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Tensions between China and the West are running high following the Asian giant imposing sanctions on the UK, EU, US and Canada after a crackdown by Western states on Beijing over human rights issues.

China has sanctioned individuals and entities in the four powers for maliciously spreading what it says are “lies and disinformation” about the Xinjiang region in northwest China.

Targeted individuals and their immediate family are banned from entering Chinese territory. They, along with companies and institutions associated with them, are also prohibited from doing business with China.

One entity sanctioned is the Mercator Institute for China Studies, a leading European think tank on China. In a statement the institute said it remains committed to fostering a better understanding of the country.

The move follows the Western alliance imposing sanctions on China for the treatment of Uyghur Muslims – an ethnic minority that has reportedly been subject to mass arbitrary detentions, severe abuse, forced labour and other labour abuses, surveillance, religious persecution, political indoctrination and forced sterilisation by the state.

The co-ordinated pressure campaign saw four Chinese senior state officials sanctioned, as well as the Public Security Bureau of the Xinjiang Production and Construction Corps, the organisation responsible for enforcing repressive security policies across many areas of Xinjiang, according to Dominic Raab, the UK’s foreign secretary.

The measures mark the first time in three decades – since Tiananmen Square – for the UK, EU and Canada to punish China for human rights abuses.

Fears of abuse against Uyghurs have been growing in the past few years as reports surfaced about their alleged treatment and involvement with forced labour in supply chains, notably cotton production – the Xinjiang region accounts for about a fifth of the world’s cotton output and 80% of China’s production.

In January, US Customs and Border Protection issued withhold release orders for shipments of cotton and tomatoes. These orders allow it to detain imports based on suspicions of forced labour involvement. It also imposed sanctions against state officials last year.

Beijing has repeatedly dismissed claims of any wrongdoing. Yang Xiaoguang, chargé d’affaires of the Chinese embassy in the UK, said in interviews published in late March on the embassy’s website that the camps in the region are training centres aimed at educating and saving people from being influenced or brainwashed by extremist preaching.

Although the sanctions exchange will not significantly hurt trade directly and is more of a superficial move, it threatens to scupper any trade deals on the table. The landmark Brussels-Beijing deal hangs by a thread, while any hopes of reconciliation between US President Joe Biden and Chinese leader Xi Jinping have been all but dashed.

 

Businesses need China

As the governments squabble over Xinjiang, the crackdown has placed renewed focus on the action and opinions of companies operating in the region.

Swedish retailer H&M announced last year that it was “deeply concerned” over reports of forced labour in the cotton sector, adding that it does not source products from Xinjiang.

Following the sanctions on Beijing, H&M received a barrage of criticism from Chinese social media users and has since effectively been erased from China’s digital sphere – it was removed from searches on e-commerce platforms Tmall and JD.com. China accounts for around 5% of H&M’s sales.

Xu Guixiang, a foreign policy spokesperson, said in a press conference on March 31: “H&M is an enterprise, so it should carry out its own business activities instead of politicising its economic behaviour.”

A similar situation has occurred around other big brands such as Nike, Adidas and Burberry, which are part of the Better Cotton Initiative (BCI), a Geneva-based ethical industry group that halted licensing cotton from Xinjiang last year over the allegations. The BCI’s China branch has said, however, that it has found no evidence to support forced labour claims.

It is no secret that China, the global leader in merchandise trade exports, has become a financially important market for many Western firms. This has become clear during the pandemic as demand slumped in Europe and North America. For example, Nike’s sales in China grew by 51% in its third quarter results ending February, offsetting declines in other markets to give it total overall growth of 3% compared with the same period last year.

Another company that has wedged itself in the debate is Boeing. The plane maker has urged the US to keep human rights and other disputes separate from trade – arguably an impossible feat as a fundamental part of manufacturing and trade involves the employment of workers in factories and across supply chains.

In fact, human rights will only become of more importance in trade. “Governments, primarily in western Europe, Canada and the United States, are looking to heighten business human rights obligations by making supply chain human rights due diligence mandatory,” states Verisk Maplecroft in a report in December.

Dave Calhoun, Boeing’s chief executive, told an online business forum that issues need to be isolated as firms still need to do business with China.

“I am hoping we can sort of separate intellectual property, human rights and other things from trade and continue to encourage a free trade environment between these two economic juggernauts,” he told the US Chamber of Commerce Aviation Summit, as reported by Reuters, adding: “We cannot afford to be locked out of that market. Our competitor will jump right in.”

As the plane manufacturer makes clear, companies doing business with China cannot afford to be cut off from a market with 1.4 billion people and one of the world’s top trade powers.