American Silly Greed

LeBron$ James And The NBA Think They’ll Get Richer In China. So Did U.S. Airlines — And Me.
By Dan Reed

NBA's Labron James posed in September 2017 with players at the Rise Academy Challenge in Hong Kong. 

Now that he’s back in the relative safety of the United States after his fence-mending trip to China, here’s hoping that NBA Commissioner Adam Silver used all that time he spent in the air reading up on the airlines rather than merely reading their soft-focus inflight magazines.
If he did, he would have absorbed a cautionary tale that serves as a warning that the NBA’s quest for riches from China could turn out to be Quixotic.
Silver, LeBron$ James (who has dented his reputation by supporting the Chinese government’s repressive tactics against Hong Kong’s pro-freedom demonstrators), and others looking to make big bucks out of the world’s most populous nation, may get richer in the short run. 

But if the Chinese treat the NBA the way they have treated other U.S. airlines and other western business “guests” there, it is only a matter of time before the NBA becomes irrelevant in China, and somewhat diminished globally as a result.
China began opening its enormous markets in 1979 – albeit slowly and with lots of restrictions – to Western companies that lusted after China’s many consumers. 

U.S. airlines, which historically had been limited to mere token service by just two relatively weak carriers – Pan Am and Northwest – fought savagely for new rights to serve all of China’s mega-cities.

A China Southern Airlines Airbus A380-800 taking off from Amsterdam Schiphol International Aiport. China Southern, with a fleet of nearly 800 Boeing and Airbus jets is the largest of China's Big Three carriers. 

Ultimately United (which acquired Pan Am’s Chinese routes and some old planes in 1986), Delta (which got Northwest’s China service rights via merger in 2008) and American, which muscled its way in to a competitively weak position by winning newly negotiated U.S.-China air route rights, thought they’d laid claim to a gold mine that would never play out.
They were wrong, having been blinded to the reality of doing business in and with China by the huge potential of such an enormous market.
All three have had to scale back their service to China rather significantly in the last three years. 

They were losing money there in direct competition with China’s own airlines, carriers that only 30 years were pathetically incapable of competing head-to-head with western airlines. 

China Southern, China Eastern and Air China now all rank among the Top Ten airlines in the world and are on track to zoom past the U.S. Big Three in size, and perhaps profitability, by 2030 at least, and probably sooner.
Delta and American have had to resort to investing $450 million and $200 million respectively for small stakes, again respectively, in China Eastern and China Southern. 

Meanwhile the Chinese Big Three have thrown tons of new capacity on China-U.S. routes (and on other international routes). 

They’re effectively using their lower costs and inherent advantages of language and unassailable penetration of the gigantic domestic Chinese air market to overwhelm U.S. and other western carriers that still vainly hope that they’ll one day make a fortune serving China.
They also learned how to operate efficient and fiercely competitive airlines from the master of U.S. airline competition himself. 

I know this from firsthand experience.
Back in the early 1990s I wrote my first book about American Airlines’ growth from a nearly bankrupt industry also-ran in the early- and mid-’70s to the undisputed leader of the global industry under legendary CEO Robert Crandall. 

About six months after my book hit the U.S. market my agent called with news that she had been approached by a Chinese publisher that wanted to buy the Chinese language the rights to my book.
I was ecstatic. 

Like Silver, James and other NBAers these days, I looked at the size of the Chinese market, pulled out a calculator and, after a few seconds of pounding on the keys (and then dividing the results in half several times over in what I believed to be a reasonable effort at making a conservative estimate) I began dreaming of the huge new house we soon would be building for ourselves with all that new money.
So, you can imagine my horror when my agent then told me the Chinese buyer was offering just $1,000. 

In my naivete I was insulted. 

I was expecting $1 million. 

Even an offer of $100,000 would have been a big let down for me. 

But a mere $1,000?
Thus, I urged my agent to go back with a much, much larger counter proposal. 

