It should be rejected and if China insist then the Olympics should be boycotted.
Maybe they will try to make the USA dip its flag during the ceremonies. That won't happen ever. The US flag is never dipped to any foreign leader. So it would set off a storm if they tried.
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The Nazi salute was far worse than this. That was actively condoning the regime.
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It wasn't required by the Nazi Government in the 36 Olympics. The national athletes that did it where widely (*)(*)(*)(*)ed by their various nations..especially the French.
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Over 5,000 athletes from 51 nations then marched in according to alphabetical order, with Greece leading the whole parade and the host country, Germany, at the end. But even the opening ceremony was not without controversy - the question being whether athletes would give the Nazi salute to Hitler as they passed by his reviewing stand. There was some confusion over this issue, since the Olympic salute with right arm held out sideways from the shoulder could also be mistaken for the Hitler stiff-arm salute. Most countries gave either one or the other. Austrian athletes gave the Hitler salute. French athletes thrilled the German audience by giving the Hitler salute, although some French athletes later claimed it was the Olympic salute. The Bulgarians outdid everyone by goose-stepping past the Führer. The British and Americans chose a military style 'eyes right' with no arm salute.
The flag bearer of every nation was supposed to dip their country's flag while passing by the Führer and the Olympic officials. The American flag bearer upset many Germans in the audience by ignoring this, adhering to the U.S. custom of only dipping to the President of the United States and no one else.
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http://www.historyplace.com/worldwar...r-olympics.htm
On a side note the movie 'Olympia' by Leni Riefenstahl is probably the best Olympics films ever made..she also did 'Triumph of the Will' largely regarded as the best propaganda movie ever made.