Olympic Games (2022)

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Why Companies Struggled to Navigate Olympics Sponsorships

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The debacle over Olympic sponsorship shows how the U.S.-China relationship has turned into a minefield for companies trying to do business in both countries.WASHINGTON — Companies usually shell out for Olympic sponsorship because it helps their business and reflects well on their brands. But this year, with the Olympics in Beijing, Procter & Gamble paid even more to try to prevent any negative fallout from being associated with China’s repressive and authoritarian government.The company, one of 13 “worldwide Olympic partners” that make the global sports competition possible, hired Washington lobbyists last year to successfully defeat legislation that would have barred sponsors of the Beijing Games from selling their products to the U.S. government. The provision would have blocked Pampers, Tide, Pringles and other Procter & Gamble products from military commissaries, to protest companies’ involvement in an event seen as legitimizing the Chinese government.“This amendment would punish P.&G. and the Olympic movement, including U.S. athletes,” Sean Mulvaney, the senior director for global government relations at Procter & Gamble, wrote in an email to congressional offices in August.Some of the world’s biggest companies are caught in an uncomfortable situation as they attempt to straddle a widening political gulf between the United States and China: What is good for business in one country is increasingly a liability in the other.China is the world’s biggest consumer market, and for decades, Chinese and American business interests have described their economic cooperation as a “win-win relationship.” But gradually, as China’s economic and military might have grown, Washington has taken the view that a win for China is a loss for the United States.The decision to locate the 2022 Olympic Games in Beijing has turned sponsorship, typically one of the marketing industry’s most prestigious opportunities, into a minefield.Companies that have sponsored the Olympics have attracted censure from politicians and human rights groups, who say such contracts imply tacit support of atrocities by the Chinese Communist Party, including human rights violations in Xinjiang, censorship of the media and mass surveillance of dissidents.“One thing our businesses, universities and sports leagues don’t seem to fully understand is that, to eat at the C.C.P.’s trough, you will have to turn into a pig,” Yaxue Cao, editor of ChinaChange.org, a website that covers civil society and human rights, told Congress this month.The tension is playing out in other areas as well, including with regards to Xinjiang, where millions of ethnic minorities have been detained, persecuted or forced into working in fields and factories. In June, the United States will enact a sweeping law that will expand restrictions on Xinjiang, giving the United States power to block imports made with any materials sourced from that region.Multinational firms that are trying to comply with these new import restrictions have found themselves facing costly backlashes in China, which denies any accusations of genocide. H&M, Nike and Intel have all blundered into public relations disasters for trying to remove Xinjiang from their supply chains.Explore the Games Propaganda Machine: China has used a variety of tools such as bots and fake social media accounts to promote a vision of the Games that is free of controversy.Aussie Pride: Australia has won more medals than ever before at the 2022 Winter Games. Could the country turn into a winter sports wonderland?At High Speed: The ‘Snow Dream’ train line, built to serve the Winter Olympics, has been a source of excitement — and a considerable expense.Reporter’s View: A typical day in Beijing for our reporters may include a 5 a.m. alarm, six buses, a pizza lunch and lots of live-blogging. For some, it’s the first time back in China in a while.Harsher penalties could be in store. Companies that try to sever ties with Xinjiang may run afoul of China’s anti-sanctions law, which allows the authorities to crack down on firms that comply with foreign regulations they see as discriminating against China.Beijing has also threatened to put companies that cut off supplies to China on an “unreliable entity list” that could result in penalties, though to date the list doesn’t appear to have any members.