China Unleashes Economic War On LA Coffee Shop…For Serving Taiwan President

China unleashed economic warfare against a bakery-and-coffee chain that served the President of Taiwan coffee during her trip to the United States.

Gourmet Master Co Ltd., a Taiwan-based coffee shop mainly involved in the provision of western-style desserts with stores in China, Taiwan, Hong Kong, the United States, and Australia, saw their stock collapse last week as the company was caught in the middle of tensions with China over Taiwan President Tsai Ing-wen’s visit to a store in Los Angeles, California.

On August 12, during her layover in Los Angeles, the Taiwan President visited an 85C Cafe location, where social media pictures reportedly show her receiving gifts and coffee.

“The light of Taiwan. Taiwanese chain coffee shop opened a branch in Los Angeles at 85 °C, and the visiting team stopped. President Xiaoying and the legislators ordered a few cups of coffee, thank you # 萧美琴 , this cup is her request,” said Keelung Cai, a Taiwanese Democratic Progressive Party official, who posted a series of images of the visit on Facebook.

Taiwan President Tsai Ing-wen receives gifts from the shop.

And here it is. The one cup of coffee that led to the company’s stock collapsing.

Surprisingly, Tsai’s visit went viral in mainland China which triggered a severe backlash.

According to Bloomberg, shares tumbled in the Taipei trading session, wiping out over $310 million from its market capitalization, after several Chinese nationalistic media outlets published articles calling for a boycott of the company. Some even said Tsai’s stop at the chain, makes 85C Cafe a “supporter of Tsai Ing-wen and Taiwan’s independence.”

One delicious cup of coffee collapsed the stock down 20 percent in a few trading sessions. The company has declined more than 42 percent since the top in December 2017.

The Global Times, a state-run newspaper that has been known to distort information to incite nationalism, was the most active agitators this time, said The Diplomat. The Communist newspaper published a series of articles claiming that 85C Cafe - “such a Taiwanese company which is making big money in mainland China” - supports Tsai’s policy of pro-independence of Taiwan. It was even mentioned that 85C Cafe’s official website categorized its China branch under its “overseas operations,” a mistake that could cost the business of many Chinese nationalists.

Mainland China accounted for 64 percent of Gourmet Master’s revenue, according to data compiled by Bloomberg. In comparison, Taiwan, the company’s home base, and the United States each generated only 17 percent of the total revenue. As it seems a boycott in mainland China could be devastating for the company.

The market has become a big “uncertainty,” where the government could punish it with measures including hygiene inspections, Reliance Securities Investment Consultant Co. Vice President Richard Lin said by phone to Bloomberg.

On Wednesday, the company issued a press release, emphasizing that the company “has never changed its position of upholding the 1992 Consensus (or One China Consensus).”

The company also said: “keep contributing to the peaceful development of cross-strait relations and opposing any behavior and words that split cross-strait compatriots,” the announcement said.

However, the Global Times intensified its attacks on 85C Cafe after the press release, claiming that the company’s slow response is just a mean to ease criticism, because the announcement was not published on social media.

“To make matters worse, several of China’s most popular platforms that offer online food delivery service, including ELEME Inc., Meituan, and Dianping, have deleted 85C Cafe from their apps. This collective move — against the logic of the market — implied that authorities in Beijing are likely standing behind the anti-85C Cafe campaign, although Beijing so far hasn’t publicly expressed its attitude on the incident,” said The Diplomat.

Tsai’s spokesman Alex Huang condemned the need for the coffee operator to issue a “humiliating” statement. “It shouldn’t have happened in a civilized society,” Huang said in a text message to Bloomberg.

Bloomberg also noted the company’s Taiwan website was hacked last week, per a report via Taipei-based Central News Agency. The website earlier had “many photos” of Tsai, CNA reported. Bloomberg failed to get a response from the company spokesman Chris Lee.

While this is not the first time that overseas brands have suffered in China due to strong political action, the risks of more incidents like this are almost inevitable amid a worsening trade war environment between China and the United States. Which company is next?