Suppliers Shun China's Forced Uyghur Factories To Avoid Western Product Boycotts

Outrage over forced labor imposed on Chinese ethnic minorities is causing brands to change their supply chains, avoiding factories - especially in the Xinjiang region - where such practices are prevalent.

Businesses are concerned that using components made by forced labor will diminish brand value and sales due to consumer discomfort and even boycotts. China may not change its policies but western customers are registering their disapproval. JL 

Liza Lin and colleagues report in the Wall Street Journal:

Factories that supply Apple and Nike and make other products sold in the U.S. are shunning workers from Xinjiang, as Western countries increase scrutiny of forced labor from the remote northwestern region where Beijing has been accused of committing genocide against local ethnic minorities. The about-face by suppliers that have collectively hired thousands of Xinjiang workers through government-backed labor programs highlights the growing pressure that firms face as Western governments push multinationals to eliminate forced labor from their supply chains in China.

Chinese factories that supply Apple Inc. and Nike Inc. and make other products sold in the U.S. are shunning workers from Xinjiang, as Western countries increase scrutiny of forced labor from the remote northwestern region where Beijing has been accused of committing genocide against local ethnic minorities.

Lens Technology Co. Ltd, a Chinese maker of smartphone touch screens and supplier to Apple and other companies, phased out Uyghur factory workers transferred from Xinjiang through a state-backed labor program last year, according to former staff and shop owners near one of its factories. The company has also ceased hiring Uyghur workers, according to current staff.

Chinese mask producer Hubei Haixin Protective Products Group Co. Ltd., whose personal protective equipment is sold on U.S. e-commerce sites, no longer employs laborers from Xinjiang, said a company employee who didn’t identify herself before hanging up. The company decided not to renew the contracts of its Xinjiang laborers last September after reports last year alleging the use of forced labor drew negative attention, the employee said.

And a Chinese subsidiary of Taekwang Industrial Co. Ltd., which makes sneakers for Nike in China, sent workers from the region home in the second quarter of last year, according to a Nike statement that was on the company’s website in June 2020. The company’s statement has been updated since then, but the old version of the statement has been stored by the Internet Archive, a nonprofit that keeps a digital library of webpages.

It couldn’t be determined if Xinjiang workers at Lens facilities were producing components that ended up in Apple products. An Apple spokesman said the company conducted more than 1,100 audits and interviewed 57,000 workers in the past year and a half to check if suppliers were following its standards. The company’s supplier code of conduct prohibits any kind of discrimination.

“We will continue doing all we can to protect the rights of workers across our supply chain and ensure everyone is treated with dignity and respect,” he said.

Spokespeople from Nike and Taekwang declined to comment.

The about-face by Chinese suppliers that have collectively hired thousands of Xinjiang workers through government-backed labor programs highlights the growing pressure that firms face as Western governments push multinationals to eliminate forced labor from their supply chains in China. Rights groups and Western researchers have accused Xinjiang authorities of mass internment and exploiting what the Chinese government calls “labor transfer” programs to force Uyghurs and other Turkic Muslims from the region to work at factories around the country.

Washington, the most vocal critic of Beijing’s policies in Xinjiang, has taken aim at such labor transfers by issuing import bans on cotton, tomatoes and polysilicon from the area over the past year. In response, many multinationals have organized supply-chain audits in China—even hiring investigative firms to sniff out exposure to raw materials and labor from Xinjiang—while trying to avoid provoking Beijing.

Last week, the Senate passed the Uyghur Forced Labor Prevention Act by unanimous consent. The bipartisan bill, which faces likely approval in the House, would ban goods produced by Xinjiang workers in state-run programs unless importers prove otherwise.

China’s government denies all allegations of rights abuses and says state-run transfers of Uyghur, Kazakh and other mostly Muslim minority laborers are part of poverty-alleviation programs. Such workers may be punished for speaking out about their working conditions, say rights groups, while auditing firms say the workers are wary of retaliation from Chinese authorities, making it difficult to verify to what extent the programs are involuntary.

Companies “want to make the right decisions from an ethical perspective and also want to manage successful businesses in China,” said Ken Jarrett, senior adviser for corporate advisory firm Albright Stonebridge Group in Shanghai. But for firms caught between political pressures from both the U.S. and China, “it’s an extremely difficult position,” he said.