I’m sure she had to stifle the urge to laugh at me and then advised against that approach.
“Take this deal now,” she told me, “or the Chinese will just print it and sell it there and never give you a dime. I’ve represented lots of authors who’ve had their books printed in Chinese, but never one that the Chinese publisher offered to buy the language rights to up front. They usually just print it and never tell you.”
It was my first lesson in the reality of doing business with China in those days and, if what I read is true, still today. 

Copyrights and intellectual property rights never have been much of a concern for Chinese businesses of any consequence. 

So, I took my $1,000 and muttered bitterly under my breath as I signed the contract. 

The most valuable thing I got out of the deal was a copy of my book in Chinese, which I use sometimes as a conversation piece with guests to our home, but mostly just to raise the height of my desk fan during the hot Texas summers.
Meanwhile, I’m told several thousand copies of my book printed in Chinese were distributed to managers in the Chinese airline industry and related businesses. 

To them it was a textbook that helped them learn how to compete with western carriers applying Crandall’s tactics, still regarded as the best in the industry’s history 20 years after his retirement.
No doubt the airlines, and tech, manufacturing and agri-business companies that have entered the Chinese market in big ways over the last 40 years got more out of the Chinese market than I ever did. But just ask ‘em, and most of them will admit that the rewards, while nice early on, are diminishing rapidly. 

From smartphones to cars to iconic U.S. snack brands, China’s homegrown competitors have been taking away their market share, as this recent sobering article in the Wall Street Journal describes.
Does that mean the China Basketball Association will soon – or ever – equal or surpass the NBA in the quality of play and level of talent on display? 

Not necessarily. 

But don’t be surprised if the CBA in the not-too-distant future is generating as much or more revenue than the $25 billion a year that the NBA now generates through ticket sales, broadcast rights and product advertising and endorsements. 

That’s the power of a 1.4 billion-person market vs. a 325 million-person market. 

And don’t be surprised to see the quality of play of Chinese teams and the talent and skills of Chinese players close the gap on the NBA.
Already there have been a half dozen or so Chinese players good enough to play in the NBA, most notably 7’6” center Yao Ming, an eight-time All-Star with the Houston Rocket whose career was cut short by chronic foot and leg injuries. 

As the Chinese learn more about the game, which they declared their national pastime more than 70 years ago, and how to develop young players, more Chinese players undoubtedly will be drafted into the NBA. 

And more Americans players will go to China, not only to revive careers that once seemed headed downhill in the NBA, but to prove their worth to NBA teams and, eventually, create international bidding wars for their services.
Will the CBA ever actually overtake the NBA as the highest level of basketball competition in the world? 

Who knows? 

But it’s not unimaginable. 

And it’s quite conceivable that the CBA will one day bring in more revenue and post bigger profits than the NBA and its teams.
That’s the way China does business. 

Of course the average Chinese teenager buying NBA players’ jerseys and Air Jordans today probably doesn’t care about the business of basketball, just like the average American teenager buying player jerseys and Air Jordans today don’t care about the business side of the league. 

But Silver, James and the rest of the NBA may learn, soon enough, that the mine in China that they think will yield them endless riches really contains only fool’s gold.

American Loyalty

Giving In to China, U.S. Airlines Drop Taiwan 

By Sui-Lee Wee

The check-in counters for American Airlines at Beijing Capital International Airport. 

BEIJING — You can book a ticket to Taipei from New York on a major American airline. 

Just don’t ask them which country you are going to.
Bowing to pressure from China, American Airlines, Delta Air Lines and United Airlines began to remove references to Taiwan, of which Taipei is the capital city, as a separate country from their websites Wednesday.
American, which was the first to make the switch, listed Taipei Taoyuan International Airport, the city’s main airport, as a destination for travelers looking to book a flight on its website, with no reference to Taiwan. 

Delta listed only Taipei and the code for the city’s airports.
The American carriers were among the last holdouts against a Chinese effort to force all airlines to drop any references to Taiwan as a separate country. 

Beijing regards the self-ruled democratic island as a breakaway province.
While many major international carriers now designate Taiwan as a part of China, the American carriers stopped short of that step.
But changes to the websites were inconsistent on Wednesday: A user booking a ticket on Delta, for example, could search for Taiwan as a destination, but the name would not appear in the results. 

