France's Carrefour Feels China's Ire

The world's No. 2 retailer is facing a boycott because of pro-Tibet protests in Paris and President Sarkozy's threat to shun Olympic ceremonies

Chinese police outside a branch of the Carrefour supermarket on April 20, 2008. Fresh protests broke out across China in reaction to Western media coverage of Tibet and rising anti-China sentiment in the West ahead of the August Olympics. MARK RALSTON/AFP/Getty Images

by Carol Matlack

In a new signal of its status as a global economic power, China now appears ready to use market muscle to retaliate against critics of its policies. If it does, the first casualties could be French businesses.

For the past few days, angry crowds have been gathering outside Chinese outlets of French retail group Carrefour (CARR.PA) to protest France's efforts to use the Beijing Olympics to pressure China on human rights and Tibet. Carrefour, the global No. 2 retailer after Wal-Mart (WMT), vehemently denies any involvement in politics and says that so far the protests have had little effect on its Chinese business.

But protesters, backed by a swiftly-moving wave of blogs and instant messages, are urging their countrymen to boycott the French chain, as well as all French-made products. "If you are a patriotic Chinese, forward this text message to your friends and family and do not shop at Carrefour," says one missive now circulating.

The Chinese were outraged when the Olympic torch relay was repeatedly disrupted by protesters as it passed through Paris on Apr. 7, with French police making little apparent effort to intervene. Adding to the anger, French President Nicolas Sarkozy has said he won't attend the Games' opening ceremonies unless China opens talks with the Dalai Lama, Tibet's exiled spiritual leader.

High-Level Delegation from France

If the anti-French protests spread they could harm not only Carrefour, the biggest foreign retailer in China, but also luxury-goods makers such as LVMH Moët Hennessy Louis Vuitton (LVMH.PA), which count China as one of their fastest-growing markets. Plenty of other French companies have placed big bets on China as well, ranging from hotel group Accor (ACCP.PA) and cement maker Lafarge (LAFP.PA) to utility giants Suez (LYOE.PA) and Veolia Environnement (VE). But luxury and retail groups face the greatest risk because of their visibility to consumers.

Sarkozy, elected last year on a pro-business platform, is trying to calm things. He dispatched a high-level delegation to China this week with a letter expressing regret for the torch-relay incident. On Apr. 22, Chinese newscasts showed Christian Poncelet, the president of the French Senate, in Shanghai kissing the hand of Jin Jing, a wheelchair-bound Chinese athlete who became an emblem of national pride after footage showed her trying to protect the Olympic flame from protesters during the Paris relay.

But it's unclear whether those overtures will work. After meeting with Poncelet, Jin was quoted as saying it was "a pity" that Sarkozy's letter had not contained a clear apology. And the President says he hasn't changed his plans to boycott the opening ceremony.

Carrefour Alarmed at Backlash

Meanwhile, some situations have turned violent. According to several accounts, a 22-year-old American was attacked by protesters over the weekend as he came out of a Carrefour store in Hunan province. The man, who was not identified for fear of reprisals, was said by colleagues to be working in China as a volunteer teacher. Local news media are starting to urge calm. On Apr. 22, the official English-language China Daily editorialized: "Over-the-top nationalism is not constructive but can do harm to the country."