H&M & Adidas – China Targets Foreign Companies

After EU sanctions were imposed on China, several foreign businesses like H&M and Adidas came under fire. Last month, Chinese state media strongly criticized H&M, Adidas, Nike, and New Balance for refusing to source cotton from the Chinese region of Xinjiang; there have been rumors that the Muslim Uyghur minority that lives in the area was forced into labor. 

When H&M initially announced that it would not source cotton from the region, there was no reaction from China, but that changed when the EU imposed sanctions on China for the first time in more than three decades. The sanctions are directed against Chinese officials who are held responsible for the persecution of the Uyghurs. In response, Beijing immediately announced its own sanctions against European politicians and institutions. 

Boycotts 

H&M was the first western company China chose to boycott. The attacks came from China’s Youth League, and the accusations quickly circulated on social media. The company’s products then disappeared from several large online shopping platforms, and many Chinese H&M stores got closed down by their landlords. 

The party-affiliated newspaper, Global Times, continued to accuse other businesses, such as the sporting goods manufacturers Adidas, Nike, and New Balance, of making “cutting remarks” about purchasing cotton from Xinjiang. The fashion company Burberry and Zara were also mentioned negatively. A number of Chinese stars publicly terminated their cooperation with the aforementioned companies. 

On its social media account, H&M commented that the company “doesn’t represent any political standpoint” and “respects Chinese consumers.” 

Apologize or lose a huge market 

In China, foreign companies are repeatedly targeted by the state media as a result of political tensions. In the past, for example, the US fashion chain Gap had to apologize in China for showing a ‘faulty’ map of China without Taiwan on a T-shirt. And the German carmaker Daimler apologized to China in 2018 for using a Dalai Lama quote in an advertisement. 

Normally, U.S companies apologize publicly and seek alternative ways of advertising to Chinese consumers. When it comes to Xinjiang, however, the situation is quite tricky. Western brands will need to choose whether to lose their access to the Chinese market or face pressure back home from participating in a crime against human rights. 

China’s relations with the EU have previously been very amicable, in comparison to its rocky relationship with the U.S – the U.S had accused China of spying on numerous occasions and has even blamed it for COVID-19. Regarding the situation in Xinjiang, the U.S has accused China of a “state-run corporate and consumer boycott” against Western businesses who choose not to buy from Xinjiang. 

In its latest statement on the situation, H&M announced, “China is a very important market to us, and our long-term commitment to the country remains strong. Having been present there for more than thirty years, we have witnessed remarkable progress within the Chinese textile industry. Being at the forefront of innovation and technology, China will clearly continue to play an important role in further developing the entire industry. We are proud our suppliers are part of that development, and we want to continue contributing to driving progress together with our partners and stakeholders in the country. We want to be a responsible buyer in China and elsewhere and are now building forward-looking strategies and actively working on the next steps with regards to material sourcing. Together with all relevant stakeholders, we want to collaborate to be part of the solution and jointly build a more sustainable fashion industry.” 

_{Legal disclaimer: The material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instruments. UR Trade Fix Ltd accepts no responsibility for any use that may be made of these comments and for any consequences resulting in it. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. The analysis does not involve any specific investment objectives, financial situation and needs of any specific person who may receive it. Past performance does not constitute a reliable indicator of future results and future forecasts do not constitute a reliable indicator of future performance.}

_{It has not been prepared in accordance with legal requirements designed to promote the independence of research, and as such it is considered to be marketing communication. Although we are not specifically constrained from dealing ahead of the publication of our research, we do not seek to take advantage of it before we provide it to our clients. We aim to establish, maintain and operate effective organizational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. We operate a policy of independence, which requires our employees to act in our clients’ best interests when providing our services.}