An op-ed recently appeared in Chinese state-owned media praising Fast Retailing chief executive Tadashi Yanai for doing something unusual.

The Japanese founder of Uniqlo was lauded for explaining in a December interview with Nikkei Asia why he previously declined to comment on whether the company sources cotton from Xinjiang, the Chinese region where human rights groups say forced labour is used in the supply chain.

When asked whether it was because he is concerned about a potential Chinese consumer boycott, Yanai responded, “that’s not it. I want to be neutral between the US and China. The US approach is to force companies to show their allegiance. I wanted to show that I won’t play that game.”

In response, an op-ed by Zhang Zhouxiang in China Daily reads in part that “Uniqlo’s stance can… serve as a lesson to all businesses.”

“Uniqlo’s gesture should not be simply interpreted as refusing to choose sides so as to maintain its economic interests,” the author continued, in reference to last year’s US ban on cotton imports from Xinjiang. “It is rather a defence of a fundamental principle in international affairs, namely that no power should bully any other country or force other countries or businesses to take its side in its competition with another country.”

It is worth noting that China announced retaliatory sanctions against the US over Xinjiang in December. Uniqlo did not respond to a request for comment on Zhang’s op-ed.

What is interesting about this turn of events is that Yanai’s sentiments were hardly an endorsement of China’s labour practices in relation to Xinjiang and its majority-Muslim Uighur population. Nor were they an outright rejection. But the professed neutral stance of Uniqlo’s founder did articulate a position that other fashion brand executives have been trying —and often failing — to navigate since the controversy first erupted.

For their part, Uighur activists are likely to see any equivocation on this issue as a sign that brands are willing to sacrifice human rights principles for business interests, as part of a broader culture of deference to the China market employed by companies where silence is often the default position. There are, however, signs that some brands are prepared to take a less deferential stance than others when it comes to lightning rod issues such as this.

When Nike, H&M, Gap and others vowed not to source from Xinjiang at an earlier phase in the controversy, they risked the wrath of a vocal group of Chinese consumers for whom that decision means a brand does not support China or its people. Consequently, some of these brands endured consumer boycotts that led to a very substantial dent in sales in the world’s largest fashion market. It remains unclear how long the financial impact will last.

With online outrage surfacing regularly over both perceived slights and genuine transgressions against Chinese culture, sovereignty, governance and other issues, it is almost impossible for brands to remain controversy-free in China. Given that most will stumble at some point as they continue to walk this tightrope and that many will inevitably suffer public relations crises, some global brand representatives in China have started asking — albeit behind closed doors — whether they should take a less conciliatory tone when consumers’ tempers flare on some occasions.

Others say, do so at your own peril. With many fashion and luxury brands now more reliant on China than they were before the onset of the Covid-19 pandemic, the market can be make-or-break for business.

More Conflict Is Inevitable

This year features major events in China that naturally inspire patriotism such as the 20th National Party Congress and next month’s Beijing Winter Olympics, which has become even more poignant to some Chinese who feel aggrieved since the announcement of the US-led diplomatic boycott of the games.

Because of the growing nationalism, consumers in China are becoming more sensitive about Chinese culture... [and] the proliferation of social media amplified and accelerated that.

Both events will be held against the backdrop of a pandemic which has led Chinese citizens to see their own government as performing better than many others internationally in keeping infections and death rates low. It is a safe bet that already rising levels of China pride and nationalist sentiment will reach a crescendo among some consumers. When this meets foreign brands perceived to be raking in a growing proportion of their revenue from the China market, the result, increasingly, is heightened sensitivity and vocal criticism of perceived indignities.

“Because of the growing nationalism, consumers in China are becoming more sensitive about Chinese culture... [and] the proliferation of social media amplified and accelerated that,” says Jason Yu, Shanghai-based managing director of the Worldpanel division of global market data group Kantar.

