Profits and politics: Western brands tested by China amid forced labor allegation backlash

After Beijing-based Li Ang’ang shared a photo of herself on social media wearing a brightly colored shirt from Swedish clothing giant H&M, she received a barrage of comments urging her to delete the post and foreign powers no longer support in order to “destroy China”. “”

Li, 33, shrugged off criticism, telling NBC News that she would continue to share fashion items from Western brands “as long as they are pretty and extremely affordable.”

But other Chinese consumers, social media influencers, and celebrities have boycotted fashion retailers like H&M instead. Nike and Burberry as Beijing presses with growing ferocity against allegations of human rights abuses and forced labor targeting the country’s Uighur Muslim minority in Xinjiang – home of 20 percent of global cotton shipments.

The boycott backlash has left Western companies in an uncomfortable position.

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With a population of around 1.4 billion, China is the second largest economy in the world and has enormous purchasing power, which makes it a lucrative market for retailers.

But socially conscious young buyers in Western countries have also looked for brands that speak up on ethical issues related to their products, from climate change to working conditions.

“Huge dilemma”

When the United States and its allies put pressure on China through sanctions, they viewed the treatment of Uyghurs as “genocide” charges Beijing Denied – Many brands expressed concern about reports of forced labor.

Some even joined that Better cotton initiative, a global trade group of more than 2,000 members dedicated to promoting best practices in the industry. However, their commitment to this stance has been tested as Chinese consumers inflamed by the ruling Communist Party appear determined to punish those who speak out on Xinjiang.

“It’s a pretty tough position. Companies have flocked to China for the past 25 years to make money,” economist and writer George Magnus told NBC News. Now they are faced with a “major dilemma”.

At the center of the storm – fueled by state media and officials after a year statement reappeared on Chinese social media on this topic – HM, has now vowed to regain the support of Chinese consumers.

“China is a very important market for us and our long-term commitment to the country remains strong,” the company said in one statement after last month’s game. “We strive to regain the trust of our customers, colleagues and business partners in China.”

The company also said it wants to be a “responsible buyer” in China and elsewhere, and “actively work on the next steps in terms of materials sourcing”. It was not specified what these steps would look like.

H&M declined to comment on this story.

“I don’t think a company should politicize its economic behavior,” said Xu Guixiang, a government spokesman for Xinjiang, at a press conference last month. He compared the efforts of some brands to distance themselves from the cotton produced in the region with “lifting a stone and dropping it on your own feet”.

The German fashion giant Hugo Boss is also having problems appeasing both markets.

The company told NBC News in September that it had asked its direct suppliers around the world to prove their products were not from Xinjiang and said it would not tolerate forced labor.

Amid similar calls for a boycott, the company issued a statement on its official account on Chinese social media platform Weibo last month stating that it would “continue to buy and support Xinjiang cotton” for what it calls ” one of the best “labeled in the world.”

The post was later deleted.

In response to a request for comment, Hugo Boss, who in recent years apologized for the use of forced labor in his factories that made uniforms for Nazi soldiers during World War II, said the Weibo post was unauthorized and not his current one Position.

“We value our long-term relationships with many partners in various locations in China,” said the company in its latest issue statement on his website. “So far, Hugo Boss has not purchased any goods in the Xinjiang region from direct suppliers.”

People walk past a shop of the German fashion house Hugo Boss in Beijing, China, March 2021.Thomas Peter / Reuters

Japan Muji apparently reiterated his openness to the use of cotton from Xinjiang in a Statement online last week, but said it would “take all necessary steps to respect human rights and administer labor standards”. After the Chinese subsidiary of the sportswear brand Fila said it would continue to use Xinjiang cotton and would try to withdraw from the Better Cotton Initiative, the company’s headquarters appeared to be distancing itself.

“FILA Holding’s position on forced labor and raw materials procurement will remain the same as it has been in 2020 and 2021,” said Jamie Jeong, spokesman for FILA Holdings, referring to a Corporate statement in which the company said it would “continue to work with industry associations to find global solutions to this complex problem”.

Walk the line

In the weeks since the first boycott, images on Chinese state television have been censored to blur Western brand logos on sneakers and sweaters. Meanwhile, according to The Associated Press, some H&M stores have apparently disappeared from popular Chinese search engines and e-commerce websites.

With Xinjiang, a major exporter of global cotton supplies, the scale of the problem for companies is “enormous” and represents a real “test of corporate integrity,” said Penelope Kyritsis, director of strategic research at the Worker Rights Consortium, a US surveillance organization of labor rights.

“The line is pretty clear,” Kyritsis told NBC News. “Consumers do not want to participate in crimes against humanity.”

According to human rights groups and first-hand reports from Uyghurs, more than 1 million Uyghur Muslims are being held in detention centers in the region, where they are forced to study Chinese law, worship the CCP, give up their religion and work in factories.

In January the US announced that it would cease all cotton imports from the Xinjiang region, and in March the Biden government imposed sanctions on Chinese people for alleged abuse.

Profits and politics: Western brands tested by China amid forced labor allegation backlash 1

Chinese officials have denied these claims. The government claims that courses in so-called “education and training centers” will help Uyghurs find future employment and are necessary to combat extremism.

The economist Magnus compared the situation to South Africa during apartheid, saying that willful neglect of human rights allegations could harm brands and China alike.

“Basically, this is really about values ​​and belief systems,” he said.

And while China may represent a growing market for retailers, socially conscious millennials and Gen Z shoppers in the US and Europe also represent a “numerically significant” population that cannot be ignored, he added.

According to an analysis by the Brookings Institution think tank, as of 2019, these younger Americans are more numerous than the baby boomer generation, making up just over half of the US population.

The choices companies are making now could have long-term implications for their brands, both in China and Western countries.

“I think companies have inadvertently found themselves in the midst of this controversial argument and there will be a price to be paid,” said Magnus, “regardless of what they choose.”

A farmer picking cotton in a field in Hami, northwest China’s Xinjiang region, October 2018.AFP – Getty Images file

The Catch-22 company is also aggravated by the strained Beijing-Washington relations. Some US companies warn that Washington’s stance on China could hurt their bottom line.

Boeing CEO Dave Calhoun recently called on the Biden government to decouple human rights concerns and trade ties for the aviation industry.

“I hope that we can separate intellectual property, human rights and other things from trade and continue to promote a free trade environment between these two business juggernauts,” Calhoun told the US Chamber of Commerce aviation summit last month.

“We cannot afford to be left out of this market. Our competitor will step in immediately,” he added.

The State Department and the White House did not respond to requests for comment.

Despite the commercial retaliation and online noise, “Chinese brands are still not as strong as Western brands among Chinese middle-class buyers,” said Rana Mitter, director of the China Center at Oxford University.

Mitter said calls for boycotts could encourage nationalism and support for the ruling Communist Party, but would likely do less economic damage than expected.

“It is not yet clear whether the rise in short-term patriotic sentiment is really changing long-term consumer behavior,” he added.

Yang Zhengmeng, 35, a sportswear blogger from Henan, said he would participate in the boycott of Western brands over their stance on Xinjiang, even though it meant giving up his favorite Nike running shoes.

“That’s why I have to change coaches personally,” he said. “Although it concerns me a little, I will keep this boycott going until the end!”

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