China Investigates Fashion Retailer for Refusing Xinjiang Cotton #

Beijing has announced an investigation into a major fashion retailer for refusing to source cotton from the Xinjiang region. This move could potentially lead to sanctions on the company, which has significant business interests in China.

The announcement from the Commerce Ministry follows a day after the U.S. administration proposed a possible ban on the sale or import of smart vehicles that use specific Chinese or Russian technology, citing national security concerns.

The ministry stated that the New York-based company is suspected of ‘violating normal market transaction principles’ by boycotting cotton sourced from China’s far western region of Xinjiang. If found guilty, the company could be placed on China’s ‘unreliable entities list,’ effectively barring it from doing business in the country.

Currently, five American companies are on this list, primarily defense manufacturers with limited business in China. Being on the list prohibits companies from importing, exporting, and investing in China.

The retailer maintains that it complies with all relevant laws and regulations in countries where it operates and is in communication with the Chinese Ministry of Commerce.

According to the company’s supply chain guidelines, it prohibits direct or indirect sourcing from Xinjiang. The U.S. implemented a ban on all goods produced in the region in June 2022, following the enactment of a forced labor law the previous year.

There have been reports of human rights abuses in Xinjiang, including allegations of detention and mistreatment of Uyghurs and other Muslim-majority ethnic groups. China has consistently denied these allegations, describing the facilities in question as ‘vocational training centers.’

A ban from China would significantly impact the retailer, which sources extensively in the country and has a physical presence in nearly every Chinese province. The company has previously stated that China is an important growth engine, with both of its major brands seeing potential for increased awareness and market penetration in the country.

This is not the first time Western apparel brands have faced pressure in China over their stance on Xinjiang cotton. In 2021, a Swedish multinational clothing company experienced a backlash, including being pulled from major e-commerce stores, though this situation was resolved about a year later.