In conversations online about the sentiment driving such behaviour, middle-class consumers often employ an expression. To say they are being “harvested like a leek (jiucai)”, suggests customers feel foreign brands — and some big Chinese companies — treat them like an easily-grown crop that can be picked again and again for profit. In other words, some customers increasingly feel undervalued, taken for granted or even exploited.

Chinese fashion influencer and luxury brand consultant Leaf Greener advises brands to do more to show local consumers that they are not just a “market” to be plundered, by employing marketing strategies that engage more profoundly and authentically with Chinese people and culture.

“How do you as a luxury brand go about, not only making money from this community but, in a way, giving back to this community and investing in the community? As a brand you have to send a positive message; you need to engage this deep-thinking community. It’s not just selling a product, it’s never just about that,” she said.

Being respectful of Chinese values in the China market sounds simple enough in so far as it is a local expression of a worldwide marketing principle but what has become increasingly apparent is that sometimes these values conflict with a brand’s own values or those of its home market or other key regions.

At Risk of ‘Kowtowing Too Much’

“For international brands, they are always balancing the value system from their home countries, and also the values system that they have to operate in a market like China and they are sometimes different. That is the reality,” Yu said.

[Brands] need to be sensitive to the Chinese market... but they also need to balance this and consider how it will be perceived in Western markets, which might think they kowtow to China too much.

Jonathan Yan, a principal at consultancy Roland Berger in Shanghai, agrees that this reality will require international fashion and beauty brands to continue to make tough choices.

“They need to be sensitive to the Chinese market because it’s so big and important, but they also need to balance this and consider how it will be perceived in Western markets, which might think they kowtow to China too much,” Yan said.

One tactic used by international brands to try to achieve a middle ground is to deflect conversations about controversial issues or evade them altogether.

With Beijing hosting next month’s Winter Olympics, for example, corporate sponsors based in Western countries including Visa, Coca Cola and Procter and Gamble have largely tried to avoid talking about the US-led diplomatic boycott of the games or other issues where tensions exist between China and the West like Xinjiang.

However, maintaining silence on China-related issues deemed to be an injustice elsewhere comes at a cost in terms of brand perception in those markets. As the influence of purpose-led consumers grows, the no-comment approach favoured by some brands may not be sustainable in the long-term.

Though it is still rare for fashion and beauty brands to wilfully antagonise Chinese consumers and other business stakeholders by standing up for values, narratives or moral imperatives they know to be unpopular in China, there are signs that some organisations with economic interests at stake in the China market are prepared to take a tougher stance.

Last month’s announcement by the Women’s Tennis Association that it was suspending tournaments in China over concerns for the safety of player Peng Shuai following her initial accusation of sexual assault against a high-profile Chinese politician, is one example. Another, albeit in the realm of international relations, is Lithuania’s stance on Taiwan, which has come at the cost of retaliation from Beijing through a ban on Lithuanian imports to the vast China market.

For fashion and beauty brands, navigating these and other minefields is already challenging enough as their public relations and marketing teams must mediate tensions between personnel in brand headquarters in the West and colleagues in their mainland Chinese offices. But as controversies and conflicts continue to multiply, things are only likely to get more difficult. At some point, brands may need to revisit or even reform their China marketing playbook.

Increasingly Wide Spectrum of Offensiveness

Since the high-profile sins of Dolce & Gabbana became the pinnacle of China controversies in 2018, the ways in which foreign brands are seen to transgress Chinese sensibilities has become more and more complex. So, too, have the ways brands respond with their crisis management efforts.

While Dolce & Gabbana released an ad that many found to be racist, depicting a Chinese model awkwardly attempting to eat Italian foods with chopsticks, it was the handling of the initial furore that caused even more damage.

In 2019, it was merchandise and maps suggesting that Hong Kong or Taiwan were independent countries, in contravention of Beijing’s “One China” policy, that led to a raft of foreign brands losing Chinese celebrity ambassadors and profusely apologising for the offense.

The list of what not to do is getting longer and longer. There are more and more boxes that [need to be] ticked.

