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The Big Story

How Beijing enlists global companies to pressure Taiwan

From Air Canada to Zara, corporations advance China's policy goals

CHRIS HORTON, contributing writer, and SHUHEI YAMADA, Nikkei senior deputy editor | Taiwan

TAIPEI/TOKYO -- In May, the Taiwanese government published a detailed list of what it labeled China's "interference with Taiwan's international presence" since the start of 2018.

The document lists a number of almost farcical episodes, such as the decision by organizers of a beef expo in Australia to cover up a Taiwanese flag that schoolchildren had painted on a statue of a bull. There are also significant diplomatic developments, including the Dominican Republic's severing of diplomatic ties with Taiwan after intense lobbying from China.

And there are multiple examples of Beijing's successful efforts to force companies -- including Marriott and Mercedes-Benz -- to designate the island democracy as "Taiwan, China" on their websites, despite the fact that Taiwan has never been ruled by the People's Republic of China. If anything, the government's list of companies could have been even more exhaustive: Global brands such as Muji, Zara and Costco have also been targeted recently by Chinese authorities for how they refer to the self-ruled island.

Most controversially, China's aviation authorities threatened dozens of international airlines with severe punishment in April if they did not change their websites to indicate that Taiwan is part of China -- a campaign that culminated with a July 25 decision by major U.S. airlines, American, Delta and United, to alter their websites.

To those with little understanding of the complex relationship between China and Taiwan, these incidents might seem like a trifle, or just another sign of insecurity by a Communist Party that heavily censors media and obsessively monitors its internet.

But for businesses deriving significant revenue from China -- that is, most major global corporations -- the ability of mandarins in Beijing to influence corporate decision-making beyond China's borders raises serious concerns. At the top of the list is that multinational corporations are being used by Beijing to give the veneer of legitimacy to its long-term goal of unifying the mainland and Taiwan, a geostrategic asset the Communist Party has coveted for seven decades.

Zara is one of several global retailers recently targeted by Chinese authorities for the way it referred to Taiwan. (Photo by Akira Kodaka)

"As more companies choose to refer to Taiwan as 'Taiwan, China,' the fewer number of companies recognize Taiwan in the international sphere, and the easier it will be for China to justify its claims and the cause of unification," said Lauren Dickey, a researcher at King's College London. "Requiring major corporations to accept the terms and conditions of 'One China' is thus likely to be viewed by Beijing as one step of many to create a fait accompli of unification."

With China's development into an economic powerhouse over the past two decades, its ruling Communist Party has frequently pressured companies to comply with its wishes. Its ability, and willingness, to use official platforms and public sentiment to punish private companies for real or perceived transgressions often results in corporate apologies for "hurting the feelings of the Chinese people."

Despite cross-strait tensions, Taiwan's exports to the mainland surged 18-fold from 2001 to 2017.

When it comes to Taiwan, the pressure on companies appears to be intensifying. The effort to force 36 international airlines to change the way they refer to Taiwan on their websites was the most sweeping example so far, and it yielded results.

Many carriers, including Singapore Airlines, Air France and Lufthansa complied quickly. American Airlines, United and Delta held out until the July 25 deadline imposed by China before altering their sites to list only Taipei as a destination -- not Taipei, Taiwan.

Those moves did not go as far as Beijing wanted, since they did not list Taiwan as a part of China, as some airlines have done. In a July 26 statement, China's aviation authority declared the steps by the U.S. carriers to be "incomplete." 

JAL and ANA adjusted their sites to list all of its destinations in East Asia by city name only. Air India announced in early July that it would alter references of Taiwan on its website to "Chinese Taipei."

Observers say the Communist Party has effectively weaponized China's growing consumer market to exploit the weaknesses of open market economies, where corporations answer to shareholders rather than an all-controlling one-party state. China is turning the issue of Taiwan's sovereignty into a question of corporate sovereignty.

"There are significant risks for foreign companies down the line," says Tiffany Ma, senior director at BowerGroupAsia, a Washington-based political consultancy.

That risk, she says, is that "expected compliance with Beijing's wishes may not stop at how companies list Taiwan on their websites."

Initially there was little condemnation of China's demand from governments or the companies involved. In May, the Trump administration urged American carriers not to cave in to what it labeled Beijing's "Orwellian nonsense." But China remained resolute, rejecting a U.S. request to talk about the website dispute, according to a Reuters report in late June.

Airlines for America (A4A), a trade group that represents United, American, and other U.S. carriers, acknowledged that the airlines would alter their websites after China's demands. "As with other sectors of the economy, the U.S. airline industry is a global business that must contend with a host of regulations and requirements," it said in a July 24 statement. It added that the "affected US airlines appreciate the engagement and counsel we have received from the [Trump] administration."

In July, the U.K. minister of state for the Foreign and Commonwealth Office, Mark Field, pushed back against Beijing during questioning by MPs on the airline issue. "U.K. companies should not be placed under political pressure to make changes," Field said, noting that U.K. officials had registered their concern with the Chinese government on the matter.

"Since ancient times"

China's assertiveness under Xi Jinping, its strongest leader since Mao Zedong, is manifesting itself in a number of ways around the world. From a more aggressive military posture in the South China Sea to the massive investment projects of the Belt and Road Initiative, the nature of the "great rejuvenation of the Chinese nation" that he envisions is coming into focus.

Xi has made it clear that Taiwan is a vital part of realizing his Chinese Dream. The Chinese Communist Party has always insisted that Taiwan has been China's "since ancient times." In fact, the Republic of China is the only China-based government that has controlled all of Taiwan, which it did between 1945 and 1949, before fleeing the Communist revolution.

