EU companies in China pay the price for Brussels stance on Xinjiang

·4-min read

Doing business in China is becoming “more complex and expensive” for European firms which are finding themselves increasingly caught in the geopolitical struggle between the world’s second-largest economy and the West.

EU business leader Joerg Wuttke said human rights concerns over Xinjiang were posing a major challenge to European companies in China.

Wuttke, who heads the EU Chamber of Commerce in China, was speaking on Monday, ahead of legislation coming into force in the United States to ban imports of products linked to controversial labour programmes in Xinjiang, where China is accused of detaining a million Uygurs and other ethnic minorities in re-education camps.

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The issue has also become one of the most contentious between China and Europe, where several countries have also passed or are contemplating human rights due diligence laws aimed at claims of forced labour in Xinjiang.

Among them is Germany, which last week adopted legislation – to take effect from January – forcing companies to identify human rights violations and potential abuses in their supply chains.

During a panel discussion at a forum organised by Beijing-based think tank the Centre for China and Globalisation, Wuttke said it would be difficult for foreign companies operating in the western region to prove their supply chains were free of forced labour.

“There are no external auditors willing to work in Xinjiang, so it’s going to be a big challenge,” he said.

Relations between China and the European Union have significantly deteriorated over the past year since Beijing and Brussels imposed tit-for-tat sanctions over the allegations of abuses in Xinjiang and subsequent freeze by the European Parliament on an investment pact with China.

Beijing – which denies the accusations and describes the camps as vocational training centres and a part of its efforts to counter extremism and terrorism – considers the EU sanctions as interference in its internal affairs as part of US-led efforts to counter China.

Sun Yongfu, former head of the Ministryof Commerce’s European affairs department, told the forum the human rights accusations had brought “a lot of difficulties” to trade and economic ties between China and Europe, with the two sides yet to find a way out.

But he hoped there could be “a good compromise … to really solve the problems” when senior China and EU officials meet for a high-level economic and trade dialogue this year.

“Because it did no good for both European businesses as well as the Chinese [businesses],” he said. “There are political difficulties, particularly the Xinjiang issues, but [there are] strong indications in both businesses that the trade and economic relations are still the most important.”

Feng Zhongping, director of the Chinese Academy of Social Sciences’ Institute of European Studies, said the deepening ideological divisions made the need for dialogue between China and Europe greater.

“Under normal circumstances, China’s top leaders and senior officials would need more dialogue and communication to help Europe understand China, telling them that China is not a security threat to Europe and that we are too far away, but the pandemic has made it difficult to continue this communication,” he said.

Meetings via video-link could never be as effective as in-person engagement, Feng said.

“Why do we have to send diplomatic envoys to other countries if video diplomacy will do? We do so because we can make friends. We need to communicate and overcome many difficulties to talk and understand each other.”

Former German chancellor Angela Merkel – whose pro-engagement policy largely shaped the EU’s strategy towards Beijing – visited China at least once a year. However, her successor Olaf Scholz skipped China but visited Japan on his first Asia trip in April.

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