NBA loses more sponsors as China flexes economic muscle

James Harden, Commissioner of the National Basketball Association (NBA) during a press conference prior to the preseason game between Houston Rockets and Toronto Raptors at Saitama Super Arena on October 08, 2019 in Saitama, Japan. (PHOTO: Takashi Aoyama/Getty Images)

By Jinshan Hong and Iain Marlow

(Bloomberg) -- China is flexing its economic muscle for political ends, with more local sponsors of the National Basketball Association’s mainland events suspending their ties with the league over a tweet that backed Hong Kong’s protesters.

Following Tuesday’s decision by China’s state television and tech giant Tencent Holdings Ltd. to not show pre-season NBA games, the country’s largest sportswear maker and the second-biggest dairy firm joined in distancing themselves from the U.S. organisation. Smartphone maker Vivo said it was pulling out, while Master Kong, a maker of instant noodles and beverages, said it ended all NBA-linked marketing activities.

In the latest China controversy involving the NBA, Beijing is resorting to a time-tested strategy of targeting businesses it deems to challenge its political interests -- especially those questioning its sovereignty over certain territories. The furor, triggered by last week’s tweet by an official with the Houston Rockets, has imperiled the NBA in a multibillion-dollar market.

“Beijing takes a zero-tolerance attitude to any perceived foreign interference in its internal affairs,” said Hugo Brennan, principal Asia analyst at global risk consultancy Verisk Maplecroft. “This explains why it is adopting such a hard-line stance.”

The fracas has cast a shadow on what was set to be a key week for the NBA in China, with two top teams scheduled to play exhibition matches. The Brooklyn Nets -- recently bought by Alibaba co-founder Joe Tsai -- and the Los Angeles Lakers will clash in Shanghai on Thursday, and on Oct. 12 in Shenzhen, just across the border from Hong Kong.

The row has also raised doubts if the matches will indeed proceed to plan. Both the teams, already in Shanghai, are due to speak to the media on Wednesday.

China has become increasingly sensitive as challenges mount on various fronts. A trade war is exacerbating a slowdown in its $13.6 trillion economy, while pro-democracy protests in Hong Kong are raising questions about its ability to control the semi-autonomous territory. That made the now-deleted tweet by Daryl Morey, general manager of Houston Rockets, particularly inflammatory to Beijing.

The Mengniu Group, which owns a dairy company and is a long-time NBA marketing partner, said in a statement Tuesday that it “resolutely opposes all words and deeds that challenge China’s national sovereignty and endanger China’s social stability.” Anta Sports Products Ltd., a rising sportswear and sneaker firm that signs NBA stars as brand ambassadors, said Morey’s tweet was “wrong.”

Luckin Coffee Inc., a local rival to Starbucks Corp., also suspended all cooperation with the NBA’s local events. International, an online travel agent, said on its Weibo account that it was removing all tickets and products related to the NBA from its website.

The venue that was scheduled to hold fan events ahead of an NBA China game between Brooklyn Nets and Los Angeles Lakers, at the Oriental Sports Center in Shanghai, China October 9, 2019. (PHOTO: REUTERS/Aly Song)

A “fan night” planned for Wednesday evening, featuring NBA players and Chinese pop stars, was canceled. The local celebrities had decided to pull out of the event earlier this week. Workers were seen stripping a giant NBA banner in a mall in downtown Shanghai, while state-run CCTV said the league should apologise to Chinese fans and withdraw its comments. Some users demanded refunds from Tencent for their NBA subscriptions after the blackout of the preseason games.

The backlash intensified after NBA Commissioner Adam Silver defended Morey’s right to free speech. Silver refused to apologize and said the NBA doesn’t dictate what people can or can’t say, sparking further anger in a nation that restricts free speech. China’s Communist Party-backed Global Times fired back in a tweet saying “free speech is never free.”

Freedom of speech is never free. The #NBA incident with China might help the Western world to at least pay attention to what and how Chinese ordinary people, including basketball fans, feel about #HK riots and why they are offended.

— Global Times (@globaltimesnews) October 9, 2019

The NBA’s defiance shows the league is willing to pay the price for upholding what Silver called “values of equality, respect and freedom of expression” in its most promising market. Tencent, which holds digital broadcast rights for NBA games in China, said 490 million users watched one or more games on its platforms in the 2018-19 season, triple the number from four years ago.

The league’s position also stands in stark contrast to brands from Versace to Calvin Klein that were forced by an army of Chinese internet users to apologize this year for wrongly labeling Hong Kong as a country, and not as a Chinese city. Cathay Pacific Airways Ltd. has come under intense pressure to crack down on its employees after some workers participated in the Hong Kong marches, leading to the exit of its two top executives.

The NBA’s woes in China also revive memories of the wrath faced a few years ago by brands from Hyundai Motor Co. to Amorepacific Corp., which saw their sales plunge from a boycott. K-pop performances were canceled and retail conglomerate Lotte was harassed by officials after South Korea allowed the deployment of a U.S. missile defense system.

‘Love China’

In the U.S., the reaction has been mixed. James Harden, the most-valuable player for 2018 who plays for Houston Rockets, a team made popular in China by homegrown star Yao Ming, apologised and said “we love China.” Standing next to All-Star teammate Russell Westbrook, he added, “For both of us individually, we go there once or twice a year. They show us the most important love.”

James Harden #13 of Houston Rockets looks on during the preseason game between Houston Rockets and Toronto Raptors at Saitama Super Arena on October 08, 2019 in Saitama, Japan. (PHOTO: Takashi Aoyama/Getty Images)

Yet some U.S. lawmakers have blasted the NBA for kowtowing to China. The NBA had earlier said in a separate Chinese statement that the league was “deeply disappointed” with Morey’s “inappropriate” comment.

“What you do and say represents America to the world,” Senator Josh Hawley wrote in a letter to Silver, the NBA commissioner. “And for an American organization to help the most brutal of regimes silence dissent in pursuit of profit is appalling.”

© 2019 Bloomberg L.P.