Despite being banned in the United States, cotton from a powerful Chinese paramilitary organization that reportedly uses forced Uyghur Muslim labor is still infiltrating the supply chains of American retailers such as Target and Walmart, a new report claims, as Nike’s CEO toned down some of his rhetoric about the world’s second-biggest economy.
Analysis of public data reveals that neither sanctions nor outrage has sufficiently prevented the Xinjiang Production and Construction Corps (XPCC), a major cotton producer whose sprawling economic empire casts a “long shadow,” from profiting from human-rights abuses that many have dubbed genocide, the Center for Advanced Defense Studies said Tuesday.
“Our analysis shows that abuse of Uyghurs in Xinjiang is still very much connected to global trade and finance, and that extends to the fashion industry,” Irina Bukharin, a senior analyst for the Washington, D.C.-based think tank and the author of the study, told Sourcing Journal.
The XPCC, a border and internal security force that helps the ruling Chinese Communist Party retain control of the region, plays a central role in the development of Xinjiang through the thousands of companies it controls. Together, the XPCC’s nearly 2,9000 majority-owned subsidiaries contribute 21 percent of the region’s production value, the report noted.
It’s through multiple handoffs by third-party sellers and intermediary suppliers, however, that products or materials sold by XPCC companies or “otherwise produced by forced labor” are evading detection, limiting the effectiveness of sanctions and anti-forced labor actions, Bukharin said.
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China has denied abusing Uyghurs, alternately denouncing the allegations as lies and defending its policies as necessary for lifting Xinjiang out of poverty and curbing extremism.
One “cotton conduit,” the report said, is the Xiamen International Trade Group Co., a Chinese state-owned, publicly listed company that sells XPCC and Xinjiang cotton. In 2019, Xiamen ITG sent at least two polyester and cotton fabric shipments to MMI Textiles Inc., an industrial fabric supplier from Ohio. Trade data also indicates that Xiamen ITG sent at least four shipments of fabric to Meridian Textiles in California, which claims to supply retailers such as JCPenney, Macy’s, Kohl’s and Target, the same year.
MMI Textiles says it no longer conducts business with Xiamen ITG and that its last transaction was in Jan. 2019. “Since this last transaction, we have not had any contact with this firm and are troubled to learn of the details in which you described in your inquiry,” a spokesperson told Sourcing Journal.
Meridian Textiles did not immediately respond to a request for comment.
“The complexity of the XPCC’s engagement with the world makes it hard for stakeholders to understand fully how supply chains intersect with oppression in Xinjiang,” Bukharin said. “That means that it’s not enough to not buy cotton directly from Xinjiang.”
With current measures meant to protect retail supply chains from supporting forced labor falling short, she said, brands must supercharge visibility by integrating commercially available trade data into their tracing efforts.
“Companies can leverage their position to demand greater transparency from their supply chains, while also applying publicly available information to verify that their goods are not tainted by forced labor,” Bukharin added.
Nike’s ‘important market‘
Meanwhile, Western brands are continuing to tiptoe around China, a market whose 1.4 billion-strong population could make or break their bottom lines.
On Thursday, Nike CEO John Donahoe seemed to deflect a question about the sportswear giant’s relative silence regarding human-rights abuses by the ruling Communist Party in Hong Kong, Tibet and the Xinjiang Uyghur Autonomous Region by noting that “China is a very important market for us.”
“We think sport is a global phenomenon, an important phenomenon. And so we participate in sport all over the world, including China,” he told CNBC “Closing Bell” host Sara Eisen. “China is a very important market for us. We take a very long-term view in China. We’re continuing to invest in China and we will continue to invest in China while also operating a very responsible global supply chain.”
He appeared, however, to backtrack on comments that called Nike a “brand of China and for China” after sales in the region fell below expectations following a state-sanctioned boycott from Chinese consumers. Nike had incurred their wrath after noting on its website “concerns” about forced labor in and connected to Xinjiang. The Swoosh firm also said it does not source materials from the region, denying a previous report by the Australian Strategic Policy Institute that alleged ties to Xinjiang companies.
