Hong Kong protests increasingly turning violent

The controversy surrounding the NBA and the comments made by one of its managers on twitter has been prominent in the news and social media sites. The tweet made by Daryl Morey supporting the Hong Kong violent protests caused a huge backlash in China. This caused NBA to make somewhat conciliatory comments and Daryl Morey deleted his tweet. But an increasingly anti-China America then reacted with its very own backlash against perceived Chinese influence in American corporations and supposed loss of American values.

However, I must caution non-white, non-European audiences that they must not fall into this narrative. Instead, they must understand the real problem behind this controversy. Why is the NBA, which stands for the “National” Basketball Association, a foreign sports organization, trying to dominate Chinese audiences in the first place? Shouldn’t China, which is more than 4 times larger in population than America, have its own “national” Basketball brand that is larger than the NBA?

The bigger question comes next; why does China gets mad about Basketball, a completely foreign sport? Why is there no local Chinese sport that is popular?

This complete domination of white-European/American culture and companies is the real problem that causes this kind of controversy. Our world has been dominated by a small minority for the last 3 centuries, which allowed them to achieve such complete domination of the cultural space, that we no longer even think why we are following European/American fashion, entertainment and sports without any other alternative.

In a more equal world, China, India and other parts of the world would be as wealthy as America and would have their own cultural exports into America. Would Americans have the arrogance to expect that only they will export their own “American values”? They might be even humble to understand that any kind of business interaction will cause both parties to have some influence and leverage. Your customer will have leverage on you, and if you are exporting a cultural product, you will influence your customer. This is not a one-way interaction.

Unfortunately, we do not live in such an equal world. But we are certainly getting there with the rise of the rest of the world. China is at the forefront of this transformation. Many Chinese people dream about China as a rich and prosperous country. But can China really become a true globally influential country if it still gets mad watching American Basketball while ignoring its own domestic leagues or even entirely domestic type of sports?

I argue that it cannot, because there is a limited amount of space in every person’s mind for fandom, and once it is filled with American Basketball, there will be little room for another league. China will not be able to develop its league if its countrymen do not want to watch it.

China went through a stage in the past when it was too poor and undeveloped to have its own Basketball league. In fact, it was too poor to even play and enjoy modern sports. It could be argued that allowing NBA unlimited access to the Chinese market was a good thing back then.



But it is no longer the case now. This is exactly the right time to develop China’s own sports leagues and make them globally competitive. Established leagues such as NBA have too much unfair advantage of the existing pipeline of stars, facilities and associated media-machine. China’s domestic sports will not be able to compete with this unfair advantage without government support. The Chinese government can provide that support by banning NBA and other western leagues so that existing fans of Basketball in China can slowly transition into the domestic league. This infusion of fans can lead to more money, which can allow China to poach NBA stars, which can again allow more fans to get more interested and bring in better facilities and training. This positive cycle can only be sustained if the alternative, which is the NBA, is not easily accessible.

Apart from nationalism and geopolitics, there is actually a strong economic reason for this kind of government support: Avoiding the middle-income trap.

Avoiding the middle-income trap means having a skilled and educated population who are involved in high value generating jobs such as science, technology, and finance. This is common wisdom. But what people forget is that people can only be involved in these kinds of professions when there are companies that are doing such high-value tasks. You cannot have skilled architects if all your construction projects are dominated by foreign architecture firms. You cannot have software engineers earning 100K US$ salaries if you do not have powerful tech companies that sell globally competitive products.

Thus, having powerful domestic companies and brands are a precondition to prosperity, not a result of it. The much-touted middle-income trap only happens when countries open themselves to foreign brands too much and therefore fail to develop their own. Once the foreign brands establish themselves completely, there is little room left for developing domestic alternatives.

There are actually economic theories that support my argument. The economic complexity theory from MIT actually argues the same notion, that a countries level of GDP per-capita is determined by its economic complexity. Countries with lower economic complexity do things like producing raw material through agriculture and mining for example. These activities require less skilled labor and know-how. Countries with higher economic complexity make things like aircraft engines and medicine which require a much higher level of education and skilled labor.

This basic notion of this theory can be extended further. I argue that economic complexity is not just about manufacturing or technology. We can divide economies by how complex their companies are. US or France or UK are rich not just because they are involved in high tech, but also because they have companies that are selling their brands to the entire world. High fashion goods, sports, and entertainment are just the tip of the iceberg, they are also selling their know-how and brand recognition when they open a new KFC or sell Coca-cola. These companies are not selling anything that involves high-tech, but they are selling their own mishmash skills such as designers, product marketing experts, experienced managers and so on. These are all high paying jobs that China does not have right now and it is relying on the Euro-American companies to provide them while China only provides low-skilled labor.

Chinese companies are currently involved in being the manufacturing hub for these foreign companies. They need to get rid of their clients and start developing their own brands. This obviously will be difficult because they will be competing with these very established companies with a long brand reputation. But as long as they remain slaves to these foreign brands, they will not have the reputation or skilled people such as designers or marketing experts. They need to make this painful transition to move up the value chain. However, this can be made easier if they have support from the government who can make life difficult for these foreign brands.

Trump’s trade war and the entire decoupling hysteria has been a godsend for China to be honest. It has forced China to reckon with foreign dependence and has provided the necessary drive to make this painful transition towards local brand development. China is also at the perfect stage in terms of development when they have to make this transition. China just passed 10 thousand US$ in GDP per-capita. This is an important milestone that shows why China’s old economic model of contract manufacturing will not provide further growth. This is also an important indication that the Chinese consumers have the purchasing power to consume and support local brands to gain the necessary economics of scale.

This transition needs to be supported further by the Chinese government. China needs to use the Trump trade and export ban as a pretext to kick American companies out of China. This will create the needed space for local Chinese brands to grow. As long as there is a superior alternative from American brands, Chinese consumers will have less incentive to buy local brands. This unfair advantage can only be mitigated by restricting these brands and companies. This includes not just tech but also things like Coca-cola, NBA and Hollywood. Of course, kicking these companies out will lead to short term problems such as job loss. But that is why China should just let Americans get crazy about decoupling and let them lead this transition. This will slow this enough that the Chinese economy can transition the unemployed into new jobs.

In conclusion, I argue that kicking out NBA has actually happened at the perfect time and is actually necessary for China’s future development. China cannot grow rich without the high paying jobs that NBA players and coaches for example have right now. These jobs should be held by Chinese players and other personnel. That stage may not be reached soon but in a few decades of slow growth, Chinese sports can get as big as NBA.



China should not fear the decoupling but encourage it as much as possible. That is the best way they can develop their own local brands which will slowly go global and beat American brands in their own game. Only then China can avoid the middle-income trap.