SHANGHAI — The number of fashion brands caught in the crossfires of a heavy political storm in China over Xinjiang cotton is ballooning quickly.
Shares of Chinese domestic sportswear groups surged, benefiting from the strong nationalistic rhetoric. On the Hong Kong Stock Exchange, Li Ning jumped 10.74 percent to 50 Hong Kong dollars, while Anta rose 8.4 percent to 121.30 Hong Kong dollars and Xtep International increased 2.72 percent to 4.53 Hong Kong dollars. Trending tags on Weibo have been praising the groups for specifically using Xinjiang cotton and particularly Li Ning for listing on its clothing tags that it does so.
In contrast, foreign firms that have previously stated their concerns about cotton imports from the region — where multiple investigations found mass detention camps that the Chinese government contends are education camps — have taken steps to remove the cotton from their supply chains. And now their goods are being dragged down from online marketplaces in China because of it.
On Wednesday, H&M was the first to be targeted. The Swedish fast-fashion brand was suddenly removed from all major Chinese e-commerce platforms including Tmall, Taobao, JD.com, and Pinduoduo. Later, its mobile application was banned on Huawei, Xiaomi, Vivo, and Tencent’s China app stores, and Chinese navigation providers such as Baidu, Dianping and AutoNavi also removed H&M’s physical store information from their platforms. Ride-hailing platform Didi, China’s version of Uber, also has blocked H&M — riders are not able to request H&M physical stores as their destination. However, brick-and-mortar stores for the brand and sister label Cos are operating normally.
The next day Nike, Uniqlo and Adidas slid into the hot seat as new targets; however, these brands have not been blocked on major platforms. The Shanghai-based sneaker and streetwear resale platform Poizon, or Dewu in Chinese, said it has removed all Nike products indefinitely as of midnight Thursday, but the brand is still available on mainstream e-commerce platforms.
New Balance, Burberry and all members of the Better Cotton Initiative have also been mentioned in online posts by People’s Daily.
The publicly traded Western companies that have been named specifically have felt the reverberations in their stock prices. Among those losing ground Thursday were Adidas AG, down 5.7 percent to 263.30 euros; Burberry Group, 4.6 percent to 19.02 pounds; Nike Inc., 3.4 percent to $128.64, and H&M Hennes & Mauritz, 1.8 percent to 202.70 kronor.
On Thursday morning, Weibo’s trending news ranking was dominated by Xinjiang cotton-related topics.
Nike topped the list, as the brand’s ambassador Wang Yibo’s studio said he is terminating his collaboration with the American sportswear giant, and said: “Our company and Wang resolutely resist any speech and behavior that tarnishes China, the dignity of the country cannot be violated, and we resolutely protect the interests of the motherland.” Actress Tan Songyun later also distanced herself from Nike.
In an undated statement, Nike said it “does not source products from the Xinjiang Uyghur Autonomous Region and we have confirmed with our contract suppliers that they are not using textiles or spun yarn from the region.”
“Nike takes very seriously any reports about forced labor and we have been engaging with multistakeholder working groups to assess collective solutions that will help preserve the integrity of our global supply chains,” the brand added.
Adidas replaced Nike as the most trending topic on Weibo around 10:30 a.m. Beijing time. The brand has deals with far more celebrities than Nike in China, including Eason Chan, Angelababy, Jackson Yee, Yang Mi, Jackson Wang, Liu Yifei, Peng Yuyan, Deng Lun, Chang Chunning, Dilraba Dilmurat, Chen Linong and Xiang Zuo. All of them have terminated their working relationship with the brand.
Uniqlo drew fewer criticisms online, in comparison, but the brand’s local ambassadors including Jing Boran, Ni Ni, Lei Jiayin and Roy Wang publicly denounced the brand by Thursday at noon.
A slew of sportswear and fast-fashion brands were soon met with the same fate over their public comments regarding alleged forced labor in Xinjiang. Converse lost endorsements from Nana Ouyang, Lay Zhang and Bai Jingting. Liu Wen, Li Xian, Greg Hsu, Yang Yang, Gülnezer Bextiyar and Liu Haoran dropped Puma. Calvin Klein was ditched by Liu Yuxin, Lay Zhang and Greg Hsu. Tommy Hilfiger lost Li Zhenning and William Chan. Meng Meiqi, Zhang Zifeng distanced themselves from New Balance.
For the same reason, Tencent’s video game “Honor of Kings” said it has decided to cancel its virtual costume collaboration with Burberry. The brand’s China ambassadors Zhou Dongyu and Song Weilong soon terminated their endorsement deals with the brand. Burberry is the first luxury brand to get caught up in this political storm.
While the brands under attack now addressed their stance on Xinjiang cotton some time ago, the sudden targeting seems to be in retaliation for the ratcheting up of tensions over the issue. At the start of the year, the U.S. government stated that Beijing’s repression of Uighur and other Muslims in the region constituted a “genocide” and banned the import of the material into the U.S. unless it can be traced otherwise.
The U.S., Canada, the U.K. and the European Union coordinated this week for the first time to condemn the country’s alleged human rights violations toward Xinjiang’s Uighur minority and launched sanctions on some Chinese government-affiliated individuals. On Monday, the American Apparel & Footwear Association, Footwear Distributors and Retailers of America, National Retail Federation, Retail Industry Leaders Association and the United States Fashion Industry Association called “to end the campaign of oppression against Uyghurs and other ethnic Muslim minorities” in China.
