China exerting growing pressure on foreign companies, study finds

China is exerting increasing pressure on foreign companies doing business in its markets to bring them into line with its political agenda, broadening the "red lines" for issues to which it is allergic, a German study seen by Reuters shows.

A survey of more than 100 companies by the Berlin-based Merics think tank for China studies and the BDI industry association showed that the threshhold for exerting pressure on companies is falling. The number of known cases rose significantly from 2018, it found.

"It was about recognizing a pattern of when and how China exerts pressure," co-author Max Zenglein said.

The researchers said that in addition to issues of national sovereignty, reports on the emergence of Covid-19, sanctions against Chinese companies like telecoms equipment maker Huawei (HWT.UL) or support for parties classified as anti-Chinese are now seen as "new red lines".

In one case, German carmaker Daimler apologised several times to China in 2018 after running advertising with a quote from the Dalai Lama.

China's foreign ministry said it could only comment once it had seen the full report.

China has consistently denied allegations that the Covid-19 virus was leaked from a specialist laboratory in the city of Wuhan, where it was first identified at the end of 2019.

Washington sees Huawei as an arm of the Chinese Communist Party's global surveillance machinery, but Huawei has repeatedly denied spying for the Chinese state.

Foreign consumer goods companies in particular have been subject to boycotts in China, with Western textile firms targeted on social media in response to Western criticism of China's treatment of the Uighur minority in the Xinjiang region. 

"For fear of being targeted, companies may avoid addressing unfair treatment of foreign firms in China. Or they may consider it safest to align themselves with the Chinese government's positions and goals," the researchers wrote.