Following the sanctions imposed on China by the United States, Europe, Britain, and Canada over forced labor in Xinjiang, the Chinese Communist authorities retaliated by forcing foreign companies to reconsider the commercial and political costs of continuing to do business in China by launching a new wave of nationalist boycotts against international companies that refuse to use forced labor products from Xinjiang.
Officials Incite Boycott
Sweden’s H&M, the world’s second-largest apparel retailer, said in a statement March 31 that China remains a very important market and that it will “do everything possible” to win back the trust of Chinese consumers. The statement said the company will do what it can to address “the current challenges and find a way forward. Although H&M did not provide data on the financial impact of the boycott or what measures it would take in response, analysts estimate that H&M’s sales in China will be negatively affected in the short term, and that the company’s experience in China is a typical example of a foreign company being forced by the storm of Chinese nationalism.
This comes after the United States, Canada, the United Kingdom and the European Union condemned the Chinese Communist Party’s inhumane human rights violations and persecution of Uighurs in Xinjiang, and announced sanctions against relevant Chinese officials and institutions. China then retaliated by announcing punitive measures against a number of U.S. and British institutions and individuals.
The Central Committee of the Communist Youth League first lashed out on March 24, rehashing a statement issued by H&M last year regarding cotton from Xinjiang, China, which expressed concern about reports of forced labor and religious discrimination against ethnic minorities in Xinjiang and stated that it would no longer purchase cotton from Xinjiang. The Communist Youth League Central Committee accused H&M of creating rumors to boycott Xinjiang cotton while trying to make money in China. The Central Committee of the Communist Youth League had first launched a boycott of South Korea’s Lotte Group’s supermarkets and other businesses in China in 2017 over the deployment of the U.S. Saad missile defense system in South Korea. Following the Central Committee of the Communist Youth League, CCTV, People’s Daily and almost all other official party media launched an all-out attack on H&M.
Internationally renowned brands that once stated their rejection of frontier cotton soon became the target of a raging surge of ultra-nationalism, including Nike, Adidas, Uniqlo, Bobberley, Lacoste and more than 20 other companies.
Tough it out or pull out?
James McNaungton, a vice president at Asia Investment Consulting who has done business in China, said in an interview with the Voice of America that these American and European companies, whether they want to or not, have to make a political stand on the issue of human rights abuses in Xinjiang while facing nationalist sentiment and boycotts fanned by the Chinese Communist Party, putting them in a They are in a dilemma,” he said.
If they want to complain about China, they had better face the reality of Chinese retaliation,” he said. It’s not easy to show a strong high profile on the idea of human rights, and it costs them money. It’s a very serious dilemma.”
McNaughton said many companies have been hard at work in China for decades, and the cost of doing business and the political cost of doing business will have to increase in the future in the face of the nationalist boycott trend that Chinese officials often instigate. They need to make a choice, either to survive the current boycott and wait for the storm to pass, or to reconsider their plans and gradually reduce their dependence on the Chinese market or even withdraw, India and Vietnam and other emerging countries are good choices.
India’s advantages are obvious,” he said. India is now saying, look at us, you can come and do business in India, we have good human rights. In this very difficult phase, some companies may move to India and do business in some other places. China’s competitors, including Taiwan, will be very happy.”
Driven by economic interests
Zhao Yan, a former news researcher for the Beijing bureau of The New York Times, told the Voice of America that the nationalist sentiment officially stirred up and the Internet users’ boycott chants are hypocritical “patriotism” that flocks to international businesses as soon as they offer discounts and freebies, revealing their true nature. As long as these international businesses hold out, he said, the wind will pass, although their costs of doing business in China will increase.
As a foreign business, of course some people say either you move, move away, or you put up with it,” he said. In fact, just like Costco, from time to time, they give you a gesture of ‘I give away’ and that tears away the whole veil of these populist and so-called nationalist these people. Then the people also get more or less benefit, and companies can advertise, because the giveaway itself is a big advertisement. The Communist Party is now driven by economic interests, all deception, the ruling party needs, there is no way.”
In fact, a few days after the officially instigated boycott, Chinese netizens were unable to resist the “lure” of price cuts from some of the boycotted brands, and a rush of purchases was seen in many places. The image shows that the “second” app “Juhao grab”, which includes some major e-commerce platforms, opened a 699 yuan Nike women’s shoes for purchase at 8 p.m. that night. One hour later, more than 346,000 people had made reservations to buy. Once the time came, all the stock was almost snatched up by the “seconds”. The next day, the most serious boycott of the Swedish brand H&M 30% off the entire site, attracting a large number of customers, the goods are also instantly snapped up.
This reporter recently contacted the National Chamber of Commerce China Center and the American Chamber of Commerce in China, hoping to interview the response to China’s boycott of foreign brands, but by press time they had not received any response.
A new strategy of “one company, two systems”?
Hong Kong’s English-language South China Morning Post recently reported that the European Union Chamber of Commerce in China, which represents more than 1,700 companies, said that EU companies are facing an increasingly politicized business environment in China. On the one hand, European public opinion demands that these companies demonstrate clear principles of social responsibility, while on the other hand, they are perceived as “anti-China” in their human rights stance in the face of a public backlash in China. The European Chamber of Commerce says that the increasingly politicized business environment has put more European companies in a dilemma.
Many companies are used to playing the “ignorance” card on human rights issues, but the global business environment has changed, forcing them to take a stand on human rights issues, said Stanley Chao, a California-based Chinese business consultant and geopolitical analyst who recently wrote in Industry Week. With China’s public image in the West now at an all-time low, companies, large and small, will need to actively demonstrate that they are operating responsibly and ethically in China.
Stanley Chao also said that some of his U.S. clients have moved parts of their supply chains from China to more geopolitically neutral countries such as Mexico, Vietnam and Malaysia, with the goal of showing their customer base that the company is responsible.
In response to the dilemma of the increasing politicization of doing business in China, Stanley Chao cited analysis by European China policy researcher Dr. Sari Arho Havrén, who said he believes foreign companies will be forced to consider a “one company, two systems” strategy, where they divest their China operations from the parent company. In this way, the Chinese part of these companies would be separated from the parent company. In this way, the Chinese parts of these companies would be free to do business in China to the extent that their conscience would allow them to do so.
Confronting the business dilemma
According to a recent Bloomberg analysis, as China’s relations with the U.S., Europe and other Western countries deteriorate, it is inevitable that international companies will be involved in disputes and controversies of all kinds, and that this will be the “new normal. The best option for foreign companies facing the huge appeal of the Chinese market is to confront the bluster of the Chinese authorities, as Beijing tends to choose economic interests over ideology when it matters.
The reality is that Beijing cannot afford to drive so many foreign companies out of China over forced labor in Xinjiang or other disputes, and it needs to show that it welcomes foreign investment and the jobs, capital and technology it brings, and cannot risk intimidating the international business community, especially at a time when international goodwill toward China has plummeted, according to the analysis. And the interest and discussion of forced labor and Xinjiang cotton that the boycott has generated is not something the CCP wants, as it has avoided talking about human rights, Xinjiang and other topics it considers taboo.
The U.S. has recently condemned a Chinese government-led social media campaign against U.S. and other international companies that have decided not to use cotton produced in the Xinjiang region because of forced labor issues.
State Department spokeswoman Porter said the Chinese social media campaign and consumer boycott are targeting U.S., European and Japanese companies. She applauded and supported companies that comply with U.S. laws and ensure consumer products are not made through forced labor. The U.S. Department of Commerce also said it has taken strong action to stop China from benefiting from human rights abuses in Xinjiang and to curb imports of products produced by Chinese forced labor.
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