When multinational corporations come into the crosshairs of the Chinese Communist Party (CCP), there is usually only one response—damage control. But the Women’s Tennis Association (WTA)—engulfed in the controversy over Chinese tennis star Peng Shuai’s allegations of sexual assault and Beijing’s response to her claims—is going on the offensive instead, announcing on Thursday that it is pulling its tournaments out of China entirely.
“I am announcing the immediate suspension of all WTA tournaments in China, including Hong Kong,” Steve Simon, the CEO of the WTA, said in a statement on Thursday. “In good conscience, I don’t see how I can ask our athletes to compete there when Peng Shuai is not allowed to communicate freely and has seemingly been pressured to contradict her allegation of sexual assault.”
Last week, Simon said the WTA’s relationship was at a “crossroads” after the International Olympic Committee (IOC) successfully held a phone call with Peng while the WTA’s own attempts to reach Peng went unanswered. Now, Simon is willing to sever ties completely with one of the world’s largest tennis markets.
“We repeat our call for a full and transparent investigation—without censorship—into Peng Shuai’s sexual assault accusation,” Simon said Thursday. “We cannot put our players and staff at risk by holding events in China. China’s leaders have left the WTA with no choice.”
On Thursday, China’s government denounced the WTA’s decision to pull its tournaments out of China. “We are firmly opposed to acts politicizing sport,” foreign ministry spokesman Wang Wenbin said at a press conference.
Few—if any—Western organizations have confronted Beijing with such a stark ultimatum and followed through on it so resolutely. Last week, JPMorgan was forced into crisis management after CEO Jamie Dimon joked that the U.S. Bank would outlive the CCP. Dimon issued an apology and walked back the comment, saying it is “never right to joke about or denigrate any group of people, whether it’s a country, its leadership, or any part of a society and culture.”
Dimon’s backtracking is typical of the tightrope American corporations like hotel chain Marriott, the National Basketball Association, and tech giant Apple have walked in order to do business in China—both trying to please the Chinese state while recognizing that Western lawmakers and consumers consider China an adversary and bristle at Beijing’s record on human rights.
The WTA’s confrontation with the Chinese government has set it apart from nearly every other sports league or corporation. But, as China remains a lucrative but increasingly challenging consumer market for international brands to work in, the WTA’s approach is unlikely to set a new standard for how multinationals handle Beijing.
#whereispengshuai
Unlike Dimon, who made a joke he probably shouldn’t have, a series of events outside the WTA’s control drew the organization into its current quagmire.
On Nov. 2, Chinese tennis star Peng Shuai accused former top-level government official Zhang Gaoli of sexual assault in a post on her account on Chinese social media platform Weibo. (Zhang has not responded to Peng’s accusations.) Since then, the WTA has called on China’s government to investigate the claims of the tennis star, which were scrubbed from China’s Internet minutes after posting, and for the government to confirm her safety.
“The allegations must be investigated fully, fairly, transparently, and without censorship,” Simon said in a statement on Nov. 14. Four days later, Chinese state media outlet CGTN released an email claiming to be from Peng to the WTA where she denied making the accusations at all. “Everything is fine,” she said, according to CGTN.
Unmoved, Simon doubled down on the WTA’s stance, responding the next day that he “had a hard time believing that Peng Shuai actually wrote the email” and demanded to speak to Peng directly “without coercion or intimidation.”
At that point, the hashtag #whereispengshuai started trending on platforms like Twitter. The largest stars in women’s tennis such as Serena Williams and Naomi Osaka demanded that China’s government let Peng speak and investigate her sexual assault claims.
In response to the calls, Chinese state media journalists circulated posts and videos of Peng Shuai, purportedly shot by friends or shared by the tennis star herself on her own social media. There was Peng at home playing with a cat; here she is at a restaurant for dinner. Simon called the posts “insufficient” and said the escalating situation jeopardized the WTA’s entire relationship with China.
On Nov. 21, the IOC entered the fray. It released a statement saying that IOC president Thomas Bach had spoken to Peng Shuai over the phone. Peng is “safe and well…but would like to have her privacy respected at this time,” Bach said.
Again, the WTA said Peng’s call with the IOC was not enough. “This video does not change our call for a full, fair, and transparent investigation, without censorship, into her allegation of sexual assault,” Simon told the New York Times. He said neither he nor his agency had been able to directly contact Peng.
What is the WTA sacrificing?
Steve Tsang, a Chinese politics professor at the University of London’s SOAS China Institute, says it is unlikely Beijing will ever respond to the WTA’s demands. There is a “next to zero” chance that China would investigate Peng’s allegations, he said. “It is likely that the Chinese government will ignore the WTA and seek to punish it,” says Tsang.
Beijing has attacked foreign brands for wading into politics in the past.
In March, a CCP-linked social media account dredged up a six-month-old post from fashion giant H&M, where the Swedish retailer said it would cut ties with a Chinese supplier over concerns of forced labor among the Uyghur minority population in China’s western Xinjiang province. The viral post suggested that consumers boycott the brand, and soon after China’s e-commerce giants JD.com and Alibaba removed H&M from their sites, while Baidu deleted all H&M locations from its maps app.
