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Two Stories from China this week: Why Risk It / Absolute Zero

Why risk it?

Eileen Gu recently won the Women’s Big Air freestyle skiing competition at the Beijing Winter Olympics. Gu was born and raised in San Francisco to an American father and a Chinese mother. She grew up spending 25-30% of her time in China, and with her fluent Mandarin and “cultural fluency”, she says she feels Chinese when in China and American when in the United States. A couple of years ago, Gu chose to compete for China in the Winter Olympics, a decision that frustrated many Americans, mostly due to her immense talent. After her recent gold medal triumph in Beijing, Gu has chosen to stay apolitical. Reporter after reporter has pushed her to answer questions about her citizenship – Chinese athletes must renounce their citizenships to other countries to compete for China – but Gu has proven elusive, never answering the question and instead focusing her answer on her gratitude to both the American and Chinese Olympic federations.

In the age when athletes are becoming more and more likely to speak their minds on political issues, we need to step back and understand that not all people care to engage. Even if she does want to speak her mind, monetarily speaking, it is in her best interest not to do so. She currently has partnerships with the Louis Vuitton, Red Bull, Bank of China, China Mobile, and Mengniu Dairy. What does she stand to gain by discussing her citizenship openly? Reporters will take whatever she says, make soundbites out of it, and the move on to the next story, and they will forget about her two weeks later and until the next Olympics. If her answer damages her reputation in some way in some market, Gu is the one who will face the consequences. With the diplomatic issues between the United States and China right now, I fully respect her personal choice to not participate in polemic political discourse. She risks her body when she competes, she should not have to risk her marketability if she does not want to.

Absolute Zero

As the Omicron wave starts to crest across much of the world, China has still maintained a strict “zero COVID” policy. This has forced international companies to make tough decisions about their operations in China, and one such case study is Mandarin Oriental. If you are not familiar with the company, the Mandarin Oriental Group is based in Hong Kong and is worth 2.7 billion USD. They operate luxury hotels and properties in more than 20 countries, and they are known as one of Hong Kong’s oldest business empires. James Riley, the CEO of the company, has lived in Hong Kong for the last 25 years. He only recently returned after spending almost a year overseas because of strict government policies. The company has had to move most of the company’s key senior executives outside of the country. For example, as Riley told The Financial Times, “My chief operating officer, who’s based in Hong Kong, left 15 months ago. And I have no plan for him to come back because he can’t do anything here”. While much of Europe is easing restrictions again, Hong Kong has seen a surge in cases that has led to the closure of schools, gyms, and restaurants after 6 PM.

This case demonstrates how overly strict policies, when extended, can have long-term effects. If border restrictions ease in China going forward, it is not as if tourists and businesspeople will rush back and pretend that everything is back to normal. Companies enjoy stability, and when they know that governments might undermine that stability, it forces them to make contingencies. Do not be surprised if the “zero COVID” policy ends up doing long-term damage to China’s business reputation.