Don’t let money rule your world

Jul
13

Nike Funding Chinese Capitalism and the Olympics

Published by Andrew | Filed under Funding

funding china olympicsLast year, Nike made seventeen billion dollars. That is up over ten billion from about ten years ago. Even with so many anti-sweatshop and anti-globalization groups trying to put pressure on them, Nike is still one of the most profitable US companies around right now. The last Olympic Games in Athens cost a total of $2.6 billion dollars. The 2008 Beijing games are expected to far exceed that price. China is pouring large amounts of money into the games which start next month. China is Nike’s second largest market. One billion dollars in revenue is generated from sales by Nike in China. They are also one of the major sponsors of the Chinese Olympic Games (unofficially though). In China there are fifty million kids who will begin playing basketball this year. According to the CEO these kids haven’t bought their first pair of Nikes yet, “but they will.”

Adidas though is the main Olympic sponsor for the 2008 games according to the official Beijing Olympics website. Forty percent of the Chinese populace actually believed that Nike is the official sponsor of the games. Nike did give a great deal of money to the games and they did so without paying the massive nine digit sponsorship fee that Adidas did. Nike also has managed to have a more overall brand awareness level in China than Adidas, who has failed in every respect (despite their best efforts) that Nike has excelled in. Why is Nike viewed so highly in China then? Nike has basically loaned the required funds that have kick started the Chinese capitalist take over.

Nike involvement in China began in 1979. The same year that America recognized the government of the People’s Republic of China. The three years after the death of Mao Zedong allowed for China as a whole to open up and under the leadership of Deng Xiaoping western investment began to trickle in. One of the first companies to go in was Nike. They were in a dispute with their Korean workers who wanted to have their pay increased to $2.40 per hour. Nike moved the factories and paid their workers roughly twenty five cents per hour. By 1984, 93% of shoe production by Nike was done off shore, the majority of which was produced in China. Last year Nike sold over $3 billion dollars worth of shoes in the United States alone. In China though, Nike is a status symbol. It is widely regarded as “the coolest brand” by a majority of Chinese and is the modern equivalent of the washing machine that could also scrub potatoes of cool in China (the washing machine was a symbol of luxury in China in the early 90s).

Because Nike has been pumping so much money into China for as long as they have they are now basically given a great deal of leeway of what they can and cannot do. Recently an ad ran in China by Nike where Lebron James took on a series of Chinese kung fu figures. This ad was viewed as an offense to the national dignity of China by many Chinese people. It was so offensive in fact that Nike had to pull the ad. A few months later, the ad reappeared in China. No one complained this time. No explanation has ever been provided for this. Nike was allowed to show an ad in China that was seen as a slap to the face of Chinese dignity. Something strange was occurring here.

In the early 90s china received MFN (Most Favoured Nation) status by the United States. This status was made permanent in 2000. America’s business interests in China go back more than a century though. It was the dream of American business men to sell every Chinese male a hat at one time (literally, that was the plan, to sell them hats). The fact that they are such a large market has always interested the West and the Chinese have always been seen as a favourable investment to be made by American/Western companies. Nike is opening roughly 1.5 Nike stores in China a day. If they cannot sell them a hat, maybe they could sell them a pair of shoes or shorts or t-shirt or cologne or ice skates or soccer ball or basketball, etc. there is an estimated 250 million Chinese who could be classified as middle class, which is nearly eight times the population of Canada. That is a lot of households that need of good sports gear. This however is not the main focus of Nike. The rich already buy their products. What about the other 1.1 billion Chinese?

It is within Nike’s best interest to maintain a favourable status within the Chinese government. They are moving further into the interior of China; away from the more wealthy coastal cities into the major industrial areas with large numbers of Chinese workers will be a perfect purchasing market. Nike is also finally introducing minimum wage to all Nike employees as well as full health care benefits. China is ranked number 144 on the World Health Organization’s health system list. (America is number 37). Full health benefits would be an excellent advantage to many workers in China. A large amount of money is changing hands between private business and the Chinese government and Nike seems to be setting the standard of how much one is supposed to give. This is a rare instance where a business is granting the government money.

Thirty-seven years ago, America abandoned the concept of Fordism. Fordism is when you pay your workers a salary where they can afford the very products they produce. The ford motor company did this in order to guarantee a market for the products they made. Make them cheap, make them fast and pay people enough so that they can buy them. That way you never really pay them anything at all. It is what made America great a century ago. This is exactly what Nike is doing in China now.

The special economic zones in China are the primary concentration of Nike factories. These are also China’s most profitable locations. The Special Economic Zones are the places that are producing the beanie babies, tube socks, lead-based toys, poisonous pet foods, tooth paste and the thousands of other small manufactured goods the West craves so constantly. Nike was one of the first companies to really take advantage of the zones. They were one of the first to go in, the first to make them appealing and the first to sell within them on mass. Nike is creating Fordism in China. When other companies were afraid to send their labour overseas, Nike jumped the boat very quickly. Nike set the bar for overseas production. They put large amounts of investment capital into China and this kick started the new Chinese economy.

While China has Most Favoured Nation status in America, Nike has Most Favoured brand status in China. It has managed to do so through years of investment and funding into the country and is now a major player in the world’s fastest growing economy. Nike has been steadily expanding in China for nearly thirty years. The Olympic Games in China are as much a celebration of Chinese power as they are of the status of Nike financial strength. In many ways, Nike’s presence has allowed China to open up, become less repressive and allow for incredible prosperity to occur. On the other hand, China is still a single party country. They silence the voice of dissent very effectively and functions in a very directed and controlled manner. Because there has been so much work done by Nike over the years, these can really be called their games. This is the celebration of corporatism in China and is in many ways a dark time for internationalism and sportsmanship since they have been so effectively co-opted. Just do it.



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