U.S. Secretary Of State Antony Blinken appeared on Meet the Press today and said (about Xinjiang): “we need to be looking at products that are made in that part of China to make sure they’re not coming here.”
On the other side of the Pacific Ocean, China’s message to western retailers is equally clear. If you plan to work in China; if you plan to sell into our booming marketplace; all is fine – as long as you respect China nationalism.
With America and China staring at each other from opposite sides of the pond, circumstances for retailers are definitely getting more and more complicated.
The backlash to China retail issues raised during recent days have created a moral dilemma for international companies, simply because “adjusted” social responsibility targets don’t always fit well with parent countries or with their respective consumers. Of course, there are some retailers whose only goal is to add sales volume, and a mission with that directive can only serve to dull politically acerbic public opinion. Looking at an in-depth analysis of this difficult issue at hand (about selling into China or buying product from China), we are reminded of the ancient Chinese proverb: “Those who ride the tiger often find it difficult to dismount.”
Back in America, Las Vegas hosts the fashion industry’s semi-annual MAGIC Show, which is their largest trade gathering for apparel retailers. MAGIC actually stands for Men’s Apparel Guild In California, but China’s blowback against retail has industry people thinking that the word “MAGIC” may take on a whole new meaning.
While attending the MAGIC Show, retailers often visited the Mirage Hotel, where the late-great Siegfried and Roy displayed their incredible magic tricks. Fluffy white tigers would levitate in the air, and elephants would disappear right in front of your eyes. Retailers loved the disappearing acts, and they gave little thought to the concept that disappearing might actually happen to them years later in China.
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With China’s emerging middle class – (larger in size than the population of the United States) – retail growth has been beyond spectacular. Unfortunately, recent incidents have forced international retailers and brands to re-assess, re-calibrate, and re-state their positions of social responsibility. This happened because China reacted unfavorably to statements about the alleged forced labor in their Xinjiang Uyghur Autonomous Region (XUAR). Several western websites have been quickly updated, and their corporate moral compasses (in many cases) has been recalibrated towards a more neutral direction.
The crisis began when the Chinese Government decided to fight back (in an organized way) against accusations of forced labor in their cotton rich XUAR region, where Muslim Uyghur, Kazakh, and Turkic populations have been targeted for “re-education.”
China complained about the (not-for-profit) Better Cotton Initiative (BCI) for suspending their “assurance” activities in the XUAR region for the 2020-2021 cotton growing season. BCI had questions about reports of forced labor in the XUAR area.
BCI is based in both Geneva and London, and is a highly respected organization. They are recognized as the largest cotton sustainability program in the world. Following their headquarters announcement of suspension for the XUAR, there was an interesting twist to the BCI proclamation – when the Shanghai branch of BCI stated that “they have never found a single case related to incidents of forced labor.” China soon implied that BCI had received some USAID funding – and that funding might have encouraged an alteration of the world’s viewpoint (against Xinjiang). They also pointed out that BCI Chairman Marc Lewkowitz also served as the President & CEO of the (not-for-profit) USA Supima cotton group, and Supima is considered to be the largest competitor to Xinjiang’s long staple cotton.
The BCI accusations were generally weak, so China ramped it up even further, probably figuring that a better way to get the world’s attention – was to attack the revenue streams of western companies that hitched a ride on China’s free-spending middle class by a coordinated social media and internet campaign against them. The hardest blow seems to have landed on Swedish retailer H&M (Hennes & Mauritz AB) with 505 of their stores in China – comprising approximately 5% of their overall business.
The Chinese potentially used Sweden’s H&M, to put other well-known brands on high alert – indicating that this situation could happen to them – if they continued to fly too close to the sun. The Nike NKE brand, for example, is immensely popular in China and probably received a-bit-of a pass because of their strong ties to the Chinese consumer and the country’s focus on the upcoming 2022 Winter Olympics in Beijing. However, for many brands – their logos are now amazingly “blurred” on China TV – and many celebrity endorsements have either dried up or been severed. It would appear that any brand deciding to make negative comments about Xinjiang cotton, could soon become a target of Chinese nationalism – and an equal target of negative social media campaigns.
China’s anti-retail and anti-brand attacks started with a single post on the Weibo social media platform. The Chinese Communist Youth League posted: “Spreading rumours to boycott Xinjiang cotton, while also wanting to make money in China? Wishful thinking!”
