Washington should beware the wrath of Chinaâ€™s consumer â€” just ask Hyundai and Toyota
|National Post 06 Jul 2018 at 09:39|
Thatâ€™s somewhat unusual if you consider Beijingâ€™s most recent diplomatic spats with its trading partners.
When relations with South Korea deteriorated last year over Seoulâ€™s decision to deploy a missile shield, Chinese civil society went straight for the jugular.
Yang Bingyang, aÂ former model whoâ€™s known online asÂ Ayawawa, encouragedÂ her 2.7Â million Weibo followers to boycott Korean products. â€śEvery penny we spend is a vote on our future world!â€ťÂ the state-owned Global Times quoted her as saying. Hyundai Motor Co.â€™s market shareÂ in China was cut almost in half within a month.Â Lotte Shopping Co.â€™s local sales tumbled 84 per cent from the March to June quarters of 2017 after local authorities shutÂ stores alleging fire safety violations, and the chain is nowÂ pulling out of ChinaÂ altogether.
It was a similar story in 2012, during one of the periodic flare-ups over islands in the East China Sea claimed by both Japan and China. Nationalist crowds ransacked a Toyota Motor Corp. dealership andÂ set a Panasonic Corp.Â factory ablaze.
To date, thereâ€™s been little sign of that sort of thingÂ in this dispute. Despite claims of reduced buying of U.S. soybeansÂ and disruptive import checks onÂ fruitÂ and porkÂ in recent months, the dreaded non-tariff barriers have been confined to regulatory measures, rather than consumer boycotts.
Thatâ€™s particularly surprising given consumer goods could be Washingtonâ€™s Achillesâ€™ heel.
China in December overtook the U.S. as the worldâ€™s biggest retail market. Itâ€™s the largestÂ market by volume for General Motors Co.Â and the second biggest for Starbucks Corp., which expectsÂ sales in the country to overtake those from North AmericaÂ within a decade. Apple Inc. has some $45 billion of revenueÂ there, while Las Vegas Sands Corp. and Wynn Resorts Ltd. would collapse without the dollars flowing from their Macau casinos.
How to account for the relative silence? One explanation is that weâ€™re simply too early in this dispute for the big guns to be brought out.
The expected tit-for-tat response to the US$34 billion of U.S. tariffs Friday is an indicationÂ Chinaâ€™s government is still happy with the conventional trade weapons in its armory, and wary of reaching for anything more powerful.
There might be more to it, though. China has been careful to pose as the good guy in thisÂ fight. The spectacle of Beijing unleashing nationalist boycotts on Procter & Gamble Co., Coca-Cola Co. and Apple would make that facade harder to maintain, and give ammunition to the U.S. argument that Chinaâ€™s economy is ultimately a tool of the Party.
The lack of consumer boycotts isÂ â€śa bit unusual, but consistent with the Chinese rhetoric that China would be a defender of the global trading order,â€ť Victor Shih, an associate professor and expert on China at the University of California, San Diego, said.Â â€śThe reality is that the status quo allows China to protect many of its industries, so China wants to maintain the status quo.â€ť
Donâ€™t count on that forbearanceÂ continuing if tensions escalate. In all, Chinese subsidiaries of U.S. companies had about US$223 billion in revenueÂ in 2015, according to Deutsche Bank AG. Reduce those sales by just 20 per cent â€“Â a rather modest target, given what consumer boycotts did to Korean firmsÂ last year â€“Â and youâ€™ve already done US$45 billion in damage, more than equivalentÂ to the 10 per cent tariffÂ the U.S. is threatening to levy on a further US$400 billion of importsÂ if Beijing doesnâ€™t back down.
Thatâ€™s reason enough for Washington to reduce the temperature of this fightÂ before a chorus of complaints from boycott-battered U.S. companiesÂ force it to do so. The Chinese people â€“Â reading from a script, to be sureÂ â€“ havenâ€™tÂ spoken yet. Smile at them, pay them, pass them, but do notÂ quiteÂ forget.
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