Monday, October 14, 2019

Pander Train to China

I get it: China has a huge potential market, and it is already a place that has many people wanting to consume all kinds of stuff.  So, businesses want to have access to that market, so they are willing to sell their souls to get into it.  There is lots of news now, but this is not new.

The latest stories:
  • The NBA story where one general manager tweets out a pic that demonstrated support for the Hong Kong protestors, which now threatens to cost the NBA something like $8-10million a team in terms of reducing the salary cap (based on total income).
  • Dreamworks has got a movie with a map that recognizes China's very expansive idea of the territories that are supposed to be Chinese--the 9 dash line includes hunks of Philippines, Vietnam, Indonesia, Brunei, and maybe another country or to.  This has cost "Abominable" Vietnam's market.  Don't forget, the Red Dawn remake had the North Koreans as the enemy invading the US (much more ridiculous than China invading) to avoid offending China.
Sure, I understand that firms seek profits and don't want to lose markets. The NBA is a bit different--there is no competition with other firms or whatever since no one else can sell or buy NBA teams or products except NBA teams.  They don't have to worry about somebody else profiting more in China and then using those profits to beat the NBA.  Instead, this is just really about more money for the owners (mostly billionaires) and players (regular players make millions per year).  A decline of $10million in the salary cap might a bit less money, but greed is greed, and so be it.  It will be interesting to see if tossing out fans in the US (in Philadelphia, home of all that freedom stuff) will cost the NBA at all.

Because there will be times where firms will have to choose--that appealing to China might offend other markets.  Already, Dreamworks has lost Vietnam in one case.  What happens when it is a conflict between American or European consumers and China's?

I must say that China has been doing a great job of turning me into a hawk.  Arresting some random Canadians because of an extradition process?  Nope, not a fan.  I don't want war with China, but I am not a fan of pandering to China too much either.  If the Chinese government is likely to get pissed off and use its leverage, then maybe that should be built into people's risk calculations and maybe not sell one's soul to get into a very Sopranos-esque market (co-production means losing intellectual property and having to put people on one's payroll that mostly either sit around or don't show up). 

All I can say is that we should expect more and more of this.  China is far more sensitive to slights than a rising power should be.  Great powers get criticized a lot--retaliating against every negative stance is going to get tiresome and will cut into China's growth eventually.  A smarter way would be just to regulate its own market in ways that affect world markets, but that is not what China is doing.  I think China was better off when it had some velvet gloves on its iron fists.  Now?  Now it is clear that China is going to be pretty willing to use its increased leverage.  The way to avoid that is not to sell out.  It will be interesting to see who is seduced by the short term gains versus those who see the trouble in the long term.

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