Tensions between China and the West reached boiling point last week as several countries, including the UK, imposed sanctions over human rights abuses against Uighur Muslims and retail found itself caught in the crossfire. 

  • H&M and Nike have had products pulled from Tmall and JD.com following their comments about the treatment of Uighur Muslims 
  • Brands risk long-term damage with Chinese consumers who are “fiercely patriotic” and increasingly turning to local brands
  • “China is far too big to walk away from” warns one consultant, with the country likely to be the only place to see substantial growth in the next two years

Allegations of Uighurs being used for forced labour in the cotton industry in Xinjiang have been rife over the past year, with many retailers pulling out of sourcing from the region.

However, political intervention by the West last week, which included imposing travel bans and asset freezes on senior Chinese officials, has stimulated a backlash in China. This has included a boycott of Western brands, such as H&M and Nike, over statements the pair made last year condemning Uighur labour camps. 

State media outlets such as People’s Daily are urging Chinese consumers to boycott the brands, along with Burberry, Adidas, New Balance and other members of the Better Cotton Initiative (BCI), a not-for-profit organisation that has voiced concerns about cotton produced in Xinjiang.

H&M and Nike have also had products pulled from major Chinese ecommerce platforms, such as Tmall and JD.com, and their websites blocked by several major search engines and review and ratings apps.

As the situation continues to escalate, Retail Week explores what this could mean for the global fashion industry.

To take a stand or not?

H&M and Zara stores Beijing

H&M has backtracked by taking down its statement about Uighurs

Both H&M and Nike said in separate statements published last year that they were “concerned” about reports that Uighurs were being forced to pick cotton in labour camps, but that they themselves did not source from the region.

The statements have now resurfaced on social media site Weibo.

A director of one trade body believes China is using Nike and H&M as “pawns in a bigger political game, rather than punishing individual businesses”.

“Given that H&M and Nike’s statements are not new, it is likely the Chinese government is looking for leverage following increasing pressure from EU, UK and US governments,” he said. 

He also believes the situation may escalate further as the Chinese government will be aware of which retailers have made statements or signed up to charters and initiatives, so it could have further targets in its sights.

Retailers who take a stand risk losing their position in the Chinese market, which for brands like Burberry – which has just been implicated in the situation – could be devastating. Burberry’s share price dropped 7% overnight last week in the wake of the boycott.

H&M has backtracked by taking down its statement about Uighurs, while Inditex has removed statements on its website that claim a “zero-tolerance approach” to forced labour.

In a statement posted on its Weibo page on Wednesday, H&M China said it had always managed its supply in an “open and transparent manner” and did not “represent any political position”.

“The H&M Group continues to respect the Chinese consumer. We are committed to long-term investment and development in China,” it said.

“It’s right that businesses don’t tolerate forced labour, but there is a degree of diplomacy on how you communicate that. The question is not the use of Xinjiang cotton; it’s H&M being so vocal about why they’re not using it”

This illustrates what a fine line retailers have to walk. Consumers in the West increasingly expect brands to take a stand on issues such as human rights, yet China is a big growth market for many brands.

One retail expert points out: “It’s right that businesses don’t tolerate forced labour, but there is a degree of diplomacy on how you communicate that. If you’re selling in China, you do have to be mindful of the sensitivities. The question in this case is not the use of Xinjiang cotton; it’s H&M being so vocal about why they’re not using it.”

One consultant with knowledge of the Chinese market believes brands will increasingly become embroiled in political issues like this.

“Before, it was tenable for brands to not comment on political issues,” he says. “It is now impossible for brands that have set themselves up as value-led and existing beyond making a profit to not speak up on these issues.

“This pushes brands, rightly or wrongly, into a for or against position and by implication into political mud-slinging.”

However, the trade body director says the fallout might put big brands off taking a stand.

“It’s hard enough to get businesses to take big, complex issues seriously. When they are punished, it means those that are more timid stay in the shadows,” he laments.

What next?

While Nike, Burberry and H&M have been strategically chosen as global businesses with stores across both the West and China, other retailers could be brought into the argument.

Retailers such as Levi’s, Puma and Mulberry, who have signed up to the BCI (which said last year it could not accredit any cotton from Xinjiang), and the Call to Action programme, which includes Asos as a big supporter, could be in the firing line.

However, the consultant believes bigger brands such as Nike and H&M will bear the brunt of the boycotts.

Nike store Shanghai

Brands such as Nike could suffer long-term with Chinese consumers 

The trade body director says H&M and Nike will be hoping that a “critical mass of retailers stand with them”, although he questions whether they will.

“To what extent do those businesses want to put at risk employees or their supply deals by being public on that?” he questions.

Many retailers have simply distanced themselves from actually sourcing in the Xinjiang region and refused to comment further as they strive to stay away from the highly politicised situation.

The consultant believes the issue will die down in the coming months and that Nike and H&M will be made available again on platforms such as Tmall and JD.com when that happens.

“Chinese consumers are fiercely patriotic and very proud of what China has achieved in the last 30 years. It doesn’t take too much to get them irate”

However, he does think their reputation – and business performance – will suffer long-term with Chinese shoppers who, he points out, are increasingly gravitating towards domestic fashion and sportswear. 

“Chinese consumers are fiercely, fiercely patriotic and very proud of what China has achieved in the last 30 years.

“It doesn’t take too much to get them irate, especially as the most digitally enabled consumers in the world with social-media platforms that have hundreds of millions of followers,” he says.

Some Asian brands have already shown their allegiance to keep Chinese consumers happy.

Chinese sportswear retailer Anta has withdrawn from the BCI in protest and said it will continue sourcing from Xinjiang, while Japanese brand Asics, which has stores across Asia and Europe, posted on Weibo that it plans to continue sourcing cotton from the region.

“In the next two years, China is the only place where there will be substantial growth in GDP, so these markets are incredibly important and far too big to walk away from”

Bad publicity in the West or China could be devastating to global brands, particularly at a time when the fashion industry is already suffering amid the pandemic.

The consultant concludes: “In the next two years, China is the only place where there will be substantial growth in GDP, so these markets are incredibly important and far too big to walk away from. This is where the rubber meets the road in terms of your value sets.

“The strategic dilemma is consumers in the West vs consumers in China – if this gets a lot worse, will they have to choose between one or the other?”

That’s a decision no brand wants to make, but if the situation continues to escalate and it becomes harder to keep below the parapet, they may well be forced to do so.