The lesson was, if a company runs into trouble, the only way out is with a swift apology. Trying to defend, debate or explain your position risks your brand becoming a pariah in the world’s second largest economy. And so it has become standard for companies, chief executives and celebrities that cause offense in China to quickly apologise in an attempt to diffuse the situation or move on from it.

Organisations and individuals as diverse as the NBA (National Basketball Association of the US), JPMorgan Chase chief executive Jamie Dimon and Hollywood actor John Cena have all employed this tactic. Some of their apologies, however, have been criticised by the Western media for their “grovelling” tone or otherwise being disproportionate for the perceived offense.

Another topic rising with increasing frequency and heat is that of the Western lens versus Chinese lens when depicting beauty, and who should be the barometer of what is beautiful when the audience it is intended for is Chinese.

Even a few years ago, it was unlikely that the image by Chinese photographer Chen Man displayed by Dior at an exhibition in Shanghai would have ruffled nearly as many feathers as it did in November. That controversy was followed by a Gucci campaign that garnered criticism for stereotyping Asian beauty because it featured an Asian model with small eyes.

“The list of what not to do is getting longer and longer. There are more and more boxes that [need to be] ticked,” Yan said.

Take Risks But Be Respectful, Not Reckless

There is, however, an argument that, as controversies multiply, each individual episode has less impact on a brand than it may have in years gone by when such occurrences were rarer.

“Most consumers tend to have short memories about most controversies. In many cases, the incident might be forgotten in a matter of months,” Yan said, though he does add that some sectors are better protected from long-term damage than others due to their position in the market and their competition, or lack thereof, from domestic brands.

You can take a risk but you can’t be reckless.

So while domestic sportswear brands, including Li Ning and Anta, have been able to take a greater share of the China market from global giants Nike and Adidas due to the latter pair’s stance against sourcing cotton from Xinjiang (compared to the former pair’s vocal support for it), this was possible because Chinese players were already seen as valid competitors in the sector, having raised their game in recent years.

When it comes to the luxury segment, however, there is less danger of losing market share to local brands as controversy hits because of fewer Chinese alternatives, Yan says. Usually, “it’s more like a hiccup [for luxury brands because Chinese consumers] still want to buy the Swiss watch and the Louis Vuitton bags. [Those products] need heritage, history, stories, design; it’s more complex.”

Greener believes there is more room for risk-taking among luxury brands, particularly when it comes to depicting a wider spectrum of beauty or challenging certain beauty standards that some Chinese consumers find confronting. Rather than apologising and removing controversial images, she says, brands can open up conversations and also instil global brand values, such as diversity and inclusion, in the China market.

She points out that Balenciaga is regularly the target of online criticism in China for its non-traditional take on beauty, but it works for them because it is more widely understood to be intentional and fits with the brand’s DNA.

“That gives them a certain freedom, it’s suitable for their brand image to be a bit provocative, but that works for them,” Greener added.

Not every brand can or should emulate Balenciaga, of course, but every brand can be more confident in how they approach the Chinese market when armed with a strong sense of themselves and the cultural politics they are operating in.

“You can take a risk but you can’t be reckless,” Greener said.

时尚与美容

FASHION & BEAUTY

Fear of God’s Jerry Lorenzo Co-Curates Shanghai’s Innersect Fair

China’s biggest streetwear fair, postponed from its original December dates due to sporadic Covid-19 outbreaks in China, ran its main three-day programme from Jan. 15 to 17 with one of global streetwear’s most in-demand names lending some star power from afar as the event’s co-curator. Designer and entrepreneur Jerry Lorenzo’s three brands — Fear of God, Essentials and Athletics — were some of the most popular draws for the fair, which was forced to limit its daily attendance to 4,000 people due to new restrictions on crowds introduced in Shanghai last week. (BoF)

Will Chinese Fashion Etailer Shein List in New York This Year?