Uyghur and labor-rights groups say it is a step in the right direction for Chinese suppliers to refrain from such programs, but want brands to also ensure that workers are compensated when they leave and aren’t simply transferred to less visible and more poorly-run factories through the same state-backed labor program.

Before Lens Technology let go of its Xinjiang workers last year, the touch-screen manufacturer was an active participant in the local government’s labor transfer program.

Since 2017, Lens Technology has received at least 2,200 workers from Kashgar prefecture in southwestern Xinjiang through state-backed poverty alleviation programs, according to a post published by a government bureau overseen by the Ministry of Civil Affairs.

But last summer, as scrutiny on Xinjiang grew, the company let go of more than 400 workers from Xinjiang working at Lens’s main facilities in Liuyang, a city under the administration of the Hunan provincial capital of Changsha, where the company is headquartered.

The fired workers were given between $1,500 and $2,900, the equivalent of between 10,000 and 19,000 yuan, in compensation because they were let go before their contract ended, according to a former Lens worker who was among those cut loose and returned home to Xinjiang afterward. Some of the workers then attended a new training program and were sent to work in Jinhua city in eastern China and at a mask factory in Changsha, said the worker.

The company isn’t hiring any Uyghur factory workers this year, according to two hiring agents at Lens.

Lens Technology didn’t respond to requests for comment.

When The Wall Street Journal visited Liuyang one weekend in June, three proprietors of halal businesses close to the Lens factory estimated that many workers from Xinjiang—two of them said thousands—had been employed there last summer, but most, if not all, had left by year-end. Lens hired Xinjiang workers on a mix of short- and long-term contracts, some said, citing labor agents and Uyghur workers at Lens who frequented their restaurants and shops.

Li Qiang, executive director at New York-based labor-rights group China Labor Watch, said his organization dispatched an investigator to the Liuyang Lens factory in April for more than a week. The staffer didn’t see any Uyghurs in the halal canteen or on the factory grounds, Mr. Li said.

Chinese factories have typically preferred to hire Han Chinese, often explicitly discriminating against Tibetans and Uyghurs in job advertisements, as many assume ethnic minority workers aren’t proficient in Mandarin or come with additional management and security risks, according to labor-rights groups.

State-run labor transfer programs have attracted interest from factories by not only offering a stable supply of workers—appealing to places with high turnover—but also providing subsidies for each worker hired. Xinjiang governments typically transfer minority workers en masse to factories, usually with accompanying security personnel and cadres from the region, according to online job advertisements and labor transfer guidelines.

Former detainees of Xinjiang internment camps are also sometimes funneled to factories around the region in the name of poverty alleviation, according to rights groups and Chinese government documents. Western researchers have pointed at references to paramilitary management of workers and political indoctrination at factories that appear on government websites and in Chinese state media reports as further indicators that the poverty-alleviation programs may be involuntary.

Transferred laborers often undergo background checks before relocating, including inquiries into their political record. In 2018, Xinjiang workers heading to Lens’s facility in Changsha had to be screened by the Integrated Joint Operations Platform, a predictive policing platform used to monitor ethnic minorities in Xinjiang, according to a now-deleted document posted by the human-resources department of Turpan, eastern Xinjiang.

As scrutiny over forced labor from Xinjiang mounts, however, some factories are phasing out participation in state-run labor programs to avoid getting hit with restrictions on exporting to the U.S. Human-rights groups say that while factories opting out of labor transfer programs is a positive development, cutting ties with Xinjiang workers across the board is discriminatory and doesn’t address the issue of state-led programs that carry the risk of forced labor. They say suppliers should opt out of state-backed labor transfers but continue to hire Xinjiang workers who apply independently.

“These factories appear to care more about preventing scandals than fair-hiring practices,” said Maya Wang, senior China researcher at Human Rights Watch. In an environment where even majority Han Chinese workers face repression for attempting to organize independent unions, Uyghur workers are unable to push back and protect their rights, she said.

Some supply-chain auditors say the lack of any supply-chain transparency in Xinjiang due to Chinese government restrictions could lead to Western brands breaking commercial ties with suppliers in Xinjiang.

Companies with suppliers in the region face a difficult choice, said Doug Cahn, co-founder of supply-chain management firm Better Buying. They can “risk being associated with forced labor—and I don’t know of anyone who wants to do that—or take steps to ensure that their supply chains are relying on other sources for cotton and production,” he said.