Vitasoy Incident Sets Off Chain Reaction In China

An employee of Vitasoy International Holdings Limited caused stock for the company to plummet the most dramatically since 2008, after the stabbing of a policeman in Hong Kong, as stated in Bloomberg News. The incident, which occurred on July 1st, comes at a time when tensions between residents and city police are heightened. According to Bloomberg, the city police have been accused of using excessive force while breaking up pro-democracy protests scattered throughout Hong Kong before the pandemic. The Hong Kong National Security Department is now in charge of leading the investigation and has declared the incident a domestic terrorism attack. Reuters suggested that the incident occurred on the anniversary of the former British colony’s return to Chinese rule and, as an observed day, usually triggers protests and rallies against Beijing’s government and treatment of citizens. This year, gatherings have been banned by the government over coronavirus concerns, and security on Thursday was heavier than usual. According to Reuters, Hong Kong was armed with “thousands of police officers, water cannon trucks…armored vehicles” for the July 1 anniversary. Fortune stated that Thursday was also the one-year anniversary of Hong Kong’s new National Security Law, which was imposed on the city by Beijing to deter protests like those calling for democratic reform in 2019. Since the initial incident on Thursday, Vitasoy has been adamant about supporting justice in Hong Kong.

Bloomberg reports that Vitasoy has pledged to support the investigation but denies responsibility for an internal memo that circulated extending condolences to the family of the attacker. The attacker took his own life after stabbing the Hong Kong policeman from behind. Fortune reports that Vitasoy claimed the memo was “written and forwarded by an employee in private who was neither authorized by the group nor followed the internal approval process” and, according to the South China Morning Post (SCMP), Vitasoy ended up firing the employee behind the message. SCMP reported that the text in the memo said a 50-year-old manager with the surname Leung had “unfortunately died” in the accident. According to Reuters, after firing the employee responsible for sending the memo, Vitasoy released a company statement reading “Vitasoy Group sincerely apologizes for any troubles or grievances this has caused. We support Hong Kong’s long-term prosperity, stability, and development.” The Hong Kong National Security Department claimed that the attacker had been “radicalized” after searches of the man’s apartment and laptop were conducted. The police have not released any further information about what exactly these searches found.

The economic repercussions from the incident on Vitasoy are visible in their stock, as it dropped 15% in the wake of the attack. According to Reuters, the company currently gains about two-thirds of its revenue from mainland China since being partnered with Gong Jun and Ren Jialun. Both major actors have released information that points to cutting ties with Vitasoy. A statement from a representative for Gong released on Sunday read “[Gong will] resolutely boycott all forms of violence and terrorist radical acts…we insist on having zero tolerance towards any violence and behavior supporting violence.” The online boycott topic “Get out of Mainland, Vitasoy” had nearly 120 million readers on social media as of Monday. According to Fortune, while Vitasoy’s largest market is in mainland China, which accounted for 62% of total sales in 2020, Hong Kong is the second-largest market. Per Vitasoy’s 2020 financial report, Hong Kong represents 29% of the company’s sales market. As stated by the BBC, that 15% stock drop was also the biggest single-day loss since the initial Vitasoy listing in 1994. At the beginning of the month of June, Vitasoy stock was worth 30.2 Hong Kong Dollars (HKD) or roughly $3.89 USD, per Yahoo Finance. One week after the incident, Vitasoy closed the market out at 26.6 HKD ($3.42 USD) a share. This near 50 cent decline in shareholder prices is one of the largest declines experienced by Vitasoy since its entry into the market. Fortune reported the stock remains down approximately 11% this week, which has cut Vitasoy’s market cap by $500 million. Vitasoy’s cap is now resting at $3.6 billion dollars.

There are some examples of companies in China being boycotted and losing large sales numbers because the companies had spoken out against injustices. According to the BBC, the fashion giant H&M, based out of Sweden, noticed a second drop in sales in China since the company released a statement about the Xinjiang Province’s treatment of Uyghur Muslims. Fortune reported that internet users had scrounged up a statement from H&M the previous year about “potential forced labor violations.” Chinese e-commerce sites like Tmall and Baidu have since pulled H&M products from online entities. Compared to the same time last year, H&M sales in China are down 28% (to $189 million) in the local currency for the second quarter in a row. Shoe and athleticwear giant Nike also faced some backlash from China after they released a statement similar to H&M’s. Fortune states that Nike reported last week that, compared to last year, the company’s sales in China increased by only 17% during the March to May quarter. Since the incident, Vitasoy stock has yet to bounce back and the length of the boycott remains to be seen.

The reaction of the population of mainland China to the stabbing in Hong Kong denotes a cultural difference between the United States and China. The Chinese government labeling the attacker as a “lone wolf” terrorist could have impacted the public’s response. For example, according to the National Law Enforcement Officers Memorial Fund, there have been 156 police deaths in 2021 in the U.S. Out of those 156, it is reported that 29 of them were firearm-related and two were stabbings. The reaction of the American public to these deaths is virtually non-existent, especially on a scale that is capable of spearheading a boycott. The U.S. Government also has not labeled any of the attackers as “terrorists.” Beijing may be altering the appropriate language surrounding the incident because much of the Chinese population has been shown to be pro-democracy. Beijing may see democracy as weakening its global influence as it strives to remain a near-authoritarian regime. The grip which Beijing has on the population of China in terms of skewing information to make the national government look better is staggering. Those fighting for democracy and justice in China are then being punished for doing so, something which has not gone unnoticed by international actors. China now stands facing international repercussions and internal civil war over how to retaliate against “terror” attacks and which government regime the citizens support.

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