A journalist views an exhibition at the Beijing 2022 Winter Olympics Exhibition Center in Yaqing District on February 5, 2021 in Beijing, China.

Kevin Frayer | Getty Images

Countries and companies outside of China are facing increasing pressure to boycott the Beijing Winter Olympics next year, but China will not sit back and relax, political risk adviser Eurasia Group says.

“Western governments and companies are under increasing pressure from human rights activists and political critics of China to boycott the 2022 Olympic Winter Games in Beijing,” said analysts from the Eurasia Group.

The games will take place from February 4th to 20th.

“China will punish countries that boycott the Games with political sanctions and commercial retaliation, but in the sporting boycott scenario with much greater severity,” said a report published on Thursday.

“If a company does not boycott the games, it risks reputational damage to western consumers. If it does, however, it risks being excluded from the Chinese market.”

“Activists have focused on Beijing’s targeted repression of Uyghurs in Xinjiang, which some Western governments have labeled ‘genocide’,” the report said. “The demand to avoid what activists refer to as ‘genocide games’ will grow with the opening ceremony, increasing the risk for governments, businesses and investors whether they choose to boycott or not.”

Last month, the governments of Canada, the United Kingdom and the United States issued a joint statement accusing the Chinese government of imposing “extensive programs of repression” on the Uyghur people, including internment camps, forced labor and forced sterilization.

China has repeatedly denied allegations of forced labor and other abuses in Xinjiang. The State Department last month called such claims “malicious lies” to “smear China” and “thwart China’s development.”

Companies have also been caught in the crossfire.

In late March, H&M in China had a backlash over a statement – reportedly last year – in which the Swedish retailer said it was “deeply concerned” about reports of forced labor in Xinjiang.

Proponents of the Olympic boycott argue that “there is a need to punish China for its systematic discrimination against ethnic minorities in Tibet and Xinjiang, crackdown on political freedoms in Hong Kong and hostility to self-government in Taiwan,” the Eurasia report said .

Three types of boycott

Eurasia outlined three possible scenarios: a diplomatic boycott, a sporting boycott or a so-called “outlier scenario”.

1. Diplomatic boycott

The most likely scenario – with a 60% probability – is that the US will join at least one other large western country in what is known as a diplomatic boycott of the Games.

“A diplomatic boycott is defined here as demoting or not sending government officials to the Olympics and taking other high-profile steps to keep Beijing from hosting the limelight,” the analysts said.

Eurasia said the likely participants in a diplomatic boycott would be the US, Canada, the UK and Australia, with the possibility of some European countries joining.

In Asia, however, US partners such as Japan, India and South Korea, which have “more complex political dynamics” or deeper economic ties with China, are not expected to join such a boycott.

The diplomatic approach is the least drastic scenario according to Eurasia.

2. Sporting boycott

In this 30% probability scenario, one or more Western countries could prevent their athletes from participating in the Games, possibly by exerting domestic political pressure. An economic boycott is defined as the prohibition of US viewers, broadcasters and sponsors.

“Sporting and economic boycotts, which are harder for the public to ignore, would force even tougher retaliatory measures from Beijing, possibly including a diplomatic freeze and more widespread consumer boycotts against Western brands,” Eurasian analysts said.

3. “Boycott Lite”

This is an outlier scenario where tensions between the West and China will ease and there will be “mild political statements about the Games” but no formal boycott, the analysts said, calling it “boycott-lite”.

It’s the least likely scenario and only has a 10% chance of happening, they said, adding, “There’s not much reason to be optimistic about the development of Sino-Western relations right now.”

Here heads of state could refuse to participate in the games and cite planning conflicts or other apolitical excuses. “The rhetoric would fall far short of enthusiastic approval from Beijing as the host, but there would be no boycott declaration and no representation of a unified Western position,” the report said.

Blowback from China?

A boycott of the Olympics would “diminish any soft-power dividend” Chinese President Xi Jinping had hoped for from the event, giving Beijing “a platform to promote its global status with domestic audiences and a positive for billions of overseas viewers To convey an image. ” all over the world, “said the Eurasia analysts.

“Beijing will almost certainly take revenge on countries involved in boycotts,” the analysts said. “Beijing’s direct response to a diplomatic boycott would likely be a reciprocal boycott of Western events and sanctions against prominent boycott advocates.”

Increasingly, consumer companies based outside of China are trying to do a balancing act – by projecting an image of human rights concerns for consumers outside of China on the one hand, and avoiding being excluded from the massive Chinese market on the other.

“If a company does not boycott the games, it risks reputational damage to western consumers. If it does, however, it risks being excluded from the Chinese market,” the analysts said.

Due to the high international profile of the Games, retaliation in China could be “even worse” than the current removal of H & M’s commercial presence on the Chinese Internet.

Still, analysts say most companies are likely to choose to participate in the Olympics as “the potential cost of losing access to the Chinese market is likely to outweigh concerns about a backlash from Western consumers,” the Eurasia expects will hold briefly.

– CNBC’s Arjun Kharpal contributed to this report.