under pressure from customers elsewhere who are critical of the undemocratic practices and censorship in the country.

For example, Apple drew fierce criticism when it removed VPN apps -- which allow users to bypass China's so-called "Great Firewall" and to access overseas sites -- from its China App Store last July.

The endorsements Apple Chief Executive Tim Cook and Facebook Vice President Vaughan Smith gave to Chinese internet regulators during a conference in China last December also raised eyebrows, as some observers accused them of betraying the companies' core values.

Facebook, Youtube, Twitter and a number of foreign media outlets are banned in China. Google has become unavailable in China in 2010, due to its refusal to comply with Beijing's request to filter content that appeared on its search engine.

Yet, authorities are not the only ones that multinationals need to please in China. Chinese customers, who have become increasingly sensitive to comments made by foreign parties concerning China, could also be a headache for multinationals. Paritcularly so as they can be easily stirred by official media and organizations.

Charlie Pownall, author of "Managing Online Reputation: How to Protect Your Company on Social Media," blames Beijing and official media for tacitly backing action against foreign companies by consumers.

"Most accusations have been -- and remain -- tacitly encouraged or directly started by Beijing, often through the mainstream media, which gives them a high level of credibility, not least at a time when the nationalist pot is being actively stirred," the reputation and communications adviser said in an email.

In fact, complaints about multinational companies listing Taiwan as a separate country had appeared on Weibo -- China's equivalent of Twitter -- from time to time. But it was only when an image of the Marriott survey was circulated by the Communist Youth League of China, a youth wing of the Communist Party, on Weibo that the news started to spread rampantly and passions stirred.

By contrast, when state-owned Air China was also found to have listed Taiwan, Hong Kong and Macau as separate countries on its Hong Kong website, Global Times, a tabloid sponsored by the ruling Communist Party mouthpiece the People's Daily, praised the Chinese airline for its quick response to fix the issue. The Chinese airline was not ordered to issue a public apology.

Pownall also pointed out that China's importance on the world stage can also pose risks to multinationals outside the country.

"Like it or not, foreign companies need to appreciate that all their business activities -- and not just those in China -- are now more likely to be seen in a Chinese context," he said, "and that their foreignness will play out in any resultant incident or crisis in the country."

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