For all the concern about China’s military strength, economic leverage might be its most powerful weapon.
For all the concern about military confrontation in the South China Sea, economic leverage might be the most powerful weapon in Beijing’s arsenal. It is deployed more effectively, or at least more often, than all the missiles, tanks, and artillery in the People’s Liberation Army. If power is the ability to force others to do what you want them to do, then China exerts its power with yuan more than with bullets. And its capacity to make one of the world’s most celebrated sports leagues beseech forgiveness of a noncrime is a case study in how it’s done.
On October 4, Daryl Morey, the general manager of the National Basketball Association’s Houston Rockets, posted a rather anodyne tweet reading, “Fight for freedom, stand with Hong Kong.” In short order, nearly every Chinese entity that is in any way involved with American professional basketball suspended its ties to the Rockets: the Chinese Basketball Association, the national television network, the company that holds the $1.5 billion exclusive rights to stream all NBA games in the country, and sponsors ranging from sportswear manufacturers to a bank in Shanghai. Just as speedily, the Rockets’ owner tweeted that Morey “does NOT speak for the @HoustonRockets.” Before the weekend was out, the NBA itself had issued a statement of contrition (though the league’s commissioner has since said, perhaps confusingly, that he supports its staff’s right to free speech).
To understand why this is about far more than sports, you have to understand a few things about basketball in China.
First, hoops in China, like China itself, is huge. There are more Chinese people who play recreational basketball—300 million—than the populations of all but three of the world’s countries. About half a billion people in China watched at least one NBA game last season—more than every single person in the United States, and every other country producing current NBA stars, put together.
Second, hoops in China is big business. The NBA doesn’t reveal how much money it makes from this, but it is estimated at more than $4 billion annually. That’s why top NBA teams routinely play exhibition games in China during the off-season: It does little for most players themselves (only a few have big sneaker contracts, and every game risks a career-ending injury), but it certainly helps the bottom line for billionaire team owners and league executives.
Third, of all the NBA teams, the most popular in China is very likely the Rockets. China has produced only a single NBA megastar: Yao Ming, the Rockets’ center from 2002 to 2011. So when the Beijing bosses decided to send a message to all global corporations in all types of business, they picked the highest-profile target they could find. The head of the Chinese Basketball Association who severed ties with the Rockets at once? A 7-foot-6-inch executive by the name of Yao Ming.
Related: China’s Credibility Problem
By taking on the wildly popular NBA, and especially the even more popular Rockets, China’s leader, Xi Jinping, is blowing a whistle on companies (and nations) around the world. On topics that Communist Party leaders really care about—particularly Tibet, Xinjiang, Taiwan, and now Hong Kong—they’ll risk as much domestic backlash as needed to make adversaries pay. The warning registered: Morey deleted his tweet and has since expressed contrition. His forced self-criticism conjured up memories of a dunce-capped capitalist roader in a Cultural Revolution struggle session—it is important not simply that he comply, but that he is seen to comply.
Ever since China’s emergence as an economic powerhouse in the 1990s, analysts in the United States and other nations have tried to figure out the strategic implications of its heft. The question has become all the more pressing with Beijing’s ambitious Belt and Road Initiative, a sprawling set of infrastructure projects throughout Asia, as well as burgeoning investments in Africa, Latin America, Europe—really, just about everywhere except the polar ice caps. (Yet.)
What makes China’s economic prowess different from that of its rivals is not merely its size (the economies of the U.S. and the European Union are larger—for now), but its dominance by the government itself. An American president can start a trade war with any country that annoys him, but he has no power to order General Motors or Caterpillar to cease investing in factories there. Xi, however, does. Not as a matter of law, but because for all intents and purposes, the Communist Party is the law.
In 2019, China’s gross domestic product was more than $14 trillion. For global firms, the prospect of being shut out of one of the world’s most lucrative markets is terrifying. “China is applying the same economic statecraft playbook that it has used in the past to intimidate multinational corporations,” says Bonnie Glaser, the director of the China Power Project at Washington’s Center for Strategic and International Studies. “In almost every case, companies have prioritized their bottom line and have been willing to offer groveling apologies.”
Last year, more than 40 airlines, including United, American, and Delta, were ordered to erase their websites’ references to Taiwan as a “country.” All have operations there, but they readily complied. The Marriott hotel chain was given a similar diktat, and acquiesced with a cringing mea culpa. Mercedes-Benz was rebuked for an Instagram post so toothlessly clichéd that it could have come from a fortune cookie: “Look at situations from all angles, and you will become more open.” The person quoted was Tibet’s Dalai Lama, so the carmaker immediately made a confession to propagating “wrong information.”
The attempt to enforce guidelines for international firms is particularly noteworthy in the entertainment industry, where content is the product rather than the by-product. Beijing already limits the number of foreign films shown in theaters within China to only a few dozen a year, so producers could theoretically be as bold as they wish in offerings that will never reach Chinese consumers. But with a $4.8 billion market on the line, there is a strong incentive to avoid getting put on the party’s blacklist.
This month, the comedy show South Park bucked the Hollywood trend with a story line that sent one of its characters to a Chinese labor camp. The series was promptly banned—not necessarily a bad thing for a controversy-courting work of satire, but hardly a scalable business model. “Like the NBA, we welcome the Chinese censors into our homes and our hearts,” the show’s creators tweeted, tongues firmly in cheek. “May this autumn’s sorghum harvest be bountiful! We good now, China?” To make certain that the ban would never be lifted, they referenced Xi’s supposed resemblance to Winnie the Pooh.
Talk to security strategists anywhere in Asia (living in the region, I frequently do), and they’ll almost universally express greater concern about China’s economic power than about its military might. “China has a lot of money—and they use it,” says Manoj Joshi of New Delhi’s Observer Research Foundation. “India can defend its own borders, but we can offer nothing remotely like Beijing’s BRI investments.” Similar sentiments can be heard from Kuala Lumpur to Kathmandu.
Global corporations show little sign of pushing back against Beijing’s demands. Big tech companies such as Facebook, Google, and Twitter are still jockeying to enter the market; they are kept out not by any sense of principle, but by “the Great Firewall of China”—the party’s tool for enforcing online ideological purity. Three years ago, the NBA set up a training camp in Xinjiang, the province where some 1 million ethnic-minority Uighur Muslims are currently interred in camps designed not for basketball, but for what is euphemistically termed “reeducation.”
The pressure to conform will increase in lockstep with China’s economic power. International firms have a stark choice: Take a stand for the principles they so often claim to respect—or just keep getting dunked on by the Beijing Cadres.