Multinationals cautiously engage in boycott of China

A backlash in China against foreign brands that have sought to distance themselves from “forced labor” in Xinjiang cotton threatens to drag multinationals into a long diplomatic row as Beijing demands that the global garment industry reject the allegations.

Online calls, backed by state media, for a boycott of Hennes & Mauritz, Nike, Adidas, Burberry, Uniqlo and Zara, among others, have pressured brands to take sides in the diplomatic feud between Beijing and Western governments over alleged rights violations in the country. region, which produces more than 80 percent of China’s raw cotton.

The campaign was launched a day after the UK, US, EU and Canada imposed coordinated sanctions on Xinjiang officials for a mass internment campaign that has detained more than a million of Uyghurs, Kazakhs and other Muslims in “re-education” camps. China denies the abuse allegations.

Contrary to some earlier nationalist cries aimed at foreign groups, multinationals seem reluctant to apologize and accept China’s demands. Doing so could spark criticism among politicians and human rights groups pushing for Beijing to be held accountable for the use of “forced labor” in the region.

UBS analyst Zuzanna Pusz said the boycott was more serious than past crises because brands were “caught up in something political.”

“If a brand makes a mistake in their communications or in choosing an influencer, they can apologize and correct things. Here, by trying to do things right, they would actually be doing things wrong, ”she said, noting that many Western groups have pledged to follow the advice on sourcing from the Better Cotton Initiative, a group of ethical commerce based in Geneva which has more than 2000 brands. as members, including Nike and H&M.

Yet membership is now a handicap in China, after state media accused BCI of “sullying” Xinjiang and causing widespread rejection of its cotton. The nonprofit group stopped licensing Xinjiang cotton last year citing “sustained allegations of forced labor and other human rights violations in Xinjiang.”

Chinese state broadcaster CCTV last week broadcast an interview with BCI officials in Shanghai, who accused Geneva headquarters of ignoring its assessments, saying there was no evidence of “forced labor” in Xinjiang.

Mei Xinyu, a researcher affiliated with the Chinese Ministry of Commerce, told the Financial Times that he believes BCI is now one step away from Chinese government sanctions. The group should reform its audit work to focus on technical standards and “avoid politicized acts,” he said.

BCI declined to comment.

Earlier boycotts in China, like that of Dolce & Gabbana after one of its advertising campaigns were labeled racist, have targeted individual companies, but the BCI’s removal of its ethical stamp on Xinjiang cotton has meant that brands that sought to change supply chains were trapped.

H&M, which bore the brunt of the latest campaign, is missing from research on China’s largest e-commerce platforms Alibaba’s T-mall and Local media reported that some stores of the Swedish group have closed, although those in major cities remain open.

Dozens of brand ambassadors have ended their representation of foreign brands caught up in the boycotts, although Nike and Adidas have so far maintained their sponsorship deals with major Chinese sports teams.

Many clothing groups had previously been reluctant to indicate that cotton from Xinjiang would no longer appear in their supply chains, in part because most lack control over the exact origin of clothing components.

Cotton will change hands “at least” six or seven times between harvest and textile spinning, sometimes passing through several different countries, according to BCI.

H&M store in Beijing, China on March 20, 2021

H&M took the brunt of the campaign and is absent from researching China’s biggest e-commerce platforms Alibaba’s T-mall and, while some stores have reportedly closed © Getty Images

An owner of a Bangladeshi garment factory, who did not want to be named, said it was “incredibly difficult” to ensure the cotton did not come from Xinjiang.

“Almost all brands tell their suppliers not to buy cotton from Xinjiang, but the whole issue is traceability,” he added, explaining that most garment manufacturers had no choice but to to trust suppliers’ assurances on the origin of cotton.

The brands sent mixed messages about their stance on Xinjiang, which appeared to be internal disagreements that led some groups to issue conflicting statements in Chinese and English.

Hugo Boss’s official account on Weibo, the Chinese microblog, said last week that the brand would “buy and support” Xinjiang cotton, while its website said the company “had not purchased any products from the Xinjiang region from direct suppliers ”. The Weibo message was later deleted, with the company saying it was “unauthorized.”

Luxury groups like Hugo Boss and Burberry are much more exposed. China is H&M’s fourth largest market, but only accounts for about 5% of revenue. Chinese consumers accounted for about 40% of the 281 billion euros spent on luxury goods in the year before the pandemic, but were responsible for 80% of the growth, according to Jefferies.

Still, Greater China is Nike’s third-largest market: from the year to May 2020, it recorded its sixth consecutive year of double-digit revenue growth in the region, with $ 6.7 billion in sales.

More recently, China’s economic recovery has made the country a rare bright spot for Western brands, as demand in Europe and North America remains weak.

H&M declined to comment and Burberry did not respond to a request for comment. There are, however, indications that the brands have tried to soften the impact of their previous statements. H&M, for example, updated its original statement, removing lines that said it would “reduce exposure” to Xinjiang.

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