Dozens of Chinese celebrities have canceled contracts or said they will cut ties with the brands, while H&M, the world’s second-largest clothing store, has been pulled from major e-commerce sites.
Investor Insight: Nike shares plummeted more than 3% on Wall Street on Thursday, while Adidas fell more than 6% in Frankfurt. In London, Burberry lost more than 4%. H & M’s share also fell by almost 2% in Sweden.
The outrage was triggered by a social media report from a group affiliated with the ruling Communist Party, which reappeared in a statement made by H&M in September on reports of forced labor in Xinjiang. The state media has since focused on other big brands that have spoken out before.
Human rights groups have repeatedly accused Beijing of locking Uyghurs and other Muslim minorities in “re-education camps” where they are forced to make products that make their way into global technology and retail supply chains.
A backlash in China against companies that have spoken out about Xinjiang could pass, according to Bernstein analyst Aneesha Sherman. Shares of H&M were up 1% in early trading on Friday, while shares of Nike are up about 1.5% in premarket trading.
But the episode reminds us of the challenges Western brands face as they seek out the immense purchasing power of Chinese consumers.
“It’s a tough position to manage because they can’t really get back on them [stances], but at the same time, they want to make sure they don’t let the Chinese customer down, “Sherman told me.
China accounted for about 5% of H & M’s sales in 2019. Sherman estimates that this figure rose to about 10% in 2020 as the Chinese economy recovered from the coronavirus faster than its home market, Europe.
“In a year like this, even a 5% topline haircut is a big hit when H&M tries to recover,” said Sherman.
Luxury brands like Burberry are even more visible, she added. Burberry cited “any significant change in the spending habits of Chinese consumers” in its most recent annual report as a major risk to sales.
Big picture: The tensions between the US and China that gained importance during the Trump era have not dissipated as the Biden administration and allies have taken a hard line with Beijing. This creates challenges for Western companies operating in the Chinese market.
“It affects these brands,” said Sherman. Plus, weeks like this only bolster the hand of local competitors, who are more responsive to regional tastes and can avoid politically generated controversies, she noted.
This mighty oil lobby has changed its voice on a carbon tax
But the devil will be in the details, my CNN Business colleague Matt Egan reports. The American Petroleum Institute has established a set of principles that must be met before the age-old group approves a price on carbon.
Proponents of carbon pricing say it is crucial to combat the climate crisis because it would speed up efforts to curb global warming emissions and force investors, businesses and individuals to bear the costs of pollution.
But API opposed the latest serious effort to impose a price on carbon in 2010. Since then, ExxonMobil, Chevron and other industry leaders have publicly backed on carbon pricing – paving the way for others to follow.
“This is a pretty big deal for the industry. It is widely recognized that the country clearly needs to do something about climate change,” API CEO Mike Sommers told CNN Business. “We want to be a willing partner with the Biden administration and others in Congress who are taking this challenge seriously.”
Still, there is skepticism among climate groups that the change of heart of API will translate into support for meaningful legislation.
“ An explanation of theoretical support for a market-based carbon price is far from agreeing with what probably must be strong, binding rules to limit fossil fuel use. [and] methane emissions, ”Dylan Tanner, executive director of InfluenceMap, a think tank focused on energy and climate change, said in a statement.
WeWork is finally going public by merging with a SPAC
The Latest: The Wall Street Journal was the first to report that WeWork has agreed to merge with a specialty acquisition company, or SPAC.
The merger with BowX Acquisition Corp. would value WeWork at $ 9 billion. That’s a fraction of the $ 47 billion private market value the company previously raised.
Remember: WeWork was plunged into crisis in 2019 when investors scoured the company’s IPO paperwork, revealing former CEO Adam Neumann’s uncontrolled power and numerous potential conflicts of interest, as well as the startup’s staggering losses.
The company was forced to delay its IPO, accept a bailout from SoftBank and reconfigure its operations.
Now it could raise money by tapping into the SPAC boom. In recent months, investors have been rushing to set up so-called “blank checks” companies, which exist purely to find private companies to merge with and effectively disclose them.
Details, details: BowX Acquisition Corp., which raised $ 420 million from investors last year, is led by Vivek Ranadivé, who founded Tibco Software and now owns the Sacramento Kings. Ranadivé will join the WeWork board.
Next one
Personal income and expenditure data for February posts at 8:30 a.m. ET, along with a key measure of inflation.
Next week, the US jobs report for March is a crucial economic indicator as the recovery picks up steam.