H&M Said It Stopped Using Xinjiang Cotton Following Advice Of Better Cotton Initiative In March. This Went Unnoticed Until March 24 This Year.

By Shirley Ze Yu

Amid rising tensions in Anchorage, Alaska, last month, top Chinese diplomat Yang Jiechi told US Secretary of State Antony Blinken that the two countries should mind their own business. Within days, this tension had spilled over into the business lane. The collateral damage? Sweden’s H&M.

Last September, H&M said it had stopped using Xinjiang cotton following the advice of the Better Cotton Initiative in March. This went unnoticed until March 24 this year, when a short Weibo post by the Chinese Communist Youth League ignited national rage. Within hours, H&M had vanished from China’s virtual space. H&M products were taken off e-commerce shelves, and H&M retail outlets had disappeared from Chinese digital maps.

H&M has not apologised as demanded, to the surprise, perhaps, of even the Chinese. After all, during the last wave of Chinese boycotts of global fashion houses over Hong Kong, Versace, Coach and Tiffany had quickly apologised. The latest national boycott triggered by H&M has quickly spread to many other brands, including Nike. As the row escalated, Chinese state media Global Times cautioned against evil forces fanning the flames of public rage, pointing out that footage online may be used to manipulate, such as the video of Nike shoes set on fire in apparent protest, which had actually been posted a week earlier.

That same night, Nike debuted a new shoe on Tmall. It sold out instantly, completely unaffected by the boycott. Make no mistake, Nike is not without risks in China. Yet it has offered no apology and its sales channels remain virtually unscathed. Why were there such starkly different responses to H&M and Nike? Both companies made the same decision to remove Xinjiang cotton from their supply chains.

The difference is that fashionistas can easily find alternatives to H&M in any Beijing mall. But athletes, particularly those competing at the top level, would be hard-pressed to easily find a replacement for Nike and its wearable technology – especially with the Tokyo Olympics so near. Nike, to China’s fashion garment industry, is like chips to China’s telecoms industry.

US sanctions on Huawei Technologies Co last year quickly led to a chip shortage that threatened the telecom giant’s smartphone production. Yet patriotic support for Huawei never turned into a nationwide boycott of chip makers Intel, Qualcomm or even Taiwan Semiconductor Manufacturing Co. Similarly, America’s increasing arms sales to Taiwan are partially supplied by Boeing, but this has not triggered a mass Chinese traveller boycott of Boeing planes.

It is increasingly important for global brands to understand how to survive the challenges of the Chinese market. China is expected to surpass the US as the world’s largest importer by 2025, consuming nearly half of all luxury goods. China’s economic right to consume is increasingly an expression of its economic might. Tesla, which has enjoyed unimpeded success in China, has also suddenly found itself a target of displeasure. A day after the Anchorage talks ended, Tesla chief executive Elon Musk was forced to address espionage concerns of the sort Huawei faced from the US.

“If Tesla used cars to carry out espionage activities in China or anywhere, we will get shut down,” Musk assured senior Chinese leaders at the China Development Forum. Musk expects China to become Tesla’s largest market, but Tesla cars are now banned for Chinese military and key public sector employees, including in state-owned enterprises, due to its camera technology.

Tesla is also feeling the heat from local competition. “Starting next year, get ready to be so beaten by us in autonomous driving in China, you won’t know what’s what,” said Xpeng founder He Xiaopeng on Weibo in November. He has plenty of reasons to be confident. China produces nearly half of all new energy vehicles in the world today and its autonomous driving technology, empowered by its robust 5G infrastructure and artificial intelligence, is on par with America’s.

China is hardly likely to hand the crown of autonomous driving technology to a US company. The next wave of global technology, from AI and telecommunications to biotechnology, should be built on Chinese standards over the next 15 years, a mission laid out in “China Standards 2035”. As Chinese companies close in on the tech gap, Tesla is becoming less crucial to China’s new energy vehicle strategy. Similarly, Nike is protected from wrath because, for now, it fills a gap in China’s value chain. This is a limited blessing and for an uncertain period of time – and should be a wake-up call for entrepreneurs in China.

Compared to the Chinese boycotts, the Biden administration’s sanctions on Chinese officials over human rights in Xinjiang inflict no real economic harm. After these officials finish their terms, a new cohort will replace them and the Chinese bureaucratic machinery will power on. As Global Times editor Hu Xijin put it: the West is free to take its ideological stands as long as it does not touch China’s core interests – namely, economic growth and national security.

Historian Niall Ferguson quoted Greek poet Archilochus in highlighting the difference in the US and Chinese national character: “The fox knows many things, but the hedgehog knows one big thing.” China – the hedgehog – aims all its actions towards one big unitary vision. The current Chinese boycott movement, far from being frantic, is reasoned, controlled and firmly aligned with China’s vision of its tech-empowered economic ascendancy by the middle of this century.

The Xinjiang cotton saga fundamentally reflects an enduring clash between the constructs of the world’s two great powers, one built on a foundation of individual liberty and the other on crude national power. Spring has arrived in the northern hemisphere, but a chill still lingers for the world’s fashion industry.

This news was originally published at SCMP.