H&M is wiped off from the Chinese internet. Some property owners have shut down H&M retail stores and removed their advertising billboards. Many Chinese citizens are boycotting foreign brands. Dozens of Chinese celebrities have turned their backs on endorsement contracts.
These events happened immediately after the Communist Youth League on March 24 condemned H&M. Soon, the attack spread to other foreign brands as well. This scene was reminiscent of the 1900 Boxer Rebellion, an uprising against foreigners started by peasants but supported by the Qing government. A secret society known as the Boxers instigated a violent and fatal campaign to drive all foreigners from China.
Chinese diplomacy seems incapable of taking a measured approach when responding to perceived public affronts. This rabid and unproportionate retaliation against foreign brands for saying they do not condone forced labor in the production of cotton in Xinjiang, reinforced the perception that China is not a rules-based country.
Egged on by the Chinese Communist Party (CCP), this sudden but deliberate bout of rage laid bare the vulnerability of foreign companies operating in China as tensions worsen between China and other countries.
Unlike the original Boxer Rebellion where China was forced by the Eight-Nation Alliance to sign an unequal treaty, the Boxer Protocol, that contained one-sided terms, there is no doubt now that the 21st century China is strong enough to stand up to the whole world.
Nevertheless, this new Boxer Rebellion calls into question the validity of legal contracts as celebrities and property owners can wantonly breach their contracts with the foreign brands. It also brings into sharp focus the blurring of lines between business and politics and this implies that foreign companies must toe the political lines.
Importantly too, China is not providing a stable environment for companies to operate and thrive in but is subjecting them to the whims and fancy of political masters, who favor inflaming nationalism and flexing economic muscles for political ends.
A questionable move
The first shot that started the firestorm came from a March 24 Weibo post by the Communist Youth League: “Spreading rumors to boycott Xinjiang cotton, while also wanting to make money in China? Wishful thinking!” Thereafter, netizens flooded H&M’s Weibo page with calls for the company to close shop in China, with comments like “Get out of China.”
Gao Feng, a spokesman for the Chinese Commerce Ministry said on March 25: “We can’t tolerate any forces bringing shame on and tarnishing the pure and flawless Xinjiang cotton.” Not to be outdone, Hua Chunying, a Foreign Ministry spokeswoman, said: “The Chinese people do not allow some foreign companies to eat Chinese food and smash Chinese bowls.”
People’s Daily, the state media, voiced its outrage at H&M on Weibo: “China’s Xinjiang cotton is white and flawless.” The paper then called for broad boycotts of H&M and other brands. State broadcaster CCTV accused foreign brands of “earning big profits in China but attacking the country with lies at the same time.”
The global cotton production supply chain is so convoluted and subcontracting so common that often it is hard for foreign brands to know exactly where and how every component of their garments is made.
It is relatively easy to mesh the use of Xinjiang cotton into the supply chain and no one will be any wiser. As such, there is no way to realistically distinguish Xinjiang cotton from other sources and therefore, this should be a non-issue for the CCP.
Indeed, it is speculated that the Chinese response has nothing to do with Xinjiang cotton per se. The H&M statement about not using Xinjiang cotton because of forced labor involved in its production first appeared in September 2020. Back then, there was hardly any outrage.
The economy is a pawn of politics
The outrage started only after the UK, US, EU and Canada on March 22 announced sanctions on Chinese officials for human rights abuse in Xinjiang. In a shrewd move by playing up nationalism, the CCP has turned the attention away from abuse of the Uighur minority into a matter of defending the use of Xinjiang cotton.
General Secretary Xi Jinping is also using this incident to show to a domestic audience, including his rivals, that his brand of Maoism is the best solution to defend China’s interest against foreign interference. Xi sees these foreign brands as easy and convenient targets.
However, bizarrely, by whipping up nationalistic fervor among the Chinese, the CCP is in fact playing a dangerous game where it is also harming its own economic interest. H&M has 350 local manufacturers and 505 retail stores. If they and other foreign brands close down and leave China, thousands of Chinese workers will be left unemployed.
If left unabated, this raging fire is putting at risk China’s luxury market worth US$52.2 billion, which is on track to be the world’s largest by 2025. It may be that Xi has already taken this possibility in mind and decided that sacrificing the country’s economic interest is worth the effort to consolidate his personal power and remain as general secretary for life.
Another likely end scenario is that the CCP will intervene to bring down the temperature of nationalism, Chinese anger will blow over and the situation will return to normal, while the foreign companies wait for the next political firestorm to descend.
Whichever scenario is being played out, the fact remains that the new Boxer Rebellion does not bode well for both the CCP and foreign brands.
The CCP will take a hit to its reputation; there will be revulsion, negative perception and a lack of trust from the global community. On the other hand, foreign brands will remain hostage of the CCP and continue to face risks from political issues.
Breach of contract
Brand endorsement by Chinese celebrities used to be a simple business deal but is now being weaponized by the CCP against foreign brands. Afraid of backlash from nationalistic citizens and eager to please the government, many Chinese celebrities moved to publicly affirm their loyalty by terminating their contracts with foreign brands.
However, the celebrities are opening themselves up for prosecution for breach of contract without a valid reason and are liable to pay compensation. In the event that they are sue by the foreign brands, they will be the ones standing in court facing the consequences and it is highly unlikely that the CCP will have their backs.
Therefore, there is no winner when China decides to go against the whole world.