Xinjiang cotton could portend a US-China consumer decoupling

A security guard stands outside a store of the Swedish fashion retailer H&M at a shopping complex in Beijing, China March 25, 2021. REUTERS/Florence Lo
A security guard stands outside a store of the Swedish fashion retailer H&M at a shopping complex in Beijing, China March 25, 2021. REUTERS/Florence Lo
Image: Reuters/Florence Lo
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The Chinese internet and Beijing’s state propaganda have lit up in collective outrage.  This time, it’s directed at two major foreign brands—Swedish fashion retailer H&M and American sporting giant Nike—that have taken a public stance on Uyghur forced labor in Xinjiang.

Calls for consumer boycotts of the brands ricocheted across Chinese social media, while celebrities axed endorsement deals and major online platforms removed the brands’ products. On state media, the usual array of caustic language were on full display. The nationalistic tabloid Global Times decried H&M’s statement expressing concerns over forced labor as “suicidal,” while China Daily quoted a social media user condemning the firm for “insidiously slandering and making false charges against China.”

The latest furor appears to have been sparked by statements issued by H&M and Nike last year. H&M had said that it does not source products from Xinjiang, and prohibits forced labor in its supply chain. Nike had published a similar statement, confirming that it “does not source products from [Xinjiang]” and that its suppliers do not use “textiles or spun yarn from the region.”

Some observers have raised eyebrows over the timing of the backlash, months after the companies’ statements were made public and just days after the European Union, UK, US, and Canada slapped coordinated sanctions on Chinese officials over human rights abuses in Xinjiang. Beijing quickly retaliated with reciprocal sanctions.

“It seems this is quite a coordinated campaign from society and the state media…Most of the brands’ statements on Xinjiang cotton were issued last year. So why did they go viral right now?” said Johnson Yeung, who works with Clean Clothes Campaign, a group that works to improve the global garment and sportswear industries. “This makes me wonder: is this wave of propaganda connected to the EU sanctions? “

The public flogging of foreign brands for alleged violations of political sensitivities is not a new phenomenon in China. The NBA found itself in hot water in 2019 after Houston Rockets general manager Daryl Morey expressed support for Hong Kong’s protests. Fashion brands like Givenchy, Coach, and Versace have had to offer deep apologies for allegedly disrespecting China’s sovereignty. And Nike is no stranger to dealing with Chinese online backlash either, having had to abandon a shoe release in 2019 after its co-designer expressed support for Hong Kong.

As Beijing’s diplomatic aggression shows no sign of abating, and as China continues to push towards achieving self-sufficiency, this week’s attacks on foreign retail brands raise the question of whether the dynamics of decoupling—already playing out in national security related areas like 5G networks and semiconductors—will spill over into the consumer sphere.

Surya Deva, associate professor of law at City University of Hong Kong and a member of the UN Working Group on Business and Human Rights, thinks a complete “consumer decoupling” is unlikely but that more firms may decide to withdraw from the Chinese market over tensions caused by Beijing’s political demands. “We will see this across the board, not just with Xinjiang,” he said. “There are many, many fronts on which this will unfold.”

Short of withdrawing from China’s lucrative market, international firms may create separate entities for the Chinese and international markets. Some had suggested such an approach for HSBC, the global bank facing dueling demands for its loyalty from the West and China.

“Multinationals will need to have separate companies and separate brands to serve the American and Chinese markets,” said Zhigang Tao, a professor of global economy and business strategy at the University of Hong Kong who researches the Chinese economy. He cited the example of Chinese tech giant Bytedance having two versions of its short-video app:  TikTok for US and global users, and Douyin for China.

How the likes of H&M and Nike respond to the backlash may have implications for how the West addresses China’s human rights abuses in China, said Yeung of Clean Clothes Campaign. Quartz has reached out to both companies for comment.

“It seems the strategy of the Chinese government now is to use these Western companies as an agent to influence policymaking, to try and normalize forced labor, and to lobby their governments to stop criticizing the atrocities [in Xinjiang]. That’s quite worrying, in my opinion,” he said.

This story has been updated to include the latest link to H&M’s statement.