Meanwhile, pro-Xinjiang cotton hashtags — Xinjiang’s snow [pure] white cotton, Xinjiang cotton can barely meet China’s demand alone, and Chinese sportswear brand Li Ning puts cotton made in Xinjiang on its labels as proof for premium quality — were also trending.
At the same time, Chinese sportswear group Anta announced it is withdrawing from the Better Cotton Initiative, saying the organization’s recent statement is “seriously concerning.”
“We have always sourced and used cotton from China’s cotton-producing regions, including Xinjiang cotton, and will continue to source and use Chinese cotton in the future,” the brand added.
Japanese slow-living retailer Muji added Xinjiang cotton as a keyword in its product descriptions across its e-commerce channels on Wednesday evening in response to the recent furor.
Hugo Boss put out a statement on Thursday night, saying the company “upholds its insistence on producing and manufacturing high-quality products, using fabrics from all over the world, including raw materials from major production areas in China,” including Xinjiang cotton.
“Over the years, we have always respected the one-China principle and firmly defended the sovereignty and territorial integrity of the country. We have established long-term cooperation with many outstanding Chinese companies and will continue to do so. Xinjiang long-staple cotton is one of the best in the world and we believe that quality raw materials will realize value. We will continue to purchase and support Xinjiang cotton,” it added.
Hu Xijing, editor in chief of the Chinese Communist Party-affiliated newspaper Global Times, wrote on Weibo that: “When you enter a country, follow the customs. Their rules and habits over in the west need to adhere to the principles of Chinese society. The statements made by H&M and Nike to the Western society are now colliding with the attitudes of the Chinese public.”
Unlike boycotts in Western countries which tend to be consumer-led, i.e. shoppers buy from elsewhere and put pressure on retailers to drop brands, in China, boycotts mostly are directives from the government in which authorities essentially turn off the tap. While the general public’s opinion of these brands is sure to have taken a hit, channel checks on Nanjing Road in Shanghai revealed that there was an average level of traffic at all the mentioned brand stores — and Nike and Adidas, in particular, are known to be well-loved by Chinese shoppers. However, Chinese authorities can swiftly cut off a firm’s ability to do business to compel them to fall in line with party policy.
This all comes at a delicate time for fashion companies, which more than ever have devoted themselves to operating with purpose that strives for the broader good and not just the betterment of shareholders. At the same time, most companies are laser-focused on developing their businesses in China, which is not only huge and growing, but has been the first to rebound from the coronavirus crisis and is therefore a key source of revenues.
And perception is a keystone of branding.
John Donahoe, Nike’s chief executive officer, emphasized the company’s growing business in China on a conference call with analysts last week while also acknowledging the port-driven supply problems that have hurt business in the U.S.
“Our brand continues to deeply connect all over the world,” Donahoe said. “We remain consumers’ number-one favorite brand in all 12 of our key cities in both men’s and women’s businesses. We’re also seeing particularly strong connections in Greater China, where our strong portfolio of brands, including Jordan and Converse, is helping to extend our leadership position. All over the world, the relationships we have with consumers cannot easily be replicated. Our brand differentiates us, driven by the unique competitive advantages that we enjoy.”
Nike’s fiscal third-quarter revenues were down 1 percent on a currency-neutral basis, with growth of 51 percent in Greater China.
It’s a moment that highlights the emergent difficulties of being a truly global player.
Caught somewhere in between Washington and Beijing, which have had frosty relationships lately under the new administration of President Joseph Biden, companies find themselves trying to sell both in the U.S., where goods from Xinjiang are banned, and into China, where the official line is very different.
Brands need to stay in the good graces of the governments where they operate, but they also need to stay on the right side of consumers, who are becoming increasingly vocal when it comes to social issues they care about.
This is a bind that more and more companies could start to feel as activists and others increase pressure surrounding the issue.
The Coalition to End Forced Labour in the Uyghur Region said: “The Chinese government is threatening commercial consequences against apparel brands that have taken a public stance against Uyghur forced labor. As reported by media, one brand, Inditex (owner of Zara), has responded by removing its policy on forced labor from its own website.”
The story the group pointed to, by NPR, links to a cached version of Inditex’s policy that notes: “We take a zero-tolerance approach toward forced labor of any kind and have stringent policies and actions in place to ensure that it does not take place anywhere in our supply chain.” That statement is no longer live on the company’s website and Inditex did not immediately respond to a query on the matter.
“Inditex’s behavior — like that of the numerous other brands that have remained silent on the issue of Uyghur forced labor, such as Amazon, Target and Walmart — emboldens the Chinese government in its crimes against humanity in the Uyghur Region,” the coalition said. “Placing human rights over profits carries a price. Millions of consumers worldwide who do not want to be made complicit in Uyghur forced labor are going to be watching to see how companies react to this bullying. Will they reaffirm their opposition to forced labor and crimes against humanity or will they follow Inditex’s footsteps and cave to pressure? This is a moral test for the world’s apparel brands. We will see who passes and who fails.”
Representatives for Amazon, Target and Walmart could not immediately be reached for comment.