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Is China’s Nike Boycott ‘Backfiring?’

Typically, reports of a nationwide boycott in a company’s largest growth region would not be good news.

But the events of the past week are anything but normal.

H&M faced a sudden uproar in China last week for past statements regarding reports of forced labor in the Xinjiang Uyghur Autonomous Region of northwest China. The backlash on Chinese social media soon engulfed Nike, Adidas, Uniqlo, Burberry and other fashion giants that had previously issued similar statements on Xinjiang. Many of China’s celebrity endorsers quickly cut ties with companies caught in the furor and China’s biggest e-commerce sites and apps, such as Alibaba’s Tmall, and Pinduoduo, removed H&M products. On Monday, the South China Morning Post reported that telecommunication giant Huawei Technologies Co. had suspended downloads of Adidas and Nike’s apps.

How exactly these events will impact companies’ bottom lines may not be as straightforward as it would first appear, however.

On Sunday, The South China Morning Post offered some evidence that the boycott, at least against Nike and Adidas, is “losing steam.” Unlike H&M, Adidas and Nike products remain available for sale on Tmall. And while Nike brand ambassadors Wang Yibo and Tan Songyun have announced the end of their relationships with the Swoosh company, major sports organizations have not yet followed suit.

Damon Verial, a statistical analyst who occasionally writes for the financial market resource Seeking Alpha, published a think piece Monday that went further, suggesting that the Nike boycott is “backfiring.” In fact, he described it as “more likely a medium-term bullish catalyst” akin to the boost provided by stimulus checks. Since calls for boycotts originated from government officials, not consumers, Verial reasons, reports of actual boycotts may have “jumped the gun.”

“Once you dig deeper, you find the opposite of boycotts: mad rushes to the stores to buy up Nike shoes,” Verial said. “These buying crazes seem to be out of fear (however misguided) that the Chinese government will enact bans or tariffs on Nike shoes and other US brands.”

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The circumstances surrounding the boycott calls suggest a more calculated origin rather than an organic groundswell of public outrage. Chinese state media have been behind some of the more popular posts on social media. China’s party-run Communist Youth League, for example, garnered hundreds of thousands of likes on Weibo, the nation’s version of Twitter, for a post that read “Spreading rumors to boycott Xinjiang cotton while trying to make money in China? Wishful thinking!” It was forwarded tens of thousands of times.

Notably, the statements that supposedly spawned last week’s calls for boycotts largely were made months ago. H&M, the company at the center of all the outrage, made its original Xinjiang sourcing comments in September.

The uproar does, however, follow sanctions on China that the United States, Canada, the European Union and the United Kingdom announced last week for what they described as “genocide” against Uyghurs, Kazakhs and other Turkic Muslim minorities. A report released in December by the Center for Global Policy, a Washington, D.C.-based think tank, estimated the Uyghur-majority prefectures of Aksu, Hotan and Kashgar marshaled at least 570,000 people to pick cotton in 2018. Experts believe 1.8 million Uyghurs, Kazakhs and other Turkic Muslims are being held in internment camps and prisons in and around Xinjiang.

Should the recent outrage—manufactured by the government or not—translate to long-term behavioral changes in consumption in China, companies that have been pursuing ambitious growth in the country could suffer a substantial blow. At Nike, total sales in the market grew 42 percent on a currency-neutral basis year-over-year in the most recent quarter to $2.3 billion. Total sales during the period totaled $9.8 billion companywide.

Following last week’s events, several businesses have removed their statements regarding Xinjiang, including PVH Corp., which owns Calvin Klein and Tommy Hilfiger; Zara owner Inditex; and VF Corp., which operates Timberland and The North Face. Asics, the Japanese sporting company, took to Weibo to say it will continue to purchase Xinjiang cotton and it is “firmly opposed to all actions that discredit and spread rumors about China.”

White House spokeswoman Jen Psaki responded to China’s social-media campaign at a press conference Friday.

“American consumers and consumers everywhere deserve to know that the goods they are buying are not made with forced labor,” Psaki said. “Many companies are standing up for consumers’ rights. The international community, in our view, should oppose China’s weaponizing of private companies’ dependence on its markets to stifle free expression and inhibit ethical business practices.”

State Department deputy spokeswoman Jalina Porter told reporters in a briefing later that China’s targeting of Adidas, Burberry, H&M, Nike, Uniqlo and others amounted to a state-sanctioned “corporate and consumer boycott.”