Economic consequences of suppressing the Uyghurs?

US State Department spokesman Ned Price said in Washington the reports add to the already overwhelming evidence of China’s atrocities in Xinjiang. The genocide and crimes against humanity there continued. Asked whether the US State Department considered the Xianjiang crimes directly attributable to Chinese President Xi Jinping, Price said in a system like China’s, it’s hard to imagine such a campaign of repression and detention not having the blessing have the highest level of government.

FDP leader Christian Lindner was also appalled. “The pictures from China are shocking. We have to address Chinese officials about the human rights situation on all occasions,” the finance minister told Handelsblatt.

The pictures impressively show how brutally China oppresses the Uyghur minority in the Xinjiang region. The recordings are part of a comprehensive leak that the “Spiegel” or the Bayerische Rundfunk (BR) evaluated with other media partners. The “Xinjiang Police Files” contain information about around 300,000 Chinese registered by the authorities, mostly Uyghurs.

FDP leader Lindner urges that human rights violations be clearly addressed. “There shouldn’t be any patties based on our economic interests,” he said. Against this background, the enormous dependence of the German economy on the Chinese market is particularly depressing.

For the Federal Minister of Finance, it is therefore “also a requirement of economic wisdom to quickly differentiate our economic relationships”. It’s not about withdrawing from the Chinese market. But other markets would have to become relatively more important.

Volkswagen and BASF remain active in Xinjiang

For Lindner, it would be more than a symbol if the CETA free trade agreement with Canada was ratified immediately. “Here I encourage my Green coalition partner. Our words must be followed by deeds,” he demanded. Talks must be started immediately with other value partners such as the USA in order to further deepen trade relations”.

Foreign companies, including German companies, continue to operate in Xinjiang. For example, the carmaker Volkswagen has a plant in Urumchi, and the German chemical giant BASF has a production facility in the city of Korla.

According to a study by the Australian think tank Australian Strategic Policy Institute (Aspi), the Chinese government operates internment camps in the vicinity of both plants, in which Uyghurs are also believed to be held.

>>Read here: “Don’t leave me cold”: How German companies do business in China’s oppressed province of Xinjiang

Despite the recent revelations, VW wants to hold on to its plant in Urumqi. “Volkswagen takes a firm stand against forced labor in connection with its business activities worldwide,” said a company spokesman in Wolfsburg. This not only applies to their own factories, but also to upstream suppliers. In Xinjiang, too, the group works with suppliers who rule out human rights violations.

The comparatively small plant in Urumqi has existed since 2013 and had 600 employees. Due to the corona pandemic and the associated production restrictions, the number of employees has recently been reduced to around 400. The car factory can therefore not produce to the planned extent and is well below the annual capacity of 50,000 vehicles.

Ferdinand Dudenhöffer: VW is in a dilemma

Volkswagen does not operate the plant alone, but as part of a joint venture with the state-owned SAIC group from Shanghai. “No employee works under duress here,” emphasized the VW spokesman. New employees are only hired based on their qualifications – regardless of age, religion and ethnicity.

From the point of view of Ferdinand Dudenhöffer, automotive professor at the Center Automotive Research (CAR) in Duisburg, manufacturers like Volkswagen are in a dilemma. The Wolfsburg group cannot afford to snub the communist leadership in Beijing too much. “The Chinese are very sensitive,” said Dudenhöffer. Volkswagen must continue to operate the plant in Urumqi. If the VW group were to close the factory, the entire China business would be lost.

The Volkswagen Group sells about 40 percent of its vehicles on the Chinese market; this makes the People’s Republic by far the most important sales region for the people of Wolfsburg. For years, the Chinese joint ventures have been transferring billions in profits to the group’s headquarters in Germany.

Auto professor Dudenhöffer recommends that the VW Group shut down production in Urumqi as much as possible in order to be less vulnerable. For the leadership in Beijing, this is probably also a face-saving solution, because things are somehow going on in the factory. Dudenhöffer warns against too energetic an action by Volkswagen. “In China, you can achieve the exact opposite with a raised index finger,” says Dudenhöffer.

