Sunday, 8 December 2019

Deutschland AG sticks with Xinjiang despite Uighurs mistreatment
Volkswagen and BASF among German groups caught in mounting controversy

For much of the world, Xinjiang has become associated with “re-education” camps and the mistreatment of China’s Muslim minorities. For Volkswagen, the north-western Chinese region is also about the next model off its production line.

The German carmaker, which already builds Santana saloons at its factory in the regional capital of Urumqi, will start producing Tharu sport utility vehicles there next year.

VW’s expansion is among the investments in Xinjiang that are putting western companies in an unwelcome spotlight as more details emerge about Beijing’s mass internment of ethnic Uighurs and use of forced labour.

Heiko Maas, the German foreign minister, told newspaper Die Zeit last week that “no company can ignore the fact that hundreds of thousands of Uighurs are being held in camps”. He said his impression was that companies were beginning to ask themselves “how appropriate their investment is”.

The opposition Greens have been even tougher. “European companies cannot continue business in China and Xinjiang province as if nothing is happening,” said Katrin Göring-Eckardt, leader of the Greens’ parliamentary group. “If they cannot guarantee their values in Xinjiang, it is time to divest.”

Both politicians were responding to leaked documents published by The New York Times and the International Consortium of Investigative Journalists last month which appeared to provide the clearest documentary evidence yet that leading Communist party officials had ordered the mass extrajudicial internment of Muslim minorities in Xinjiang.

But few in Berlin expect German companies to divest. “You can imagine the trouble VW would get into in China if they closed their factory because of the deteriorating human rights situation in the region,” said Max Zenglein of the Mercator Institute for China Studies.

Companies such as Volkswagen often only invested in Xinjiang in the first place due to “pressure” from Beijing, he added, which has long sought to attract western investors into the economically backward region. “[But they] underestimated the political risks of operating there and now they are in a dilemma,” he said.

It is not just companies with production facilities in Xinjiang that are attracting attention. US companies such as Western Digital provide equipment to Hikvision, a Chinese company that has been blacklisted by the US for allegedly supplying surveillance equipment across Xinjiang.

A police station by the front gate of a vocational skills education training centre in Artux in western China's Xinjiang region © AP
Clothing brands that source cotton, textiles or yarn from the region are also coming under scrutiny. Uighur activists and scholars say they are at risk of indirectly supporting the internment programme.

One example that has been cited is Huafu Fashion Co, one of China’s largest yarn producers, which has supplied companies such as H&M and Adidas. Huafu operates a mill in an industrial park in Aksu, a city with at least two known camps.

Adrian Zenz, a researcher at advocacy group Victims of Communism, has said that until Xinjiang’s system of camps and related factories are shut down, it will be “difficult or impossible to prove” that China’s exported products “do not involve any form of coerced ethnic minority labour”.

For German companies, the issue has a particular poignancy. VW was one of many big German industrial groups that used forced labourers from Nazi-occupied countries during the second world war.

The company has insisted that its Urumqi plant stands completely outside the Xinjiang camp system, and benefits the local population. A quarter of the 650 workers there belong to ethnic minorities, it said, and all of them have a direct employment contract: “We assume that there is no forced labour,” VW said.

They have shown that being economically dependent on China means you are at the mercy of political factors beyond your control

Max Zenglein, Mercator Institute for China Studies
So does German chemicals group BASF, which has two joint ventures with Xinjiang Markor Chemical Industry Co in the city of Korla. “BASF does not tolerate any form of child or forced labour, slavery or human trafficking,” it said. Both JVs had taken “preventative measures” to ensure they were in full compliance with BASF’s global code of conduct, the company said.

Yet BASF’s plants are in close proximity to facilities that are firmly on rights activists’ radar. Nearby stands the Korla Vocational Skills Education Centre, which Uighur campaigners say appears to include detention facilities and prisons as well as a “re-education” camp.

BASF chief executive Martin Brudermüller said the company would raise the issue of Xinjiang with the Chinese authorities. But “it is not helpful to enter into public confrontations”, he said. “On the contrary it can cause greater damage.”

“Respect and caution” were, he said, BASF’s watchwords in dealing with China.

Ross Anthony, a China researcher at Stellenbosch University in South Africa who has spent months working in Xinjiang, said such an approach was not enough. “Western companies just should not be in the region at all,” he said. “History will judge them very unkindly.”

The recent revelations about Xinjiang have come as Germany frets over its dependency on the Chinese market. Last year China was Germany’s biggest trading partner for the third year running, with bilateral trade volume reaching €199bn, a 6 per cent increase on 2017.

In the US, President Donald Trump appears to be pursuing a policy of “decoupling” the US and Chinese economies, urging American companies to look for ways to shut down their operations in China. But Germany has steadfastly refused to go down that route, arguing that China’s market of 1.4bn consumers is too big to ignore.

Chancellor Angela Merkel acknowledged in a Bundestag speech in November that China was now a “systemic competitor” to the west, in a contest that recalled the Cold War. But she said the response must not be to “seal ourselves off completely” from China.

Others think Germany should consider a form of “soft” decoupling. “German business needs a kind of ‘Beyond China’ strategy,” said Johannes Vogel, an MP from the opposition FDP party. “We do not want to become dependent on such an authoritarian regime.” Instead, he added, companies should develop other markets in Asia, such as Malaysia.

That could take time. Deutschland AG is deeply embedded in China. BASF made sales of €7.3bn in China, Taiwan and Hong Kong in 2018, 11.6 per cent of its revenue. Last month the company broke ground on a $10bn petrochemicals plant in southern China, its largest ever investment. And some 40 per cent of Volkswagen Group’s deliveries go to customers in China, the world’s largest car market.

The recent headlines about Xinjiang highlight the downside risks. “They have shown that being economically dependent on China means you are at the mercy of political factors beyond your control,” said Mr Zenglein. “And that’s problematic.”

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