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Article

22 Feb 2024

Author:
Financial Times

Opinion: A window of opportunity for Western companies to stop sourcing from Xinjiang

"A window of opportunity for Western companies to quit Xinjiang", February 22 2024

... [Volkswagen] is learning the hard way that politically-driven investments have the potential to become hefty financial and reputational risks. The company has been disqualified by Germany’s Union Investment for its sustainable funds after media published claims that forced labour had been used by the joint venture to build a test track in the region.

[...]

...VW announced that it was reviewing the future of its partnership there. VW’s review came just days after BASF revealed it would sell stakes in two Xinjiang chemical plants following separate allegations of human rights abuses involving its joint venture partner.

[...]

...it may be that a rare window of opportunity has opened to exit uncomfortable investments in China ...

This week Beijing reported that in 2023 China attracted the lowest level of foreign direct investment for 30 years.... In response, the government wants to revive growth by winning foreign investors back.

So punishing two of the country’s biggest foreign investors ... would be the wrong signal to send, says Max Zenglein, chief economist at China consultancy Merics. VW is pouring €5bn into China’s electric vehicle sector, while BASF is spending €10bn on a state of the art chemical plant.

Meanwhile, it is clear that western regulations demanding clean supply chains are beginning to bite...

Part of the following timelines

China: 83 major brands implicated in report on forced labour of ethnic minorities from Xinjiang assigned to factories across provinces; Includes company responses

China: Mounting concerns over forced labour in Xinjiang