Author : Manoj Joshi

Originally Published 2021-03-31 11:22:03 Published on Mar 31, 2021
The message — no business if you are on the wrong side of issues like Xinjiang
China’s retail nationalism

The long-running self-destructive streak in the People’s Republic of China seems to be manifesting itself again these days. This time in the conduct of its foreign policy. The latest is the attack on the Swedish retail giant H&M’s China business over the issue of a 2020 statement made by the company that its products do not use cotton grown in Xinjiang, because of forced labour allegations there.

The action, in response to the European Union sanctions on Chinese individuals on account of rights violations in Xinjiang last week, could upend the promise of better China-EU ties that seemed to accompany the Comprehensive Agreement on Investment (CAI) in December 2020.

The goings-on will also have a chilling effect on efforts of US firms to have the Biden administration lift curbs placed by Trump on exports to China.

Alarmingly for China, this was a coordinated action where the US, the UK and Canada also imposed sanctions. But where they had targeted some lower-level Xinjiang officials, the Chinese upped the ante and imposed its own counter-sanctions on 10 EU individuals, including four Members of the European Parliament (MEPs), four entities, including the European Council’s Political and Security Committee, and the well-known think tank MERICS. Not only were the officials placed under sanctions, but also their family members.

As for the US and Canada, the Chinese targeted the bipartisan US Commission for International Religious Freedom (USCIRF) Chair Gayle Manchin and Vice-Chair Tony Perkins, Canadian MP Michael Choong and the rights subcommittee of the Canadian Parliament’s Foreign Affairs Committee. Manchin is the wife of a US Senator and the PRC officials appear to be waving a red rag at the US Congress where religious freedom is a big issue.

This is not the first time China has used its market power to punish a foreign company. Some years ago, it attacked Lotte, a major South Korean company, because the Korean government decided to give a golf course it owned for the setting up of a US-built THAAD anti-missile defence system. The crippling sanctions were lifted after two years, and since then, South Korea has taken care not to get on the wrong side of Beijing.

More recently, China has targeted Australian goods, including coal, wine and barley, for trade reprisals because of the call by PM Scott Morrison’s government for independent investigations into the origins of the Covid-19 pandemic.

H&M has an old relationship with China, where it sources its products for the global market. It is also a big market for H&M which has 400 retail stores in the country. In the line of target are other majors like Nike, Adidas, Uniqlo, Gap, and Burberry, who have made similar statements, though for the present, H&M seems to be the main target.

Chinese celebrities have renounced their promotion contracts with H&M and the company has been erased from mapping, ride hailing and e-commerce apps in China. Reports say that the campaign against Nike and Adidas is being kept on hold perhaps because of the advertising these companies are likely to provide for the Winter Olympics scheduled to be held in China next year. The alarming message coming out of Beijing for western companies who have long enjoyed a profitable run in China is that if you are on the wrong side of issues like Xinjiang, you can forget doing business in China.

What would be of interest is the way forward for the EU to ratify the CAI that it had signed with China over American objections. European governments may find it difficult to proceed with the process as long as four of their members are under Chinese sanctions. But the Chinese are hanging tough on this, with foreign ministry spokeswoman Hua Chunying declaring that the CAI ‘is not a gift bestowed upon one side by the other side, but is mutually beneficial and reciprocal’. The goings-on in China will also have a chilling effect on efforts of American firms to have the Biden administration lift the restrictions placed by the Trump administration on exports to China.

Biden’s arrival has changed the tone of the US-EU relations. Last week, the US President participated virtually as an honorary EU leader in a summit meeting of the European Council. Around the same time, Secretary of State Anthony Blinken was interacting with EU leaders in Brussels, and the two sides have decided to relaunch the EU-US dialogue on China to enhance coordination of their policies. This can only increase Beijing’s headaches.

It is not as though there is total congruence between the EU and the US. One issue looming large is that of the Nordstream 2 pipeline bringing gas from Russia to Germany. The US has threatened to impose sanctions if the work on the pipeline is completed. The Americans worry that the pipeline will increase the dependence of the EU on Russian gas.

But the strongly Atlanticist approach of the Biden administration has overcome the distrust engendered by the Trump administration’s ‘America first’ policy. Increasingly, Europeans are making common cause with the US. One manifestation of this is the increasing interest of countries like the UK, France, the Netherlands and Germany to join the US in establishing a naval presence in the South China Sea. A few ships will not make a difference from the military point of view, but the fact that these important European countries are willing to show the flag in what is for them a remote part of the world, will be a message to China of the growing coalition willing to take a stand against its policies.

This commentary originally appeared in The Tribune.

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.


Manoj Joshi

Manoj Joshi

Manoj Joshi is a Distinguished Fellow at the ORF. He has been a journalist specialising on national and international politics and is a commentator and ...

Read More +