Beijing Olympics highlights US government and corporations divide over China

The Beijing Olympics kick off next week under a cloud of controversy, with six countries including the U.S. announcing diplomatic boycotts over China’s human rights abuses.

Corporate sponsors have largely distanced themselves from the conversation, fearful of rattling China’s authoritarian government, with roughly $1 billion in sponsorship money at stake.

“It should be an exciting moment for sponsors, but it's kind of ironic that they are trying not to upset anyone, [saying] let's just, you know, stay quiet or stay low key,” said Dae Hee Kwak, director at the Center for Sport Marketing Research at the University of Michigan.

While officials from participating countries have been divided in their decision to send leaders to the games, sponsors of the International Olympic Committee (IOC) have remained united in their collective silence, pointing to a growing divide between governments and private businesses in their approach to handling sensitive issues in China.

From Coca-Cola (KO) to Intel (INTC), and NBCUniversal, which broadcasts the Olympics in the U.S., major companies backing the games have faced growing pressure from human rights activists to drop their support of the event to highlight abuses in the Xinjiang region, where Western countries have accused the Chinese government of carrying out a genocide against Uyghur Muslim minorities.

More than 200 groups have organized petitions and staged protests outside corporate offices. Just one — Allianz — has agreed to meet with the activists, according to the Washington Post.

“We talk about 30% of the world’s GDP doing a diplomatic boycott of the Olympics. But 0% of the world's major companies who are the top sponsors of the Olympics are boycotting,” said Josh Lipsky, director of the Atlantic Council Geoeconomics Center. “Companies aren't feeling the pain right now.”

A sponsorship 'designed around athletes'

Corporate sponsors say their partnership with the IOC spans multiple years. It doesn’t represent an endorsement of a host country.

In a statement to Yahoo Finance, an Intel spokesperson stressed that the company is only “supportive of the Games’ mission to bring together athletes from all over the world to compete peacefully, and of the symbolism of such a diverse, global event.”

“The Games also provide an opportunity for us to innovate and accelerate our technology development,” the statement read, citing 5G technology adoption and acceleration.

Airbnb (ABNB) CEO Brian Chesky, whose company signed a nine-year, $500 million partnership deal with the IOC prior to its IPO, said his company’s sponsorship was "designed around athletes" not specific games.

“I think a lot of people don't realize that a lot of athletes are not sponsored. We tend to focus on the ones with big sponsorships. A lot of athletes have to pay their way and we found out that a lot of athletes were staying in Airbnb to defer their cost of training,” said Chesky, adding that some athletes have signed up to host, in order to supplement their income. “We thought this is a great way to really, you know, kind of help these athletes with economic empowerment.”

ZHANGJIAKOU, CHINA - JANUARY 25: Peoples Liberation Army soldiers rehearse a flag raising drill at the medal plaza in Zhangjiakou Olympic village on January 25, 2022 in Zhangjiakou, China. With just over one week to go until the opening ceremony of the Beijing 2022 Winter Olympics, final preparations are being made in Beijing ahead of the forthcoming 2022 Winter Olympics. (Photo by Carl Court/Getty Images) (Carl Court via Getty Images)

'Hesitant to take any action'

Choppy U.S.-China relations have made these Olympic games particularly difficult to navigate. While the companies may attest to neutrality and support for the Olympic movement, the firms increasingly find themselves squeezed between two countries.

Last month, President Biden signed the Uyghur Forced Labor Prevention Act, banning U.S. companies from importing parts and materials from the Xinjiang region, unless they can prove it wasn’t used by forced labor. When Intel published a note to suppliers asking them not to source from the region in compliance with U.S., they faced backlash on Chinese social media, prompting the company to remove the Xinjiang advisory from the letter.

“People in China, the way they perceive and receive information about Xinjiang is different from what the Western media portrays ... that’s why the sponsors are hesitant to take any action,” said Kwak. “[If companies] try to associate their brand with the Beijing Olympics that will backfire from their home country. But if they take a stance and do what the U.S. government says, then that will backfire and will upset the Chinese people.”

Western brands like Nike (NKE) and H&M learned that first hand, when Chinese consumers boycotted their domestic stores, after the companies raised concerns about the use of forced labor in Xinjiang’s cotton production.

The NBA is still reeling from a tweet, sent by a Houston Rockets executive, expressing support for Hong Kong’s pro-democracy protests back in 2019. That brought the league’s broadcasts to a near halt in the NBA’s largest international market, and led to a revenue loss of hundreds of millions of dollars.

'Warning to multinationals, be aware'

Kwak said many sponsors are looking beyond Beijing for significant returns on their IOC partnerships, as the games return to the West, with Paris, Milan and Los Angeles hosting the next three Olympics.

China remains a lucrative market for Western brands, with 1.4 billion consumers. But, Lipsky said the cost-risk calculation for firms are changing quickly, as Chinese leadership looks to gain a tighter grip on the world’s second largest economy.

He specifically pointed to the country ramping up broad adoption of the digital yuan, with the Winter Olympics as the first major test case.

“Imagine that [foreign firms] now have to accept digital yuan. And imagine at some point the Chinese authorities become cross with you because of something you said back home about what's happening in Xinjiang, for example. They would now have a shut off mechanism available to you very quickly to make sure no payments could be made, in country, to your company.” Lispky said. “And so the warning to multinationals is, be aware ... there may not be a price to pay immediately. But that doesn't mean there won't be a price to pay in the medium term.”

Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita

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