“Companies are between a rock and a hard place when it comes to complying with U.S. and Chinese law,” said Jake Colvin, the president of the National Foreign Trade Council, which represents companies that do business internationally.President Biden, while less antagonistic than his predecessor, has maintained many of the tough policies put in place by President Donald J. Trump, including hefty tariffs on Chinese goods and restrictions on exports of sensitive technology to Chinese firms.The Biden administration has shown little interest in forging trade deals to help companies do more business abroad. Instead, it is recruiting allies to ramp up pressure on China, including by boycotting the Olympics, and promoting huge investments in manufacturing and scientific research to compete with Beijing. The pressures are not only coming from the United States. Companies are increasingly facing a complicated global patchwork of export restrictions and data storage laws, including in the European Union. Chinese leaders have begun pursuing “wolf warrior” diplomacy, in which they are trying to teach other countries to think twice before crossing China, said Jim McGregor, chairman of APCO Worldwide’s greater China region.He said his company was telling clients to “try to comply with everybody, but don’t make a lot of noise about it — because if you’re noisy about complying in one country, the other country will come after you.”Some companies are responding by moving sensitive activities — like research that could trigger China’s anti-sanctions law, or audits of Xinjiang operations — out of China, said Isaac Stone Fish, the chief executive of Strategy Risks, a consultancy.An NBC production crew in Beijing. An effort to prevent Olympic sponsors, like NBC, from doing business with the U.S. government was cut from a defense bill last year.Gabriela Bhaskar/The New York TimesOthers, like Cisco, have scaled back their operations. Some have left China entirely, though usually not on terms they would choose. For example, Micron Technology, a chip-maker that has been a victim of intellectual property theft in China, is closing down a chip design team in Shanghai after competitors poached its employees.“Some companies are taking a step back and realizing that this is perhaps more trouble than it’s worth,” Mr. Stone Fish said.But many companies insist that they can’t be forced to choose between two of the world’s largest markets. Tesla, which counts China as one of its largest markets, opened a showroom in Xinjiang last month.“We can’t leave China, because China represents in some industries up to 50 percent of global demand and we have intense, deep supply and sales relationships,” said Craig Allen, the president of the U.S.-China Business Council.Companies see China as a foothold to serve Asia, Mr. Allen said, and China’s $17 trillion economy still presents “some of the best growth prospects anywhere.”“Very few companies are leaving China, but all are feeling that it’s risk up and that they need to be very careful so as to meet their legal obligations in both markets,” he said.American politicians of both parties are increasingly bent on forcing companies to pick a side.“To me, it’s completely appropriate to make these companies choose,” said Representative Michael Waltz, a Florida Republican who proposed the bill that would have prevented Olympic sponsors from doing business with the U.S. government.Mr. Waltz said participation in the Beijing Olympics sent a signal that the West was willing to turn a blind eye to Chinese atrocities for short-term profits.The amendment was ultimately cut out of a defense-spending bill last year after active and aggressive lobbying by Procter & Gamble, Coca-Cola, Intel, NBC, the U.S. Chamber of Commerce and others, Mr. Waltz said.Procter & Gamble’s lobbying disclosures show that, between April and December, it spent more than $2.4 million on in-house and outside lobbyists to try to sway Congress on a range of tax and trade issues, including the Beijing Winter Olympics Sponsor Accountability Act.Lobbying disclosures for Coca-Cola, Airbnb and Comcast, the parent company of NBC, also indicate the companies lobbied on issues related to the Olympics or “sports programming” last year.Procter & Gamble and Intel declined to comment. Coca-Cola said it had explained to lawmakers that the legislation would hurt American military families and businesses. NBC and the Chamber of Commerce did not respond to requests for comment.Many companies have argued they are sponsoring this year’s Games to show support for the athletes, not China’s system of government.In a July congressional hearing, where executives from Coca-Cola, Intel, Visa and Airbnb were also grilled about their sponsorship, Mr. Mulvaney said Procter & Gamble was using its partnership to encourage the International Olympic Committee to incorporate human rights principles into its oversight of the Games.“Corporate sponsors are being a bit unfairly maligned here,” Anna Ashton, a senior fellow at the Asia Society Policy Institute, said in an event hosted by the Center for Strategic and International Studies, a Washington think tank.Companies had signed contracts to support multiple iterations of the Games, and had no say over the host location, she said. And the funding they provide goes to support the Olympics and the athletes, not the Chinese government.“Sponsorship has hardly been an opportunity for companies this time around,” she said. More

