Canadians aren’t the only ones glued to the NBA playoff finals this week. Fans in China are enjoying watching the Toronto Raptors on Chinese national television. The Raptors are an example of one of the many ways in which China is linked to Canadian business interests. At the same time, two innocent Canadians are in a Chinese jail in retaliation for Canada’s arrest in December of an executive of Huawei Technologies Co. Ltd. at the request of the United States.
Much is at stake for Canadian businesses as the U.S.-China and Canada-China disputes escalate. Chinese social media and state media have been heavily critical of Canada and the U.S. Many analysts have assumed the rhetoric and actions from China’s leadership and social media represent reality.
But this approach is risky: to determine what is truly at stake and what is just hype, we need to look at the evidence.
Take the assumption that there is a growing boycott of Apple products in China. International media reported this after the arrest of Meng Wanzhou, Huawei’s chief financial officer. They reported it again after a U.S. executive order on May 15 banned U.S. companies from using technology made by companies considered a national security threat - widely viewed as targeting Huawei. Recent Chinese social media posts compare the Huawei logo to a sliced-up apple, and talk about how embarrassing it is to be seen with iPhones. In May, several equity analysts reduced their price targets for Apple, arguing that iPhone sales in China could be halved.
What does the evidence show? It is hard to get meaningful data. Apple no longer releases its sales data for iPhones in China. Social media signals are unreliable: Chinese social media are either censored or self-censored. U.S. President Donald Trump’s threat in May to raise tariffs on Chinese goods - front page news in North America - was not reported on Chinese social media, for example. Traditional surveys in China rely on a narrow group of paid respondents who tend not to reflect broad-based opinion.
At RIWI Corp., we looked for evidence of whether the assumption of a boycott was true by randomly engaging more than 27,000 Chinese internet users. The data from June, 2018 - before the China-U.S. trade war started - through to the end of May showed little evidence of a dramatic Chinese boycott of Apple or North American products. Any boycott appears to be small, at least so far. This is despite Ms. Meng’s arrest in December, the U.S. ban in mid-May, and many other dramatic twists. Our method did not rely on social media signals, but on broad-based opinion at large scale across China, including usually quiet voices.
Every day, without mentioning a boycott, we asked a fresh set of Chinese people where they prefer their household products, electronics or insurance services to come from. The share of Chinese consumers who preferred to buy North American did not change dramatically, although it dropped a bit for electronic products after the U.S. ban was ordered in May.
Moreover, only about half of almost 7,000 randomly recruited respondents from March to May said they were aware of an Apple boycott. Week after week, with a fresh set of respondents, and despite the dramatic events, this share remained the same. A new Bank of America Merrill Lynch study using RIWI data also found that the percentage of Chinese respondents intending to buy an iPhone as their next phone actually increased in May from April.
A similar thing happened in the case of luxury parka-maker Canada Goose in December. Users of China’s social media platform Weibo advocated a boycott, and media reported it as if it were a fait accompli. Shares of Canada Goose dropped dramatically. Yet it was more hype than reality: Customers still waited for hours on a freezing cold day for the opening of the Canada Goose Beijing store.
Coming back to the NBA, the league said last week that, given its fan base in China, it is monitoring the political situation there. Canadian businesses such as Lululemon, Manulife, Roots and Tim Hortons, as well as universities, colleges and tourism businesses, also have much at stake as tensions escalate between Canada and China and the United States and China. These businesses and organizations derive a significant and growing share of their revenues from Chinese consumers.
How much of this revenue is at risk? Will boycotts widen and implicate other North American brands and extend to Chinese tours in North America? Could it become difficult if not impossible to do business deals between North American and Chinese companies, as already reported anecdotally?
Amid so much hype and drama, and with so much at stake, we need to challenge our assumptions with evidence, or risk basing our decisions on noise instead of signal.
Danielle Goldfarb is head of global research at RIWI Corp., a global trend-tracking and predictive analytics firm.