Forced Labor Strikes Back

A few months ago it was reported that companies like Nike, Coca-Cola, and Apple were lobbying to water down bills introduced in response to the forced labor crisis in China’s Xinjiang region. It is not hard to see why companies were concerned. As we have repeatedly pointed out in this blog, China’s forced labor problem is not just a Xinjiang problem. Products sourced in Xinjiang raise immediate red flags, but Uyghurs and members of other minority groups in China are being forced to work in factories across China, meaning any China supply chain is potentially tainted by forced labor. Moreover, persons not from Xinjiang are also victims of forced labor, as U.S. Customs and Border Protection’s finding on Chinese stevia imports last year made clear.

As Western governments ramped up their enforcement actions against forced labor, many companies saw where these efforts could lead. Once people began to understand that Xinjiang-made products are only part of the problem, and that the logical next step would be to take action against other offending products, companies realized all made in China products might eventually be impacted. Moreover, it is only natural that China would retaliate, blocking U.S. and EU companies’ products, even if made in China.

Understandably, these companies did not want to go down that road. And so they hoped that a combination of messages about human rights, “constructive discussions” with policymakers, and the occasional targeted sanctions and exclusion orders would stave off the worst-case scenarios. And their hopes were probably well-placed.

Unfortunately for these companies, China is not interested in such a subtle approach. And not only is China now insisting that allegations of forced labor in Xinjiang are, as Global Times puts it, “a rumor maliciously fabricated and fanned by Western anti-China forces:” It is also demanding foreign brands go along in lockstep with its narrative. Its latest salvo has taken aim at self-exculpatory statements made by foreign companies on the issue of Xinjiang forced labor. For having had the affront to say they did not work with any factories located in Xinjiang, Swedish clothing brand H&M “has been pulled from major e-commerce stores in China and blocked by several major navigation, review and rating apps. Videos are circulating on social media that a shopping mall in Chengdu, Sichuan province has removed H&M’s advertising sign outside the mall.” Even Didi, a ride-hailing app, is blacklisting H&M.

China’s Foreign Ministry spokesperson Hua Chunying said that the Chinese people “do not accept the fact that foreign companies earn money from them on the one hand and smear China on the other.” In other words, she is saying that the Western companies that have put out statements on Xinjiang while hawking their products to Chinese consumers are playing a double game. They are want to signal virtue by letting the world know they care about the excesses of the Chinese authorities, while at the same time downplaying the various accusations being made against China and moving forward on the business side. China (both its government and its people) have made clear they will not tolerate this two-timing.

Two key takeaways for foreign businesses in China.

First, it is not enough for Western companies to be quiet. They need to be China cheerleaders. They need to be like Muji and trumpet their use of Xinjiang cotton. They need to be like Zara and delete offending statements made in the past. They need to be like Hugo Boss and parrot their respect for the “One China” principle.

Second, China’s asks will get worse. Today it demands foreign companies affirm that, yes, Xinjiang’s cotton is pure. What will it want in the future? Making t-shirts with the slogan “China has Chinese-style democracy?” Demands that they cease to do business in or with Taiwan? Requirements to lobby their home governments not only to protect their own economic interests, but also China’s geopolitical ones?

With China seemingly holding all the cards, it has nothing to lose by pressuring foreign businesses. Companies need to start thinking about where are their lines in the sand are.

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China Business