The Chinese version of United’s website used the airport code TPE, for Taipei Taoyuan International, while the English version included TW, which is the country code for Taiwan.
Companies doing business in China often find themselves struggling to balance the demands of an increasingly nationalistic government against calls from rights groups and politicians that they should not give in to Beijing. 

The White House, for example, had described the Chinese website order as “Orwellian nonsense.”
“We have another example of nonsovereign entities contorting themselves to satisfy Chinese pressure,” said Rupert Hammond-Chambers, the president of the US-Taiwan Business Council, a nonprofit organization that works to develop trade and business ties between the United States and Taiwan.
“That bodes ill for the future, frankly, in respect of the hoops that everyone is jumping through to try to satisfy China’s goals and objectives here,” he added.
An official at Taiwan’s presidential office said that Taiwan was exploring possible litigation over the issue.
“Taiwan has been closely interconnected with the world, and defending our shared democratic values on the front line,” Taiwan’s presidential spokesman, Alex Huang, said. 

“That is a fact which cannot be easily erased by simply removing the name of Taiwan from the internet. The people of Taiwan will not bow to pressure.”
In April, the Civil Aviation Administration of China sent a letter to 44 foreign airlines demanding they change their websites if Taiwan, Hong Kong or Macau were classified as countries. 

Both Hong Kong and Macau are semiautonomous Chinese territories with their own laws.
In recent months, many international airlines including British Airways and Lufthansa have given in to China’s request. 

Lufthansa, for example, refers to Taipei as a destination in “Taiwan, China.”
Yuan Zheng, director of United States foreign relations at the Chinese Academy of Social Sciences, a government think tank in Beijing, said the Chinese authorities could have fined airlines that failed to comply, restricted their entry into the Chinese market or removed the carriers’ apps and booking systems in China.
But even if Beijing chose not to take action, ignoring China’s request could have cost the American carriers business from Chinese customers, Yuan said.
China is projected to overtake the United States to become the world’s largest aviation market, and American companies have been trying to gain a foothold in the growing market with investments and code-sharing arrangements. 

Delta owns a stake in China Eastern Airlines and American owns shares of China Southern Airlines, while United has a partnership with Air China.
A spokeswoman for American Airlines, Shannon Gilson, said that the airline “is implementing changes to address China’s request.”
Representatives for Delta and United did not immediately reply to requests for comment on the situation.
At a regular Chinese Foreign Ministry briefing on Wednesday, a ministry spokesman, Geng Shuang, said, “We have noticed that so far some positive developments have been made around this matter, and the foreign airlines have made corrections.”
“We welcome their investments in China,” he added.
Under Xi Jinping, China has been increasing pressure on Taiwan. 

The island’s president, Tsai Ing-wen, has called on the international community to “constrain” China. On Tuesday, the East Asian Olympic Committee revoked its decision to host the 2019 East Asian Youth Games in Taichung, a city in Taiwan, bowing to Chinese pressure, according to news reports.
A growing number of American companies have in recent months tried to appease Beijing. 

In January, the authorities in Shanghai temporarily shut down the website of the hotel chain Marriott International for labeling Taiwan and Tibet, a region of China, as separate countries. 

In May, the clothing retailer Gap also issued an apology to China after a map of a T-shirt sold in North America did not depict Taiwan as part of China.

China's Orwellian nonsense

U.S. Airlines Unbowed by Beijing’s Demand to Call Taiwan Part of China
Delta, American and United hold out after Chinese insist they change websites, other materials
By Trefor Moss

A United Airlines Boeing 777 takes off from Hong Kong. 