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    For China, Hosting the Olympics Is Worth Every Billion

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    For many cities, the Games make no economic sense. National pride and an enthusiasm for building transportation infrastructure change the equation for Beijing.ZHANGJIAKOU, China — To make an Olympic ski jump, China clad a hillside in steel and blanketed it with artificial snow. To construct a high-speed rail line linking the venues and Beijing, engineers blasted tunnels through the surrounding mountains. And to keep the coronavirus at bay, workers are conducting tens of thousands of P.C.R. tests on Games participants every day.Hosting the Winter Olympics is costing China billions of dollars, a scale of expenditure that has made the event less appealing to many cities around the world in recent years. More and more of them have concluded that the Games are not worth being left with a hefty bill, white elephant stadiums and fewer benefits from tourism than they had hoped.But China looks at the Games with a different calculus. Beijing has long relied on heavy investments in building railway lines, highways and other infrastructure to provide millions of jobs to its citizens and reduce transportation costs. With the 2022 Games, it also hopes to nurture an abiding interest in skiing, curling, ice hockey and other winter sports that could increase consumer spending, particularly in the country’s chilly and economically struggling northeast.The Zhangjiakou National Ski Jumping Center for the 2022 Winter Olympics. Beijing hopes the Games will nurture interest in skiing and other winter sports that could boost consumer spending.Hiroko Masuike/The New York TimesPerhaps most important of all to China’s leader, Xi Jinping, the Olympics are a chance to demonstrate to the world his country’s unity and confidence under his leadership.“For China’s international image, prestige, and face, as the Chinese would say, nothing is too expensive,” said Jean-Pierre Cabestan, a political scientist at Hong Kong Baptist University.Still, with China’s economy already slowing, and a dimming outlook for global growth, as well as concerns that the Omicron variant of the coronavirus would lead to more shutdowns and choking of global supply chains, Beijing has been wary of spiraling costs. Even Mr. Xi acknowledged the event had to be streamlined, saying last year that the aim was to hold a “simple, safe, splendid” event.Making hockey skates at Hongwei Sports Goods Company’s facilities in Zhangjiakou.Kevin Frayer/Getty ImagesPractically every Olympic Games in recent years has triggered disputes over cost overruns. A study at Oxford University had found that the operating costs of Olympics held since 1960 have averaged nearly three times what the host cities originally bid.The city of Sochi in Russia, which hosted the Winter Olympics in 2014, spent and invested more than $50 billion — half of which was on infrastructure. When Beijing hosted the Summer Olympics in 2008, it said it had spent $6.8 billion, but that did not include the tens of billions more it used to build roads, stadiums, subway lines and an airport terminal.Names to WatchKamila Valieva: The doping case surrounding the Russian figure skater, who will be allowed to compete but won’t be able to receive medals, echoes another dark Olympic era.Kaillie Humphries: The bobsledder, who left Canada after accusing her coach of mental abuse, won gold for the U.S. in monobob.Erin Jackson: The speedskater’s gold ended a U.S. drought and made her the first African American to medal in the sport.Chris Corning: The American snowboarder, who is more calculating and quiet than his competitors, thinks his sport has an image problem. He wants to fix it.This time, China has set a budget of about $3 billion, a figure that includes the building of competition venues, but not projects like a $1 billion high-speed rail line and a $5 billion expressway.Yang Qian, an Olympic sport shooter, during the Winter Olympics torch relay at the Badaling Great Wall on Feb. 3 in Beijing. One way China saved money was by shortening the torch relay.Kevin Frayer/Getty ImagesThe pandemic is making the Games even more expensive. The bill for last summer’s Olympics in Tokyo included $2.8 billion in coronavirus prevention costs alone. China’s “zero Covid” strategy, which focuses on eradicating outbreaks, has meant infection control measures are much more elaborate.China’s concerns about the pandemic have dashed hopes that the Games would draw tourists. Organizers said last autumn that they would not sell tickets to foreign