“We connect with consumers all over the world,” Donahue said. “And so I could go into any market in the world and say that consumers in that market consider Nike a brand of their market, for them. And that’s one of the reasons why Nike’s been so globally successful.”
Anta’s Olympic connections
One brand that makes no bones about its use of Xinjiang cotton is Anta Sports, whose rapid ascendancy, especially in the wake of the Western-brand backlash in China, has earned it the moniker the “Nike of China.”
The official Olympics uniform supplier for the 2022 Beijing Winter Olympics, Anta has forged a relationship with one top Olympics official that may be too close for comfort, The Daily Beast reported Saturday.
Juan Antonio Samaranch Salisachs, chairman of the International Olympic Committee’s coordination commission for the Beijing Games, also runs the Samaranch Foundation, a sports charity that has received funds from Anta since its 2012 launch and has co-run the Olympic Charity Collaboration Alliance since 2013. Anta CEO Ding Shizhong, the Daily Beast added, is the foundation’s vice president.
Anta secured major Olympics sponsorship deals during Salisachs’s IOC vice presidency from 2016 to 2020, the outlet alleged, adding that the high-profile endorsements “fueled Anta Sports’ meteoric rise to become the third-largest sportswear company in the world by revenue.”
Revelations of Salisachs’s connection with suspected forced labor in Xinjiang could bolster calls by a bipartisan group of U.S. lawmakers to postpone or relocate the Beijing Games unless the Chinese government ends its “egregious human-rights abuses” on ethnic minorities.
“The news that [Salisachs’] foundation profits off of forced labor in Xinjiang is stomach-churning,” Senator Jeff Merkley of Oregon, chair of the Congressional-Executive Commission on China, told The Daily Beast.
The IOC said that the organization’s process regarding contract management ”ensures compliance with good governance, in particular for conflict of interest risk management.” It also said it’s committed to its due-diligence efforts with Anta.
“The approach of the IOC is to always take a partnership and engagement approach with its suppliers to value and support their steps for a respecting and sustainable production, whilst being clear on our human rights requirements.” a spokesperson told Sourcing Journal. “Those are reflected in our contract with Anta and materialized through the ongoing dialogue we are having with Anta on those matters.”
Anta and the Samaranch Foundation did not immediately respond to requests for comment.
‘Nutty propaganda’
Beijing continues to lash out at its opponents.
On the heels of lawsuits against the U.S. government and prominent Xinjiang researcher Adrian Zenz, a newspaper controlled by the Chinese Communist Party has accused the Worker Rights Consortium of “blackmailing” a Chinese company and its U.S. partner.
The Global Times wrote last week that the Washington D.C.-based labor group threatened Hetian Taida Apparel Co. and Badger Sportswear, promising to “hype up fabricated ‘forced labor’ issues” regarding Xinjiang if it didn’t receive $300,000 for “remediation measures.” The Associated Press had first reported on Hetian Taida’s relationship with Badger in 2018, following which Badger cut the factory loose “out of an abundance of caution.”
But Badger, the Global Times claimed, agreed to make three contributions of $100,000 to “human-rights organizations designated by Human Rights Watch.”
Badger did not immediately respond to a request for comment. Scott Nova, executive director of the Worker Rights Consortium, on the other hand, was unamused.
“The Chinese government’s efforts to hide its abuses in Xinjiang from the world community are failing. Its response is to disseminate farcically dishonest attacks against those who are exposing its crimes, from the Associated Press, to Human Rights Watch, to the WRC,” he told Sourcing Journal.
“Since no credible media will publish its nonsense, the government’s only option is to utilize state and party-controlled propaganda organs like the Global Times,” he said. “The WRC’s investigation and remediation efforts concerning forced labor at Hetian Taida Apparel Co. are a matter of public record and they bear no resemblance to the Chinese government’s nutty propaganda.”