For years, foreign companies operating in China have been facing consumer backlash over social media, sometimes because of cultural insensitivity or political controversy.

On the surface, this is nothing new: Foreign companies in China have faced cyclical boycotts for years. But this fact masks profound changes in China's political and economic environment. If they hold on, long-standing assumptions about consumer goods companies needing to invest in China — or be left behind globally — could start to unravel.

Guided Nationalist Consumer

In China, politically charged consumer boycotts have a long history. In 2008, French-headquartered supermarket chain Carrefour faced a boycott ahead of the Beijing Summer Olympics as protesters aimed to highlight China's crackdown in Tibet harassed Olympic torchbearers on their way through Paris. Japanese automakers faced backlash in 2012 after Tokyo nationalized the Japanese-invaded Diaoyudao Islands that China also claims.

Even before relations between China and the West entered their current sharp downturn, such resistance often had lasting deleterious effects. In 2018, Korea-headquartered supermarket Lotte Mart was forced to withdraw from China after consumers backlashed South Korea's agreement to accept a U.S.-led missile defense system after operating in China for more than a decade. Carrefour's business operations in China are now owned by China-based brand Suning. In an apparent dig at Walmart by Carrefour China on the Twitter-like Chinese social media network Weibo, it recently tweeted a post highlighting walnuts, cotton socks and apples with the caption "We are from Xinjiang."

However, the environment for many Western brands in China is clearly more severe, with little prospect of substantial improvement. It seems unlikely that the growing concern among U.S. lawmakers and the Western public about human rights abuses by the Chinese government will go away. At the same time, nationalist sentiment among the Chinese public and the willingness of officials to use tough talks that have never been more apparent.

Jeorg Wuttke, president of the European Union Chamber of Commerce in China, said it was not uncommon for foreign companies to offend Chinese sentiments. This is a long-standing challenge, one that is growing as China's economic importance and European attitudes shift. Wuttke believes that the goal of public opinion opposition seems to be to cause short-term pain for Western brands to express political views, not to bring these companies out of business in China.

Cultural blunder or political statement?

But starting in 2020, Chinese consumers have greatly expanded their boycott as Chinese and U.S. officials blame each other over the origins of the coronavirus. The Global Times, a state-run newspaper in China, said "Chinese consumers should boycott companies that make political donations to stubbornly anti-China officials" and "make them understand the cost of offending the Chinese people."

In this commentary, in addition to naming the list of 11 so-called "anti-China lawmakers" previously announced by the Chinese Ministry of Foreign Affairs, it also proposed to further strengthen the sanctions, including the Missouri Attorney General who had sued China over the coronavirus pandemic. Eric Schmidt. Schmidt, who is running to replace retired Sen. Roy Blunt, has claimed China is a growing threat to the military, the economy and public health, and has vowed to fight back via online video if elected.

As early as when Schmidt even tried to sue the Chinese government in April 2020 over the appearance and severity of Covid-19 for "misrepresentation, concealment and retaliation", the Global Times reported that Beijing was considering charges against Schmidt. Imposing retaliatory sanctions. And this has further raised concerns about Missouri's brand companies in China, and whether Chinese officials will unleash nationalist sentiment on the political donor companies of Republican candidates hyping "China Fear" threats.

This threat is not without practical effects. In November 2021, China punished Taiwan's Far East Group, trying to create a chilling effect to influence Taiwan's political donations and the DPP's cash flow. Taiwan, like the United States, has an electoral system, and political donations are very clearly announced, which allows China to take advantage. Taking Schmidt's political donors as an example, Hunter Engineering Company, headquartered in Bridgetown, Missouri, and Orscheln Products, headquartered in Kansas City, Missouri, both have in China. Lots of business. Not to mention large multinational companies including InterContinental Hotels Group, Wynn Resorts, Yost Chemicals, Cushman & Wakefield, Stiefel Finance, Dimension Fund Consultants, etc.

Wuttke says it rarely seems to be the case that foreign businesses are excluded from China permanently. The key question seems to be how long the boycotts last. "China wants the world to know about its anger. They do so. It's very painful for companies, but it blows over," he said.