SHANGHAI—Many global airlines have bowed to Chinese demands to refer to Taiwan as part of China, but a handful of others—including the three main U.S. international carriers—haven’t, amid a U.S. backlash against Beijing’s insistence on conformity with its views.
The U.S. airlines look to be taking their cue from Washington, with a bipartisan group of U.S. senators urging the carriers to stand up to Chinese bullying and the White House branding China’s request “Orwellian nonsense.”
“We have deferred the matter to the U.S. government since this is a diplomatic issue to be resolved among governments,” a United Airlines spokesman said in a statement given to The Wall Street Journal on Wednesday.
Though China claims Taiwan, the island is run by its own democratically elected government.
A spokeswoman for Delta Air Lines, which has yet to change its stance, said the airline was in close consultation with the U.S. government on the matter. 

An American Airlines spokeswoman declined to comment on the carrier’s noncompliance.
Other holdouts as of Thursday included Japan’s ANA and JAL, Korea’s Asiana and Korean Air , Air India and Vietnam Airlines. 

These carriers are from countries with historical or political reasons for wanting to stand up to China—including territorial disputes. 

Beijing has set a June 24 deadline for compliance.

A model China Southern Airlines Co. aircraft displayed at the Guangzhou Baiyun International Airport in Guangzhou, China, last month. U.S. airlines have thus far not bent to Beijing’s demands to refer to Taiwan as part of China. 

“This is another example of China using its growing global heft to ensure that its view of the world informs the behavior of organizations, countries and companies world-wide,” said Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai.
“For companies doing business in China this may eventually boil down to a choice: Amend your global websites to reflect China’s view of its territorial sovereignty, or face being excluded from or disrupted in the China market,” Mr. Jarrett said.
China wrote to airlines in April demanding that they change their websites and other materials—not just in China, but globally—and adopt language approved by Beijing regarding self-ruled Taiwan.
Hong Kong and Macau, which are special administrative regions of China, are also included in the order.
Airlines were initially given 30 days to comply, though the deadline was later extended until June 24 to give them extra time to make the required changes. 

Airlines that don’t comply are liable for punishments including more frequent government inspections and the loss of landing slots at Chinese airports, according to China’s civil aviation authority.
The country’s authorities are more aggressively demanding that consumer-facing information reflect China’s world view. 

This year alone, at least a dozen U.S. and other Western brands and companies—including Marriott International, the Zara apparel chain and Daimler’s Mercedes-Benz unit—have drawn Beijing’s ire for what it considered inflammatory content.

The Taipei Marriott hotel earlier this year. The international hospitality giant has come under fire from China’s government. 

Most companies have acquiesced, fearful of being cut out of the world’s second-largest economy. Marriott even fired an hourly worker who used a company Twitter account to “like” a tweet by a Tibetan separatist group. 

Beijing has zero tolerance for "separatist" movements in Tibet, which is a colony of China.
But China’s latest demands are drawing political counter-fire in the U.S., from the Trump administration and from the bipartisan group of senators, which wrote to U.S. airline chief executives last month vowing to oppose Chinese interference in American companies.
The demands come against a backdrop of trade tensions between the U.S. and China and more interaction between Washington and Taipei.
The U.S.-backed American Institute in Taiwan on Tuesday opened a new $240 million de facto embassy in the Taiwanese capital, a move which drew stern criticism from Beijing.
Surprisingly, two Hong Kong-based airlines with strong links to the Beijing government have so far not made the changes demanded.
Cathay Pacific is 20%-owned by state-run Air China, while Hong Kong Airlines is controlled by HNA Group, another Chinese state company. 

Yet the two carriers don’t describe Taiwan as part of China or refer to Hong Kong as a special administrative region of China.
Neither airline responded to questions.
Among the airlines that have complied with China’s wishes are Air France , British Airways, Lufthansa , Emirates, Qatar Airways, Malaysia Airlines, Philippine Airlines, Singapore Airlines , Thai Airways , Turkish Airlines and Air Canada. 

They now refer to “Taiwan, China” in their list of destinations.
Australia’s Qantas had yet to make changes to its website, though its chief executive, Alan Joyce, said last week that the airline would do so before the deadline.
A spokesman for Montreal-based International Air Transport Association said China had set out some “very stringent requirements” in demanding that airlines make global changes.
“Airlines are nonpolitical businesses serving many global markets,” he said, adding that they find it tough “when government requirements are politically rather than operationally motivated.”