FOR MORE than a year some big foreign apparel and technology companies have been walking a fine line on the human-rights abuses committed by China against Uyghurs, a mostly Muslim ethnic minoritiy in the north-western region of Xinjiang. These firms have been working to clear their supply chains of the forced labour of Uyghurs, hundreds of thousands of whom pick cotton under apparently coercive conditions. What they have not done is boast about these efforts, fearful of angering the Communist Party and 1.4bn Chinese consumers. “Usually in our work it’s easier to get companies to say they’re doing the right thing than to actually do it,” says Scott Nova of the Worker Rights Consortium (WRC), a labour-monitoring organisation, and the Coalition to End Forced Labour in the Uyghur Region. “On this issue, with limited exceptions, the opposite is true.”
An online furore stoked by Chinese authorities this week suggests that Beijing may be tiring of this double game. China’s government, increasingly keen to punish critics of their Xinjiang policies, is forcing foreign companies to make a choice they have been studiously trying to avoid: support China or get out of the Chinese market.
Chinese authorities have stirred nationalist protests against foreign companies in the past, then tamped them down having made their point. This time the campaign looks like part of a broader, more enduring counterattack against critics of the government’s policies in Xinjiang, where it incarcerated more than 1m Uyghurs in a gulag for their religious and cultural beliefs. It extends beyond the corporate world. In recent days China has imposed sanctions against members of the British, Canadian and European parliaments, European scholars and think-tanks in Britain and Germany. Britain, Canada and the EU had previously joined America in sanctions on senior officials in Xinjiang, implicated in what the American government has called “crimes against humanity” and “genocide”. “China is not the first to shoot, neither will we be passive and submissive to threats from the outside,” said Yang Xiaoguang, chargé d’affaires at the Chinese embassy in London, at a news conference. “The Chinese people will not be bullied.”
Instead, it is Chinese authorities who are doing the bullying. On March 24th the Communist Youth League, a party affiliate, whipped up a nationalist online boycott of H&M, digging up a months-old statement on the Swedish garment-maker’s corporate website expressing concerns about reports of forced labour in Xinjiang. Government officials and state media joined in. An online mob besieged H&M and other brands, including Nike, Uniqlo and Adidas, demanding they retract past statements about Xinjiang if they expect to make money in China.
By March 26th Chinese apps, from e-commerce to maps, had booted H&M off their platforms. By the next day at least some of its stores in China had been closed. A Chinese business worth $1bn in revenues—about 5% of H&M’s global sales in 2020—is in jeopardy. Multiple Chinese celebrities publicly renounced brands they had endorsed but which have stuck by earlier statements about Xinjiang (or not indicated any change). These include H&M, as well as Adidas, Nike, Puma and Uniqlo. Zhou Dongyu, an actress, dropped her deal with Burberry because she said the British maker of posh trench-coats, a member of the Better Cotton Initiative (BCI), a due-diligence consortium, had not “clearly and publicly stated its stance on cotton from Xinjiang”, according to her agency. Tencent, a tech giant, pulled Burberry-designed outfits from one of its online games.
The antagonism toward foreign companies comes amid talk in both China and the West of “economic decoupling” between the two blocs, which have been intricately knitted together over decades of globalisation. These debates have focused in part on critical technology such as computer chips and artificial intelligence. But China’s new five-year plan articulates a more ambitious concept of self-sufficiency, the better to shield China from an uncertain or hostile external environment. The Communist Party views itself as increasingly able to exert economic pressure on others, using the “powerful gravitational field” of the world’s second-largest economy.
The gravitational pull is strong indeed. Several apparel firms, including Muji, Fila China and the Chinese operation of Hugo Boss, gave testimonials on Chinese social media that they support Xinjiang cotton (all three of those companies have also issued statements from corporate headquarters acknowledging concerns about allegations of forced labour in Xinjiang). China’s success at containing the covid-19 pandemic allowed Hugo Boss to increase its sales there by 24% in the fourth quarter, year on year, helping offset declines of 32% in Europe and 28% in North America. The company expects to add a flagship store in Shanghai this year.
Other firms have apparently taken down earlier statements about Xinjiang. They include PVH, which owns Calvin Klein, and Inditex, which owns Zara, among other brands. Inditex had 570 stores in mainland China as of January 2020, more than in any other country besides its Spanish home market, and its manufacturers in China employed more than 500,000 workers, second only to Bangladesh. PVH and Inditex belong—like H&M, Nike and Burberry—to the BCI, which announced in October that it would stop operating in Xinjiang. (That announcement disappeared from the organisation’s website on March 25th; a representative of the BCI said its policy had not changed, that its website has been the target of repeated distributed denial-of-service attacks in recent days, and that it would repost “relevant information” when it could.) PVH and Inditex did not immediately respond to a request for comment.
Western brands that have held their ground on Xinjiang may worry that being seen as kowtowing to the Communist Party could provoke a backlash among shoppers in the West, who increasingly expect companies to behave responsibly on everything from the treatment of workers to climate change. And there are many people inside these companies “who recognise the moral gravity of what’s happening in Xinjiang”, says Mr Nova of the WRC. The firms may also be calculating that the nationalist fervour in China will cool. And they are hedging their bets. None of the companies named has publicly endorsed a call to action pushed by the Coalition to End Forced Labour in the Uyghur Region.
Investors seem to think it’s a wash, at least for the time being. The share prices of H&M, Nike and Fast Retailing, which owns Uniqlo, all fell on news of the boycotts but have since recovered much of those losses. Those of firms that took a more accommodating stance, such as Fila and Hugo Boss, have reacted in a similar way. The big winners are Chinese firms that make using Xinjiang cotton a point of pride, such as Anta, a big sportswear-maker listed in Hong Kong (in part thanks to interest from patriotic retail investors).
That could all change as both China’s official anger at criticisms of its Xinjiang policies and pressure from Western human-rights campaigners and consumers continue to intensify. Human-rights campaigners are already calling for a corporate boycott of next year’s winter Olympics in Beijing. “Companies feel caught,” says Mr Nova. They know that responding to Chinese pressure by renouncing their own human-rights commitments looks indefensible in their home markets. At the same time, they are understandably worried about the consequences in China. The choice between the lucrative Chinese market and the values firms profess in the rest of the world is becoming unavoidable, says Bennett Freeman, a former State Department official in the Clinton administration who now advises multinationals (and also volunteers at the Coalition to End Forced Labour in the Uyghur Region).
For Western companies in China both paths, the principled and the pliant, carry risks. But so does the Communist Party’s nationalist indignation. If it does end up causing foreign firms to leave the Chinese market and reduce their dependence on Chinese supply chains, that could itself irritate many Chinese shoppers and hurt millions of Chinese workers. It would also give Western businesses more freedom to do something the party would itself love to avoid: criticise China in the open.
Source: Business - economist.com
