Global Retailers Watch Chinese Tech Crackdown In Lucrative But Challenging Asian Market

Warnings to Hong Kong from Amazon, Facebook and Google about the Chinese region’s proposed data-protection laws are a sign that even the biggest eCommerce companies are worried about doing business in the formerly autonomous area — even as they rely on China’s retail market.

Retail sales in China grew by 12 percent in May, according to CNBC, missing expectations as consumer spending remains low amidst the country’s economic recovery from the coronavirus pandemic. China is expected to keep its COVID-era border restrictions in place until the second half of next year.

Still, China is among the largest markets for retail, surpassing the U.S. in total retail sales last year according to eMarketer. China’s retail market is expected to reach over $6 trillion in sales by 2024.

The Asia Internet Coalition — which also includes Rakuten, Apple, Twitter and others — is concerned that proposed anti-doxing legislation could put tech companies’ employees at risk of becoming entangled in criminal investigations. A ban on doxing, the practice of putting individuals’ private information online to enable harassment by others, is reasonable in theory, but Amazon, Facebook, Google and its peers worry that the vague wording of proposed amendments could be used to criminalize any acts of information sharing.

The proposals call for punishments of up to 1 million Hong Kong dollars — equivalent to about $128,000 — and up to five years in prison.

“The only way to avoid these sanctions for technology companies would be to refrain from investing and offering their services in Hong Kong, thereby depriving Hong Kong businesses and consumers, whilst also creating new barriers to trade,” the Asia Internet Coalition wrote in a letter to Hong Kong’s Office of the Privacy Commissioner for Personal Data.

To be sure, companies around the world had similar concerns last year when China imposed a new national security law in Hong Kong that critics said would curtail protest and freedom of speech, and yet many of those companies continued to do business in Hong Kong and China.

Still, the Wall Street Journal reported that in a survey of members of the American Chamber of Commerce in Hong Kong released last month, 42 percent of respondents said they were considering or planning to leave the city, citing uneasiness over the security law and a pessimistic outlook on Hong Kong’s future.

Eyes On China

Even as retailers and brands become increasingly wary of the formerly autonomous Hong Kong, they’re making big investments in mainland China.

Last month, for example, Nike said it is expanding its presence in China with a new digital technology center in Shenzen to better serve Chinese consumers as the country delivered its seventh consecutive year of double-digit growth for the sports apparel giant. Chief Financial Officer Matt Friend and CEO John Donahoe told investors and analysts that the company remains “committed to investing in the local consumer experience” and inspiring athletes in China.

“Consumers feel a strong, deep connection to the Nike, Jordan and Converse brands in China,” Donahoe said.

All this comes despite increasing calls for countries and companies to stand up against China’s treatment of the Uyghur population. China has come under criticism and sanctions for detaining more than 1 million Uyghurs and other Muslim minorities in the northwestern region of Xinjiang.

Additionally, French prosecutors have opened an investigation into allegations that global retailers, including Uniqlo, Skechers and Zara, relied on forced labor in Xinjiang. The probe is based on a legal complaint filed by a Uyghur worker in exile and three human rights groups.

The companies told the Associated Press, however, that their own audits and investigations have turned up no evidence of forced labor. A Chinese foreign ministry spokesman also told the wire service that allegations of forced labor are “a lie concocted by a small number of anti-China elements … with the aim of disrupting Xinjiang and containing China.”