Statement on MOFCOM’s launch of an Investigation into PVH Go back »

2024-09-25 | All chapters

While the details of the case have not been made public, it is possible that a decision was taken to cease using partners and/or products from Xinjiang to remain compliant with globally-binding legislation. The announced investigation has therefore raised concerns among foreign companies operating in or doing business with China, given that many of them are subject to the same compliance challenges.

As a result of new or forthcoming legislation—such as the EU’s Corporate Sustainability Due Diligence Directive, the EU’s Forced Labour Regulation and the US’ Uyghur Forced Labor Prevention Act—many companies are now, or will be, required to demonstrate that their extended operations are in line with EU and/or US ESG standards, and do not use forced labour. While European Chamber members are fully on board with the goals of these pieces of legislation, there is concern that their China operations will be unable to meet the requirements due to conflicts with Chinese legislation, challenges conducting independent, third-party audits in the country, and/or political sensitivity.

As a result, European companies find themselves increasingly caught between a rock and a hard place: if they cease operations in, or sourcing from, regions like Xinjiang they may face a severe backlash from both government and consumers in China; if they stay, they risk negative consequences from their home and other international markets, including reputational damage and penalties under European and/or US legislation.

These kinds of challenges could be avoided if China were to create the conditions that permit independent, third-party supply chain due diligence to be conducted in line with international standards and without the perceived threat of reprisals.

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