China’s gross domestic product (GDP) for the January-March 2021 quarter increased 18.3 percent from the corresponding period in 2020, China’s National Bureau of Statistics (NBS) said on April 16. been a positive wind for Japanese companies that export to China or have manufacturing bases there.
However, a new risk has arisen around the abuse of human rights in the Xinjiang Uyghur Autonomous Region. Japanese companies say they will take a tough stance by suspending trade relations with business partners who force Uyghurs to work. On the other hand, Chinese threats to retaliate with boycotts against Japanese products raised concerns, which put companies in a difficult position.
Risk is one of human rights
China’s improving economy was helped by the containment of the re-emergence of COVID-19 in the country in early 2021. Investments in factories and AI manufacturing, among other categories, have further increased by 20%. The March index also suggests that consumption increased by more than 30%.
It has also boosted the recovery of Japanese companies, especially those in western Japan which export a large part of their merchandise to China.
“There has been an acceleration in infrastructure investment in China and in the import of construction machinery and related items in particular,” (citing a machine maker in Kobe), the Bank of Japan noted in its latest report. trimester Regional Economies Report (Sakura Report), published April 15.
A large electronic components company, Murata Manufacturing, has reported that, driven by profits made by China, it expects to achieve record profits of JPY 290 billion ($ 2.662 billion) for the fiscal year ending March 21. .
However, a new risk is emerging in the oppression of Uyghur minorities. Japanese companies face criticism if their Chinese partners use forced Uyghur labor at any stage of the supply chain.
More than 80 companies in the world?
According to a report published by the Australian Strategic Policy Institute As of February 2020, more than 80 of the world’s largest companies did business with Chinese factories involved in forced Uyghur labor. The Japan Uyghur Association, a group made up of Uyghurs in Japan, and Human Rights Now, an international human rights organization, investigated the corporate stance on forced labor of 14 Japanese companies including names were mentioned in the ASPI report, and announced their findings.
Thirteen companies, with the exception of Panasonic, responded. Each has either denied having had any direct dealings with the indicated suppliers suspected of using Uyghur forced labor, or claimed that they could not confirm that the suppliers used forced labor. In addition, most responded that they would stop doing business with any business partner found guilty of human rights violations.
Panasonic did not respond by the investigation deadline, and attempts to reach the company by phone only resulted in claims that the matter would be “referred to the responsible department.” Panasonic also did not respond to a request for comment from The Sankei Shimbun April 15.
On the other hand, Sharp Corporation, which responded to the survey, told the The Sankei Shimbun on April 15 that: “In our investigation so far, we have not been able to confirm the fact of forced human labor on the part of our suppliers.” The company added, “Our company policy does not condone human rights violations such as forced labor. If such facts later prove to be true, we will insist that our supplier correct the situation. If that fails, we will consider measures such as ending our trade relationship. “
The problem is, the threat of a Chinese boycott of Japanese companies looms in cases where trade relations are cut off due to human rights violations seen in the Chinese supply chain.
In a recent case, large Swedish clothing retailer Hennes and Mauritz (H&M) expressed concern over the Uyghur issue and said it would no longer purchase high-quality Uyghur-produced Xinjiang cotton. In response, the Communist Youth League of China, an affiliate of the Communist Party of China, launched a social media campaign calling for a boycott of all H&M products, which quickly spread.
Japanese companies could also find themselves in the same situation if they act firmly.
Between the devil and the deep sea
However, if companies take a passive line against human rights abuses in order to avoid a Chinese boycott, then it is inevitable that Japanese consumers and the rest of the world – other than China – will turn their backs. . Indeed, Japanese companies are seated between a rock and a hard place.
Hideyuki Araki, chief researcher at Resona Group, says that “Japanese companies are faced with a difficult choice as to their course of action. If they end their business relationship with their Chinese suppliers, depending on the size of the business, finding new production sites or other tasks may take time. “
In addition, he adds, “In the first place, it is very difficult to verify which information is correct, and (on the existence of forced labor) [the companies] have no choice but to trust China for the facts. Yet, if it later turns out that Japanese companies have misunderstood the facts, their late response will leave them vulnerable to increased criticism.
When doing business in China, “there are the trade disputes between the United States and China and COVID-19, as well as the South China Sea and Taiwan issues,” says Araki. Japanese companies “depend on China,” says Araki. But the many risks now place them in a precarious situation.
(Find access to the Sankei Shimbun special report in Japanese at this link.)
Authors: Nobuhiko Yamaguchi, Takashi Yamamoto.