The government denied it had sparked the outcry, but nonetheless said it supported the boycott calls.
“These foreign companies refuse to use Xinjiang cotton purely on the basis of lies,” Zhao Lijian, a spokesman for China’s foreign ministry said at a news briefing. “Of course this will trigger the Chinese people’s dislike and anger.”
H&M’s sales in China, once the brand’s fourth largest market, tanked 28% in the three months ended in May and continued to plunge over the second and third quarters of the year, with China falling off the retailer’s top 10 largest markets in September. In the aftermath of the crisis, H&M said in a statement that it was dedicated to “regaining the trust and confidence” of its customers in China and remained committed to serving the Chinese market. In a statement on its Chinese-language website, H&M addressed the crisis more directly, saying it does not “represent any political position” and “respects Chinese consumers as always.”
“A willingness to openly confront Beijing is rarely seen in today’s global business climate,” says Brock Silvers, chief investment officer of Kaiyuan Capital, explaining that Western companies have almost uniformly displayed a “marked reserve in conforming to Chinese expectations.”
Sports federations have been no exception. In October 2019, former Houston Rockets general manager Daryl Morey tweeted in support of Hong Kong’s protest movement, sending the relationship between the National Basketball Association (NBA) and China into a tailspin. Unlike the WTA’s Simon, NBA commissioner Adam Silver committed to doing whatever he could to “de-escalate” tensions between the NBA and its largest overseas market.
But despite the NBA’s best attempts to limit the damage, Chinese companies dropped sponsorships of NBA teams and athletes, state-owned media blocked games from airing on television, and the NBA was forced to cancel community events in China.
Silver estimated that Morey’s tweet cost the NBA up to $400 million in lost revenues. The WTA is also financially exposed to the Chinese market. In 2018, the WTA signed a $1 billion, 10-year contract to host its season-ending tournament in the southern city of Shenzhen. In 2019, it held nine tournaments in China compared with eight in the U.S., where it is headquartered.
The WTA has also boasted a more consistent stream of marketable Chinese stars—Peng included—than the NBA. There are three tennis players from mainland China among the WTA’s top 100 singles players; the professional basketball league currently does not have a single player from mainland China on any team’s roster.
But the WTA may be more willing to take on China now since it has largely stopped doing business in the country because of COVID.
Media blackout
The WTA has canceled 17 events in China owing to COVID-19-related border restrictions since the beginning of the pandemic, and China has dropped few clues about when it will reopen to international travelers. China’s government may also feel less pressure to take action against the WTA since government censors have largely scrubbed news of Peng’s post from China’s internet.
“Peng’s message has been removed from the internet, and discussion of this serious issue has been censored in China,” Simon said Thursday.
Chinese consumers aren’t harboring negative sentiment toward the WTA; they’re unlikely to even know the extent of the league’s demands. Discussion of Morey’s tweet was covered extensively in Chinese media and on social media platforms, and Morey’s case turned the Chinese public against the NBA. In the aftermath of Morey’s tweet, fans burned jerseys and boycotted games. The WTA has not faced any sort of consumer backlash.
The upcoming winter Olympics in Beijing may have emboldened the WTA, too, since the Games had already put China on a collision course with international observers who are concerned about its human rights record. Even before Peng leveled her accusations, lawmakers in the U.S. Proposed bills to punish any American companies sponsoring the games. Now U.S. President Joe Biden is reportedly considering a diplomatic boycott of the Beijing 2022 Winter Olympics.
But Tsang says that the WTA’s willingness to stand up to China may become a test balloon that other companies and sports leagues will track closely.
“Others will watch and assess if the WTA’s principled stand will be rewarded by the public outside of China and thus assess the costs involved in quitting or being forced out of China,” he said.
Ex it uncertain
In October, Microsoft-owned LinkedIn shuttered its operations in China, citing the “significantly more challenging operating environment” in the country. In November, Yahoo closed up shop, too, likewise citing the “challenging” environment of operating there. But the challenges facing LinkedIn and Yahoo are likely more technical than political.
China had just imposed a new data privacy law, enacting trying restrictions on internet companies’ operations and revenue streams. Analysts say Yahoo and LinkedIn, which weren’t making much money in China to begin with, quit rather than investing in an upgrade of their data privacy practices to fit the new regime.
“In general, companies are not deciding to leave China; companies are deciding to come into China,” says Edward Tse, CEO at Gao Feng Advisory, noting that plenty of foreign businesses—like Tesla, JPMorgan, and Volkswagen—are doubling down on investments in the country.
Foreign business in China appears to have increased this year, as Beijing relaxed some regulations governing foreign investment and allowed overseas ventures to invest in more areas of the Chinese economy. According to the Ministry of Commerce, foreign direct investment in China in the first 10 months of the year rose 17.8% year on year, to $142 billion.
But Tse says the operating considerations for sports leagues like the WTA, which largely market themselves as aspirational and socially minded, will be different from manufacturers like Tesla, which will continue to benefit from engaging with China’s “hub of innovation.”
Whether the WTA’s approach catches on is unclear. “The context of doing business in China keeps on evolving,” Tse says.
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