For Volkswagen CEO Herbert Diess, a withdrawal from China is difficult to imagine. “If we only did business with real democracies, we would only reach seven to nine percent of the world’s population,” he said at the balance sheet press conference. This means that a viable business model for a large car company like Volkswagen cannot be maintained in the long term.

“We continuously evaluate our business relationship”

The chemical group BASF said it was aware of the problems in the Xinjiang area. When asked whether the company was reviewing its commitment there, it said: “We continuously evaluate our business relationship. Whenever we become aware of human rights abuses in our value chain, we will call on our partners to stop them.”

BASF also reserves the right to terminate a business relationship, but this is always only “the last resort”. In principle, however, the group also wants to influence the improvement of the human rights situation.

The group-wide code of conduct, which does not tolerate any form of child labour, forced labour, slavery or human trafficking, as well as international labor standards apply to the two joint ventures in Korla. An internal audit did not reveal any violations in 2019.

Due to new publications on Xinjiang, BASF re-examined the local working conditions during the Corona crisis in 2020, including the agreements with suppliers. “As a result, we can state that none of these checks revealed any evidence of forced labor or other human rights violations. Violations of religious freedom were also not found during these reviews,” said BASF.

Numerous Western fashion and sporting goods brands such as H&M and Adidas have felt the consequences of withdrawing from the region. The companies had declared as part of the “Better Cotton Initiative” that they no longer wanted to purchase cotton from the western Chinese region due to the human rights situation in Xinjiang. According to Adidas, for example, it now only sources its cotton from countries such as India, Brazil and the USA.

In response to sanctions, China imposed a boycott on western brands. This makes things difficult for the companies that rely on China as a great hope for growth. Adidas’ sales in China fell 35 percent in the first quarter, complicated by further lockdowns. As a result, the entire group had to accept a slight drop in sales.

SPD demands consequences from companies

Foreign politicians from the SPD parliamentary group were critical of the intention of German companies to leave their business premises there untouched. “German companies cannot simply do business as usual in Xinjiang. Consequences must be drawn,” said the chairman of the Foreign Affairs Committee in the Bundestag, Michael Roth (SPD), the Handelsblatt.

The so-called “Xinjiang Police Files” documented “in all cruelty the Orwellian extent of the Chinese system of oppression of the Uyghurs”, according to Roth. “We must not close our eyes to the unimaginable suffering of the Uyghurs.”

The SPD human rights politician Frank Schwabe also sees companies like BASF and Volkswagen, which each have a plant in Xinjiang, as having an obligation. “German companies have to stop their activities in Xinjiang,” Schwabe told Handelsblatt.

“If our own conviction and the supply chain law are not enough, we have to examine legislation along the lines of the British Modern Slavery Act.” The law, which has been in force since 2015, is directed against “modern slavery” – especially against the exploitation of workers.

The vice chair of the German-Chinese parliamentary group, Gyde Jensen (FDP), also demanded a reaction from business. It is “completely clear that every single company that is present in China has to ask itself honestly to what extent it is contributing to the support of this system through its own activity or even benefiting from it,” Jensen told the Handelsblatt. “And I expect this honest moment of reflection from everyone.”

At the same time, Schwabe and Roth questioned the previous German China policy. “There must not be a trade agreement between the European Union and China before the camps in Xinjiang are closed,” said Schwabe.

Roth said: “Economic interests and our own values ​​are not a zero-sum game, because we have already made this strategic mistake in our Russia policy and the Ukrainians must now pay the price.” China policy, like Russia policy, must be “European embedded and value-oriented be”. Germany must reduce its strategic dependency, particularly in key areas.

The FDP parliamentary group deputy Alexander Graf Lambsdorff agrees: “In view of the increasing political tensions between China and the West, all companies active there should think intensively about a regional diversification strategy, both in purchasing and in sales.”

With agency material.

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