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H&M, Nike face boycott in China as Xinjiang dilemma deepens
(Bloomberg) – American and European retail brands in China are suddenly faced with a dilemma: embrace cotton from the controversial Xinjiang region and come under attack in the West, or reject it and risk a boycott in the second largest world economy. Investors are frightened by the prospect, sending their shares lower on Thursday. Hennes & Mauritz AB was criticized by the Communist Youth League and the People’s Liberation Army on Wednesday after social media users unearthed a statement no dated the company on charges of forced labor in Xinjiang. Calls to boycott the Swedish retailer, which earns 5.2% of its global revenue from China, quickly spread to include Nike Inc., which previously said it would not source products in the region due to manpower problems. Chinese brand ambassadors for the two companies have severed ties with the companies in recent days. “Do you want to make money in China while spreading false rumors and boycotting cotton from Xinjiang?” Wishful thinking! “The Communist Youth League said in a Weibo post, referring to H&M. One of the PLA’s Weibo accounts called H&M’s statement” ignorant and arrogant. ” Communist Party targeting Xinjiang businesses shows President Xi Jinping’s government seeks to impose real costs on governments and businesses that criticize China’s human rights record as the Biden administration aims to unite allies on the issue. Beijing on Monday imposed reciprocal sanctions on European Union officials, following coordinated sanctions and statements by the EU, the United States, Canada, Australia and New Zealand. H&M shares fell 4.4% in Stockholm. Nike shares fell as much as 5.4% in New York City before regular trading began on Thursday. senior American and Chinese diplomats last week Politburo member Yang Jiechi made lengthy remarks attacking and calling on the United States’ human rights record. on the world to stop interfering in China’s “internal affairs”. Foreign Department spokeswoman Hua Chunying, who this week slammed the United States and Europe for everything from the slave trade and Nazism to the murder of George Floyd and the alleged hoarding of vaccines against coronavirus, on Thursday called Xinjiang’s forced labor allegations “malicious lies fabricated by anti-Chinese forces.” China lashes out at US allies in an attempt to thwart Biden’s strategy “We cannot tolerate any force that shames and tarnishes the pure, pristine cotton of Xinjiang,” said Gao Feng, a spokesperson for the ministry. Trade. separate briefing Thursday. “Chinese consumers have acted in response to so-called business decisions made by some companies based on false information. We hope that the companies concerned will respect the laws of the market, correct bad practices and avoid the politicization of business issues. Chinese companies are now rallying around Xinjiang, which produces more than 80 percent of the country’s cotton. Anta Sports Products Ltd., Chinese sneaker giant that owns the Fila brand, and Hongxing Erke Sports Products Co. were among the companies that issued statements saying they would continue to source equipment from the region. Shareholders have rewarded companies that have shown patriotism, while punishing those that have ties to Western brands. Shares of Anta jumped 11% in Hong Kong, the best performer in the benchmark Hang Seng. Xinjiang LaChapelle Fashion Co. was at one point up nearly 40%. Nike supplier Topsports International Holdings Ltd. closed 12% lower for its worst decline in history, with H&M China on Wednesday saying its global supply chain is meeting sustainability commitments and not reflected no political position. The company also said it does not buy cotton directly from suppliers, but uses third parties, but the remarks have done little to stem the growing anger in China. H&M no longer appears on Alibaba Group Holding Ltd.’s Tmall e-commerce platform, where the retailer was previously present. Alibaba did not immediately respond to a request for comment. “Businesses caught in the crossfire can be heavily penalized as they find themselves in China on the wrong side of consumer preferences, social media comments and e-commerce platforms,” said Luca Solca, analyst at Sanford C. Bernstein. “European mass fashion retailers are torn between that and having to stand on the right side of the concerns of Western consumers.” “This is concerning,” said Mark Tanner, managing director of Shanghai-based branding and marketing company China Skinny. “If the bipolar trajectory continues, brands will need to make more conscious decisions weighing how consumers in China will react compared to those in the West.” Xinjiang has gradually become a hot issue between China and the West as reports have revealed that more than a million Uyghurs of Muslim ethnicity have been placed in re-education camps, prompting the states- United and others to accuse Beijing of genocide. China has denied the charges, with officials consistently calling them “the biggest lie of the century.” Beijing says its policies lift the region out of poverty, stimulate the economy and fight extremism. In January, the Trump administration ordered all imports of cotton and tomato paste to be stopped from Xinjiang. It came a month after the US-based Center for Global Policy released a report alleging new evidence from Chinese government documents and media reports that hundreds of thousands of Uyghurs were forced to pick cotton by hand thanks to a coercive labor force mandated by the state. the largest consumer of cotton in the world and also the largest exporter of textile products, imports between 2 and 3 million tonnes per year to meet demand, largely from the United States and Brazil. Xinjiang cotton is considered the highest quality, and the Chinese government purchases it from farmers to fill state reserves. analyst at the Shanghai International Cotton Exchange. Companies like H&M now find themselves caught in the middle of the problem. In the undated statement, H&M said it was “deeply concerned about reports from civil society organizations and the media which include accusations of forced labor and discrimination against ethnoreligious minorities.” The Beijing Youth Daily’s Weibo page listed a number of brands that commented on the boycott of Xinjiang. cotton, including Zara and Adidas AG of Inditex SA. The Global Times, a party newspaper, also mentioned that Burberry Group Plc.China’s online army shows which foreign brands are in charge. Inditex previously said in a statement that it was aware of allegations of malpractice. social and labor supply chains in Xinjiang, and that there was none. tolerance to forced labor. While an excerpt from the statement was still available on the Google search engine on Thursday, the link to the full statement was cut. Inditex, Nike, Burberry and Adidas were not immediately available for comment. Marks & Spencer Group Plc has become one of the first UK retailers will sign a pledge to leave the region in January by a coalition of civil society organizations and unions. M&S said in a statement at the time that 100% cotton for M&S clothing is “of sustainable origin and M&S is already one of the few retailers that does not work with any supplier or source in Xinjiang.” The company has not operated stores in China since 2016, and franchises in that market were closed in 2018. UK online fashion retailer Boohoo Group Plc banned suppliers from using cotton from the Xinjiang region, and the company is considering asking them to provide certificates. that they don’t, Andrew Reaney, the company’s ethics compliance officer, said in an interview. Reney said during a parliamentary inquiry in November that Boohoo was shocked by what was going on in Xinjiang, and all of his suppliers confirmed they were not doing it. t have any ties to the area. The retailer does not operate in China. Chinese celebrities who previously represented H&M have released statements saying they no longer have any ties to it, adding that they oppose “attempts to defamate China.” Wang Yibo, a popular actor, has announced that he will end all cooperation with Nike because he strongly opposes any comments and shameful behavior by China, and Chinese companies like Xtep International Holdings Ltd. “As a national brand, we use cotton from Xinjiang with an annual consumption of thousands of tons,” Xtep said in an official statement Thursday. “The quality of Xinjiang cotton is world class and we will continue to use it in the future.” (Updates with actions in the first paragraph) For more articles like this, please visit us on bloomberg.com’s economic news source. © 2021 Bloomberg LP
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