Since then, China's Communist government has refused to establish diplomatic relations with countries that maintain official ties with the Republic of China government in Taiwan, under its "One China" principle, which insists that Taiwan is part of China's sovereign territory.

Beijing has used this to its advantage, whittling down Taiwan's official diplomatic allies to only 18 small countries after it poached the Dominican Republic and Burkina Faso within a month of each other this spring.

Since 1949, a total of 114 countries have switched recognition from the Republic of China government in Taiwan in order to establish official ties with the People's Republic of China in Beijing. More than 60 of the countries that recognize the PRC today never had relations with the ROC.

At the heart of China's attack on Taiwan's already limited international space is Beijing's demand that Taiwanese President Tsai Ing-wen state that Taiwan is part of "one China." Tsai, who was inaugurated in 2016, has called for dialogue with China, while rejecting Beijing's claims on Taiwan.

Developed countries with unofficial ties to Taiwan tend to hold their own One China policies that acknowledge Beijing's territorial claim, without recognizing it. This important nuance is often lost on companies' upper management, however.

Alan Joyce, CEO of Australia's Qantas Airways, which announced in early June that it would change its website to say that Taiwan was in China, demonstrated the potential for misunderstanding of government policies toward Taiwan.

"Airlines don't decide what countries are called, governments do," Joyce told reporters outside the annual general meeting of the International Air Travel Association. "And at the end of the day, the Australians, like a lot of countries, have a One China policy. So we're not doing anything different than the Australian government."

In fact, Australia, like the U.S. and Japan, does not recognize China's claim on Taiwan. Though its economy is closely tethered to China's, Australia still spoke out.

"Private companies should be free to conduct their usual business operations free from political pressure of governments," Australia's foreign minister, Julie Bishop, said in a statement in early June.

Air Canada announced in May that it would list Taiwan as part of China on its website. Weeks later it announced it had entered a joint venture with Air China that will expand its presence in China.

Brittany Venhola-Fletcher, spokeswoman for Canada's department of global affairs, said the department was unable to tell the carrier what to do. "Air Canada is a private company and responsible for the contents of its website," she told The Globe and Mail.

Limited options

No market is bigger than China's, but Taiwan is still a market of 23 million people -- roughly the population of Australia. Air Canada's decision has made it the focus of protests that could affect its recently relaunched direct flights between Vancouver and Taipei, Taiwan's capital.

"It's important for companies to understand the political aspects of the issue before making a decision to proceed," Ma says. "As private entities, companies should be aware when their products and operations are exploited and politicized -- China's One China principle is not a cultural issue but a political one. Companies ought to consider the cost-benefit equation of compliance with China's demands and how it may affect them in other markets or in the longer term."

Jessica Drun, a fellow at the Washington-based Party Watch Initiative, said Western companies that comply with Chinese demands are playing an important role in "normalizing China's stance on Taiwan and conflating China's One China principle with their respective home country's One China policy."

For the Communist Party, an unelected authority with a monopoly on political power, everything is political. As a result, governments, companies and individuals are viewed in a binary fashion: actors who serve the party's interests, and those who oppose them.

Seen through this lens, Beijing is converting airlines and other companies that had been working against its interests by labeling Taiwan as separate from China into actors working for it -- and against the vast majority of the Taiwanese population who have no interest in becoming part of China.

"Beijing's censoring of Taiwan in the international sphere is intended to de-legitimize any claims the government or people of Taiwan may make to a separate, independent existence," said Dickey. "In pressuring companies to change how they refer to Taiwan on their websites, companies that comply are agreeing to Beijing's version of 'One China' and, essentially, becoming participants in Chinese tactics to delegitimize Taiwan."

Taiwan's options are limited. It has mooted taking legal action against airlines that decide to call it part of China, but not until after the July 25 deadline.

China's population of 1.4 billion vastly outweighs Taiwan's 23 million.

Given the size disparity between the Chinese and Taiwanese markets -- 1.4 billion people vs. 23 million -- it is hard to imagine any company doing what Taipei asks of it if it means bigger penalties in China.

Taiwan is not a member of the United Nations -- it was effectively ejected in 1971 when the PRC government was given the China seat occupied by the ROC government, a founding member of the body. Taiwan's status in the U.N. is unresolved, which makes proposing Taiwan-related resolutions more or less impossible.

Taiwan could appeal to "like-minded countries" such as the U.S. or Japan, or simply reach out to the world at large for support.

The biggest thing working in Taiwan's favor in that regard is the growing wariness of Chinese manipulation of governments around the world. Beijing's campaign to pressure Taiwan comes at a time when many countries are now closely examining their vulnerabilities to Chinese influence campaigns. In recent weeks, capitals from Canberra and Wellington to London and Washington have subjected Chinese government initiatives to increasing scrutiny.

It is possible to push back against China, as was recently shown when Facebook acquiesced to demands from Vietnam that it not list the Paracel and Spratly Islands -- which are claimed by both China and Vietnam -- in the South China Sea as belonging to China. After public outcry in Vietnam, Facebook announced that it was neutral regarding the territorial claims, and now does not list the islands as being part of either country.

Rupert Hammond-Chambers, president of the U.S.-Taiwan Business Council, said China is clearly "upping their game" when it comes to pressuring Taiwan.

"These companies have absolutely no business in involving themselves in public policy and the matter of Taiwan's sovereignty -- it's between countries, not companies," he said.

Hammond-Chambers said that the U.S. State Department has told American companies that it will issue guidelines regarding Taiwan-related nomenclature.

"A broader concern is that the Chinese won't just use this on Taiwan if it proves to be effective, they will use it to pressure U.S. companies to do other things that further China's interests, whatever they might be," he said. "If you don't deal with it now, all you're really telegraphing is 'Hey, this is an effective way of getting what you want.'"

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