spectators. Then they announced last month that most Chinese residents would not get to go, either, prompting a last-minute rush by hotel managers in Beijing to cut drastically the high room rates they had set for February.Despite these difficulties, Chinese authorities have insisted that they have stayed within the operating budget.Officials have said the lack of spectators has meant fewer employees are needed at the Games. China also saved money by canceling a welcoming ceremony for foreign visitors and shortening the torch relay to just three days, the Beijing organizing committee said in an emailed reply to questions. Beijing has also been able to reuse competition venues, a giant media center and other facilities built for the 2008 Summer Olympics.The National Stadium, also known as the Bird’s Nest. Hosting the Winter Olympics is costing China billions of dollars, a scale of expenditure that has made the event less appealing to many cities.Hiroko Masuike/The New York TimesAt $3.1 billion, China’s operating budget is comparable to the average, inflation-adjusted cost of hosting previous Winter Olympics, according to the University of Oxford researchers.“Judging by the cost of previous Winter Olympics, that should be enough to cover the cost, especially when you consider that many of the facilities have already been built,” said one of the experts, Bent Flyvbjerg, a professor of major program management at Oxford.But it is hard to assess what portion of the coronavirus prevention costs, if any, is being included in the budget, Mr. Flyvbjerg said. Chinese accounting is often opaque, and there are many budgets in which health spending can be counted, he said.The government has also pressed businesses to take on more of the cost of hosting the Games. Other host cities of previous Olympics spent heavily to build lodging for athletes and journalists and a media center. China has taken a different approach.In Zhangjiakou, an area near Beijing where some competitions are being held, the Chinese authorities have temporarily taken over the Malaysian-owned Genting Secret Garden ski resort. The resort expanded its capacity to 3,800 rooms and vacation apartments, up from 380 before China won its Olympic bid. Lim Chee Wah, the founder and a co-owner of the resort, said in an interview that he had not been told how much the government would compensate him for the use of the resort for most of the winter season, but that he trusted it would be fair.Apartments at the Genting Secret Garden ski resort in 2019. The resort is near the venue for some of the events at the 2022 Games.Greg Baker/Agence France-Presse — Getty Images“We said, fine, thank you, but we’ll negotiate how to do the compensation — that will be done later,” he said.China also doesn’t count long-term infrastructure investments made in the years before the Games.The national government spent $2 billion building an expressway from northwest Beijing to Yanqing, where Olympic sliding and Alpine skiing events are being held, and an additional $3.6 billion to extend the expressway to the Taizicheng valley, where the ski resorts are.Before Beijing won its bid to host the 2022 Olympics, the government began spending $8.4 billion on a high-speed rail line that whisks travelers from Beijing toward Inner Mongolia at speeds of up to 217 miles per hour. After winning the Olympics, Beijing added $1 billion to that project to build an extra segment that peels off the main line and goes up into the mountains to Taizicheng.“The Chinese are not counting any of that — they say they would have built that anyway,” said Andrew Zimbalist, a professor at Smith College who has published three books about the economics of the Olympics. “I question whether they were going to do it anyway, and if they were going to do it anyway, why do they have to host the Olympics.”Big Air Shougang, the location of the freestyle skiing and snowboarding events.Hiroko Masuike/The New York TimesResort owners like Mr. Lim of Genting hope the new infrastructure will help develop the industry. In expanding the resort 10-fold ahead of the Olympics, he said, he had been told to expect that the national rail service would run 15 or 20 trains a day to the Taizicheng valley.In an email reply to questions, China’s national railway said it ran 15 bullet trains daily in each direction when the line opened at the end of 2019. But the schedule was cut drastically just a month later when the pandemic began, to five trains on most days, and an extra five on peak travel days.China regards the Olympics as transforming Beijing, which gets only a foot of natural snow most winters, into a global destination for winter sports.“The success in opening the Winter Olympics has brought positive economic benefits and created new sources of growth for the local economy,” said the top spokesman for the city of Beijing, Xu Hejian.Liu Yi More