Xi's red line on China human rights makes companies pick sides

For years China has sought to draw moral equivalence with the West over human rights, insisting that other countries have no standing to criticise its policies. Now Beijing is making companies pay if they disagree.

China this week has pushed a campaign to boycott Western retailers after the US, UK, Canada and the EU imposed sanctions over human-rights abuses against ethnic minority Uyghurs in Xinjiang. The furor started when the Communist Youth League amplified a months-old statement from Sweden’s Hennes & Mauritz AB expressing concern about reports of forced labor in the far west region, and quickly spread to other companies.

Shares of H&M, Nike, others plummeted as Chinese government officials endorsed the boycotts and celebrities cut ties with brands including Adidas, New Balance and Japan’s Uniqlo. H&M outlets appeared not to show up on Apple Maps and Baidu Maps searches in China on Friday. Chinese apparel makers have seized the opportunity with statements supporting cotton made from Xinjiang, boosting local companies.

While both Western and Asian companies have frequently been targets of Chinese nationalism over the years, the latest flurry signals a shift in strategy by President Xi Jinping’s government as it confronts a more unified approach from the US and its allies. Analysts say the Communist Party is betting that a response that inflicts financial costs on firms will be popular at home, show China stands on equal footing with the US and help thwart President Joe Biden’s efforts to heap more pressure on Beijing over human rights.

Although Xinjiang is in the spotlight now, Chinese diplomats made clear during tense talks with the US in Alaska last week that Xi’s administration is drawing a firm line against what it calls “interference” in “internal affairs” including Hong Kong, Tibet and Taiwan. That raises the prospect that foreign companies operating in China could find themselves in the geopolitical firing line, facing pressure from Beijing to keep quiet on human rights just as global investors put more weight on environmental, social and governance issues.

China’s earlier approach of simply denying allegations has been seen as a “weak defence,” according to Wang Huiyao, an adviser to China’s cabinet and founder of the Center for China and Globali­zation. “Under Xi, China appears to have adopted the mantra that it is better to be feared than liked,” said Ryan Hass, senior fellow at the Brookings Institution.

Multinationals operating in China have frequently found themselves apologising. Daimler AG in 2018 expressed remorse for a post quoting the Dalai Lama that “hurt the feelings of Chinese people,” while Gap Inc issued an apology for a T-shirt with a map of China that didn’t include Taiwan, Tibet or disputed islands in the South China Sea.