The world’s largest online-only fashion retailer is reviving plans to list in New York this year and, in order to sidestep proposed rules about offshore IPOs for Chinese companies, Shein’s founder, Xu Yangtian (who is also known by the English name Chris Xu) is considering a citizenship change, two people familiar with the matter told Reuters. A Shein spokesperson said the company had no plans to go public. (BoF)

Chinese Beauty Retailer Harmay Raises $200 Million in New Funding

The up-and-coming Beijing-based beauty retailer has secured $200 million in recent Series C and D rounds of funding, led by QY Capital and General Allantic, BoF has learned. Harmay started life almost a decade ago as a well-curated online beauty store on Alibaba’s Taobao platform, but it has grown to become a rival to Sephora in the China market in recent years due to its unique aesthetic approach and niche brand offering. (BoF)

科技与创新

TECH & INNOVATION

Shopify, JD.com Pair Up in China as E-Commerce Competition Intensifies

The Canadian e-commerce giant has partnered with JD.com in a deal that will allow merchants in the United States sell to JD’s 550 million customers in China via the latter’s cross-border platform, JD Worldwide. The strategic partnership comes as competition in China’s e-commerce space hots up between giants such as Pinduoduo, Alibaba and Douyin, all vying for a larger slice of the country’s online consumption pie. (BoF)

Tencent Fires 70 Staff As Part of Anti-Graft Campaign

China’s biggest social media and video games company said it fired nearly 70 staff over bribery and embezzlement related incidents in 2021. It also identified 13 companies it had blacklisted from future contracts due to their impropriety. WeChat’s owner said in a social media post that it had also reported more than 10 people to authorities over their actions. (Reuters)

消费与零售

CONSUMER & RETAIL

China Sales of Luxury Goods Grew 36% in 2021, Bain Estimates

Domestic sales of luxury goods reached 471 billion yuan ($74.24 billion), a near doubling in two years, according to Bain & Company’s annual “China Luxury Report 2021.” Performance varied markedly in 2021, with some luxury brands seeing as little as 10 percent growth in China, while others enjoyed growth rates above 70 percent. Different categories also grew at different paces, with leather goods the fastest growing at around 60 percent year-on-year, followed by fashion and lifestyle, up about 40 percent. (BoF)

Young Patriotic Consumers Drive Demand for Chinese Jewellery and Brands

A strong demand from those born after 1995 for jewellery featuring traditional Chinese symbols such as dragons and phoenixes have driven significant growth during the pandemic. Millennial and Gen-Z consumers were responsible for more than 56 percent of sales for local jewellery giant Chow Tai Fook’s “heritage collection” between April and September of 2021, the company said. (Financial Times)

政治,经济与社会

POLITICS, ECONOMY, SOCIETY

In China, ‘Fight Club’ Gets a New Ending

Film fans in China have been protesting that the film, starring Brad Pitt and Edward Norton, which recently became available on streaming platform Tencent Video, no longer ends with Norton’s character’s anarchist and anti-capitalist plan to bring down modern civilisation. Instead, the final scenes of exploding buildings have been replaced with a black screen and the message: “The police rapidly figured out the whole plan and arrested all criminals, successfully preventing the bomb from exploding.” It was unclear whether the change was ordered by Chinese censors or was pre-emptively made by producers in order to gain access to Tencent Video. (The Guardian)

China’s Annual GDP Growth of 8.1% Masks Domestic Demand Weakness

GDP growth may have exceeded China’s annual target of above 6 percent in 2021, but year-on-year growth slowed to 4 percent in the fourth quarter, highlighting underlying weaknesses now being accentuated by the limited but persistent spread of the Omicron variant of Covid-19 since late December. China’s industrial sector remains the country’s economic driver, growing 8.2 percent year-on-year in 2021 but consumption demand remains weak, as reflected by retail sales. This metric’s two-year (2020-21) average growth remains far below the pre-pandemic rate of 8 percent. Domestic demand is expected to remain weak in 2022 as Omicron inflicts further lockdowns and undermines consumer confidence. (Economist Intelligence Unit)

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