China’s Control of Economic Demand
The National Basketball Association (NBA) generates over $8 billion in revenues annually, with the average franchise valued at about $2 billion. Despite the NBA’s position as one of the highest-earning and most innovative professional sporting organizations in the U.S., if not the world, it has recently come under pressure from a source far from home: China.
Daryl Morey, the general manager of the Houston Rockets, tweeted out a statement expressing his support for the long-standing protests in Hong Kong. The Chinese government quickly responded by cutting all ties with the Rockets, from streaming to sponsorships, refusing to even acknowledge that the team existed.
This reaction has major consequences for the economic outlook of the NBA. Tencent, a Chinese internet provider, and the NBA signed a $700 million streaming deal in 2015. Now, that highly lucrative agreement is up in the air.
NBA China is valued at over $4 billion, with the Houston Rockets being arguably the most popular franchise. This impacts the cash flows of one of the biggest sources of revenue for the NBA, potentially reducing sales by millions of dollars, even upwards of hundreds of millions of dollars in a true nightmare scenario.
However, more important than the NBA alone, the Chinese reaction to Morey’s tweet incentivizes other companies to change their behavior. The Chinese Communist Party (CCP) can and has exerted tremendous pressure on domestic and foreign companies to comply with official CCP positions, regardless of the morality of those positions. Such is the nature of doing business with China: with a 1.3 billion person market at stake, the incentives for corporations is clear. This showcases the CCP’s powerful influence when considering the demand they contribute to different service-providing companies.
This issue is not limited to Hong Kong. The CCP’s influence on a company’s behavior is evident in the debate around Taiwan’s sovereignty. United Airlines, American Airlines, and Delta Airlines were pres
sured into removing Taiwan from the countries listed on their websites. Similarly, Marriot Hotels apologized for labeling Taiwan as an independent country. Mercedes-Benz issued an apology for quoting the Dalai Lama, yet another issue sensitive to Chinese politics.
It is important to understand why companies seem to be caving in to unreasonable Chinese demands. A firm’s philosophy might not align with China’s, nevertheless, they are forced to comply with their demands to continue benefiting from the large market. This raises a prominent, ethical concern to individual consumers: should one consider a product’s censorship and political background? I think it is important for people to take ethicality into consideration when buying any product, for buying a service is an implicit endorsement of a product and company. That is why NBA fans should be happy that the NBA has refused to fire Daryl Morey despite Chinese demands. Any future foreign influence on US companies, whether it be from China or any other country, should be met with extreme skepticism on the part of American consumers.