Brand members of the Better Cotton Initiative (BCI) like: Nike, Adidas, and Burberry started to feel the heat, but H&M was the easier target, perhaps because they didn’t seem to have well established Government connections, and because Sweden already had a combative relationship with China on the diplomatic front.
H&M published their opinion on the alleged Xinjiang issue several months before the public criticism started. Their release stated: “H&M Group is deeply concerned by reports from civil society organisations and media that include accusations of forced labour and discrimination of ethnoreligious minorities in Xinjiang Uyghur Autonomous Region (XUAR). We strictly prohibit any type of forced labour in our supply chain, regardless of country or region.”
As the heated Chinese reaction accelerated, H&M decided to skip an apology and stood by their original statement. Over the course of a few days, the situation went from bad to worse. Chinese magicians commenced their disappearing work, and H&M literally vanished from big Chinese e-commerce retail sites like Alibaba’s BABA TMall, Taobao, JD.Com, Pinduoduo, and even the re-sale site Xianyu. The H&M mobile app also apparently disappeared from Huawei, Xiaomi, Vivo, and Tencent. Other apps that were designed to locate physical stores on digital maps, saw the store locations vanish in thin air.
Fast forward a few more days and H&M, perhaps feeling a bit more vulnerable, decided to issue yet another statement about Xinjiang. Their new memo was distributed on March 31, and it amazingly did not mention Xinjiang – at all. The release discussed H&M wanting “to be a responsible buyer, in China and elsewhere.” Their statement also indicated a long-term commitment to the country and said that they were “dedicated to regaining the trust and confidence of customers, colleagues, and business partners in China.”
Netizens didn’t like the new H&M statement much better that the first one, and an internet cry rang out for an apology. Zhang Yi, CEO of iiMedia Research Institute (in China) told the Global Times, “the (H&M) statement has no sincerity, and it is of no help in restoring business in Chinese stores.”
Perhaps, the eruption over the two memos would have calmed down by now, but H&M’s Shanghai group was then summoned to correct a map image that (apparently) appeared on H&M’s website. While the details of this new “mapgate” issue are still fuzzy, changes to a web-map were requested by China, and that action set off another frenzy in (hard to believe this) Vietnam. Apparently, the “adjustments” to the map infringed on the maritime sovereignty of Vietnam, so netizens (in Vietnam) became outraged as well, and they also went after H&M – because it is against the law to use an image that distorts Vietnam’s claimed boundaries.
To be quite pointed, China feels entirely different about the world’s reaction to their re-training and re-education programs in the XUAR region. China wants to publicly praise their “beautiful white” fluffy long staple cotton from Xinjiang. They resent the outside world meddling in their internal affairs and continue to promote their fine cotton quality – which accounts for approximately 22% of the worlds overall supply and more than 84% of China’s.
Political indoctrination in the XUAR has met with serious blowback and criticism from several countries, international organizations, and the United Nations. While accusations remain alleged, the scope of the project is quite large and China has restricted public access to the geographical area, which only heightens the suspicions of inappropriate behavior.
China is trying to explain to everyone – that their program will reduce poverty and thwart the potential of terrorism in the region – as well as promote assimilation within the country. However, without free access to the area (as requested by the United Nations), the world remains highly suspicious of activities in the region.
Meanwhile, back in Las Vegas during a Siegfried and Roy Show one night in 2003, a male white tiger named Mantecore decided to change the working dynamic with performer Roy Horn. In a frightening moment in front of a live audience, Mantecore attacked Roy, grabbed him by the neck, and dragged him off the stage. Roy was severely injured that night and nearly died. The Siegfried and Roy Show was abruptly cancelled – forever.
Thinking about the retail spat in China last week and relating that to Siegfried and Roy is symbolic of the illusion that you can never underestimate the one who has the power. Siegfried and Roy thought they were in charge, but Mantecore had the power.
With total clarity as to who has the power, western retailers and brands are re-examining their internal options and continuing with their external quest for some resolution to the questions raised within the XUAR. Antonio Guterres, Secretary-General of the United Nations, announced aggressive negotiations with China about Human Rights personnel visiting Xinjiang “without restrictions or limitations.”
China stated that “they want this mission to take place.”