Multi-National Company Treatment of Taiwan: An Emerging Battleground

Multi-National Company Treatment of Taiwan: An Emerging Battleground

Multi-National Company Treatment of Taiwan: An Emerging Battleground

In January 2018, Marriott was the subject of intense social media outrage within China for emailing its customers a Chinese-language questionnaire that referred to Tibet, Hong Kong, Macau, and Taiwan as countries separate from China. Internet users called for a boycott of the hotel chain and Chinese booking platforms Dianping (大眾點評) and Meituan (美團) took Marriott properties off their system. Access to Marriott’s website and app were blocked for a week and the Shanghai Cyberspace Administration summoned managers of Marriott’s China office. The Huangpu district government in Shanghai determined that the behavior of Marriott violated China’s Cybersecurity Law and Advertisement Law. The Cyberspace Affairs and Market Supervision Bureau in Huangpu then held a meeting and decided to file a case to investigate whether the hotel chain violated other Chinese law. The bureau asked Marriott to withdraw the content in question and conduct an overall check on information released online. The China National Tourism Administration also got involved, saying it had instructed the Shanghai authorities to launch an investigation.

After Marriott, Delta, Medtronic, and Zara also got hit. Medtronic, Delta, Qantas, and Zara all had websites that listed Taiwan as its own country. Zara was ordered by the Shanghai Cyberspace Authority to remove the “illegal” content from its website and issue a public apology. Medtronic was asked by the Shanghai Cyberspace Administration to update its website and it later issued a public apology. Delta executives were summoned to the Civil Aviation Administration of China and asked to rectify the mistake and give a public apology.

That’s a lot of detail—but important detail. Foreign companies have gotten into trouble over their treatment of Taiwan in the past, but never to this extreme level. More foreign companies that do business in China have found themselves in the middle of cross-Strait tension this year, including a number of foreign airlines. This piece seeks to address why it’s happening, why it matters, and what they can do about it.

Why it’s happening and why does it matter?

There a couple of reason why this is an important development in cross-Strait relations:

1. Foreign companies are getting caught in the crosshairs of growing cross-Strait tension.

Taiwan is used to dealing with Beijing’s ire over territorial disputes—just look at the major drop in tourism since President Tsai Ing-wen refused to acknowledge the so-called “1992 Consensus.” American companies, on the other hand, have generally not been subjected to major repercussions when the United States takes action with Taiwan; for example, introducing a new arms sale despite previous threats. This reality is changing.

A likely cause is the overlapping tenures of Xi Jinping, President Donald Trump, and President Tsai. Xi Jinping has made China’s “core interests,” of which Taiwan is one, a central feature of his policy. Speeches at the 19th Party Congress, the People’s Liberation Army 90th anniversary celebration, and the National People’s Congress have all reinforced his adherence to “One China,” leaving some to wonder if his deadline for unification is before he leaves his current role as head of the country. Even without this focus, relations between China and Taiwan were bound to get worse after Tsai came to power in 2016 due to the historical animosity between the Communist Party of China (CCP) and the Democratic Progressive Party (DPP) of Taiwan. Managing this tension has become one of the central realities of the new DPP administration in Taiwan.

And Trump has been a wildcard in cross-Strait relations. From taking a phone call from Tsai after he was elected, to his apparent walk back from upgrading Taiwan ties, and to the signing of the Taiwan Travel Act, he has introduced a new source of uncertainty into cross-Strait relations that has made Beijing very nervous. It is likely that China increasingly feels it necessary to send signals to the United States that the Taiwan issue is not to be meddled with.

2. China’s new cyber law is being invoked for sovereignty issues.

In the past, companies and individuals that were subject to public disapproval of their handling of Taiwan (and other areas of sovereignty concern for Beijing, including Tibet) were instructed to issue an apology and/or were subjected to boycotts. Now, China has begun applying its new cyber law to these issues. Cyberspace authorities are citing Article 12 of China’s cybersecurity law in these cases, which prohibits individuals and organizations from using the Internet to “incite separatism.” This matters because it subjects foreign companies to the possibility of more severe penalties, including shuttering of websites and fines. It also matters because it means there is more incentive for foreign companies to comply with Chinese requests to edit their websites or change their product offerings.  

3. It’s not just inside China.

In some of these cases, foreign companies were penalized for websites or products that were not linked to China and were not sold in the People’s Republic of China. China now seems to be working to apply its internal laws outside its borders when it comes to Taiwan. This has some foreign companies concerned that they may be at risk for working with Taiwan in any capacity if cross-Strait tension continues to get worse in the coming years.

What should a foreign company do?

These cases will likely not be the last. As recently as May, Gap Inc. was under fire for releasing a shirt on its website with a map of China that didn’t include Taiwan. In April, the Civil Aviation Administration of China reportedly sent a letter to United Airlines and American Airlines (among other companies) asking them to update their language on Taiwan, Hong Kong, and Macau or risk violating the cybersecurity law.

But foreign companies are not without options. For US companies especially, it is notable that this issue has been elevated to the level of the White House. On May 5, the White House press secretary released a statement on China’s actions, saying President Trump will stand up for Americans resisting efforts by the Chinese Communist Party to impose political correctness on America companies –citing specifically the letter to foreign air carriers. Following this statement, the US government raised the issue with its Chinese counterparts. The Chinese government has reportedly refused to discuss the issue, but it will remain a point of concern in bilateral discussions. Ultimately, this could reduce the pressure on US companies and give them more space to rebuff these requests on their public websites in the future.

Language also matters. Foreign companies have employed a range of responses to this type of situation, from extreme apologies to acknowledgments of hurting the feelings of the Chinese people. The president of Marriott Asia-Pacific called the entire incident the biggest mistake of his career, while Medtronic released a statement on its Chinese website that it fully understands China’s territorial issues and apologizes for causing misunderstanding among the Chinese public. On the complete opposite end of the spectrum, an Indian magazine that published a cover map excluding Taiwan in 2017 issued a press release simply stating that its cover photos have “consistently pushed the boundaries of creativity.”  

Many of the exposed companies mentioned in this piece chose to update their websites, including most of the airlines targeted by the Civil Aviation Administration letter. Companies that have operations in China and Taiwan would be wise to consider their options in case they get caught up in this trend. The US government, for its part, has a consistent policy of referring to Taiwan as Taiwan and not Chinese Taipei (in use by the United Nations), or Taiwan, Province of China. Some institutions prefer to refer to Taiwan as an economy. Fundamentally, is it up to the individual company to decide how to respond to this issue. There are pros and cons to every approach for each company, but one answer, or one apology, does not have to fit all.

The main point: The People’s Republic of China’s targeting of foreign companies for their treatment of Taiwan’s status on their websites is a growing trend. Citing its new cybersecurity law, Beijing has threatened to impose fines and other penalties on companies that do not comply. Companies that operate in China and Taiwan should prepare in advance a strategy for dealing with this new reality that takes into account a knowledge of cross-Strait history and precedent.