The EconomistOctober 5th 2019 Business 59“I
t doesn’t matterhow many people
hate your brand as long as enough peo-
ple love it.” So declared Phil Knight earlier
this year in a lecture at Stanford Business
School. Companies cannot remain neutral
on issues of conscience, even if it means
losing some customers. “You have to take a
stand on something,” insisted Mr Knight,
as Nike, the sportswear firm he dreamed up
while studying at Stanford in the 1960s, had
done by supporting Colin Kaepernick, an
American footballer who refused to stand
during the pre-game national anthem in
protest against racial injustice.
Woke stuff—and lucrative to boot, if
Nike’s financial performance is anything to
go by. The company’s revenues rose by 7%
in the three months to August, year on year,
to $10.7bn. Profits were up by a quarter, as,
so far this year, is the share price.
Ironic, then, that Nike must now fend
off accusations of distinctly unwoke be-
haviour. In May it was shamed into undo-
ing a policy of slashing pay for female ath-
letes it sponsors when they get pregnant.
An earlier scandal over allegations of sexu-
al harassment and abuse of female workers
led to the dismissal of nearly a dozen male
executives. And this week Nike has been
embroiled in an ugly doping affair, which
dragged its share price down by 3%.
On September 30th America’s anti-dop-
ing watchdog found Alberto Salazar, a star
running coach who counts Olympic gold
medallists as clients, and Jeffrey Brown, a
physician, guilty of “orchestrating and fa-
cilitating prohibited doping conduct” and
banned both from athletics for four years.
Mr Salazar ran the Nike Oregon Project, a
programme for elite athletes; he has a Nike
swoosh tattooed on his arm.
Nike denies wrongdoing. Mr Salazar
and Dr Brown are expected to appeal
against the ruling. In an message to em-
ployees this week, Nike’s current boss,
Mark Parker, reportedly wrote that the idea
of doping runners “makes me sick”. Yet
emails between him, Mr Salazar and Dr
Brown, reported by the Wall Street Journal,
seem to suggest he was aware of their tests.
A Nike spokesman told the newspaper that
at the time the coach was “concerned that
Nike runners could be sabotaged by some-
one rubbing testosterone cream on them”.
Mr Parker called the news reports “highly
misleading”. Perhaps. But Mr Knight’s dic-
tum may yet come back to bite the com-
pany he created. 7A high-flying sportswear brand runs
into troubleNikeDon’t do it
L
ast monthSteveBannon,President
Donald Trump’s former chief strat-
egist, spoke of “the Frankenstein mon-
ster” America had to “destroy”. “Our
capital”, he said, had created it. He has
long desired to rid American stockmark-
ets of Chinese firms and to force in-
vestors to dump mainland-listed stocks.
On September 27th Bloomberg reported
that Mr Trump had “given the green
light” to the idea. Share prices of Ameri-
can-listed Chinese companies slid.
Such firms have raised over $70bn by
selling shares in America since 2000,
reckons Refinitiv, a data provider (see
chart). The total market value of 300 or so
of them is $860bn—$1.3trn if you include
some depositary receipts of firms with
primary listings in China or Hong Kong.
This year 24 new ones have floated—an
exception to the economic war Mr Trump
has waged against China. That it may no
longer be one unnerved investors.
American regulators are frustrated by
China’s reluctance to disclose some
financial records of its companies (it
says they are state secrets). In June law-
makers in Washington introduced a bill
allowing any Chinese firm that refused to
hand over its audit papers to be delisted.
According to Reuters, Nasdaq is tight-
ening its rules to make it harder for
smaller Chinese companies to float ontheexchange.MatthewDoullofWed-
bush Securities, an investment firm, says
that some Chinese firms are “seriously
wondering” about a Plan B (Hong Kong’s
exchange, for many).
It is unclear how a mass delisting—let
alone removal of Chinese stocks from
American-run global stock indices that
many investment funds track—would
work. Americans hold $160bn of assets
on mainland exchanges. This week Ray
Dalio, founder of Bridgewater Associates,
the world’s biggest hedge fund, wrote on
LinkedIn that the Trump administra-
tion’s murmurings made him wonder if
it was “inching toward bigger moves”. Mr
Trump could use emergency powers to
enact these, he speculated.
Mr Doull says delistings would be
“nuts”. American exchanges encourage
them to behave like Western peers. Shun-
ning thriving Chinese firms may hurt the
returns of America’s pension and mutual
funds. The White House has denied the
Bloomberg report. Peter Navarro, its
Sinophobic trade adviser, called it “fake
news”. That is not how China took it.
Global Times, a state tabloid, said it was
“another smoke bomb” ahead of trade
talks on October 10th. Beijing warned
that “even attempting a decoupling”
would unleash “financial-market tur-
moil”. That would be a real monstrosity.Lockstocksandbarall
The Sino-American economic warSHANGHAI
Banning American investments in Chinese firms is mooted. AgainEnter the dragonSources:IMF;Refinitiv;Bloomberg*Equityandinvestmentfundsharesanddebtsecurities †January 1st-October 1st
‡Primarylistingsorselecteddepositoryreceiptsoffirmslistedin China or Hong KongUnited States, total portfolio investment*
in China, $bnChinese companies listed on the NYSE
and Nasdaq, IPO amount raised, $bnChinesefirmslistedonUSstockexchanges‡(yearofIPO )
Marketcapitalisation,October1st2019,$bn0501001502002001 03 05 07 09 11 13 15 180510152025302000 02 04 06 08 10 12 14 16 19†Alibaba
(2014)
430PetroChina
(2000)
151
China Life (2003)
97Sinopec (2000)
82CNOOC
(2001)
68JD.com
(2014)
41Pinduoduo (2018)
38China Telecom
(2002)
37Baidu (2005)
36Other
367Total: $1.3trn