"Damning UN report" on possible "crimes against humanity" a tipping point for China business -- China Boss update 9.02.22
Update
What happened.
“The long-overdue U.N. report on Xinjiang was finally issued at 11.47 p.m. on Wednesday — just 13 minutes before Michelle Bachelet ended her tenure as high commissioner for human rights,” Politico’s Stuart Lau reported. “The details and conclusions from the 48-page report explain why Beijing wanted it buried so badly,” he said.
Lau, Politico:
CRIMES AGAINST HUMANITY: Not only does the U.N. detail evidence of what it calls “serious human rights violations” and “widespread arbitrary deprivation of liberty,” it’s also come to this conclusion: “The extent of arbitrary and discriminatory detention of members of Uyghur and other predominantly Muslim groups, pursuant to law and policy, in context of restrictions and deprivation more generally of fundamental rights enjoyed individually and collectively, may constitute international crimes, in particular crimes against humanity.”
The report includes an explanation of why China's "vocational and educational" facilities in Xinjiang are little more than a detention of ethnic minorities there - hint: armed guards were seen by UN investigators everywhere - as well as evidence of deprivation of food and unjust denial of prayer and other religious observations.
The UN also documented "painful family separation" and horrendous testimony of women being forced to give oral sex and other "various forms of sexual humiliation." Nearly all the UN's interviewees said they had been forced to take unknown medicines that "made them feel drowsy."
UN observers describe China’s unreasonable surveillance of Uyghurs, as well the 48.7 percent decline in the Uyghur birth rate that occurred from 2017 to 2019, although human rights analysts say that the report’s section on "forced sterilization" was watered down and that “labor coercion” was used when referring to “forced labor.”
Why it matters.
Xi Jinping’s year goes from bad to worse right before party congress now set for October
“For a man obsessed with control, 2022 has not gone according to plan for Chinese President Xi Jinping,” Asia Society’s Christopher K. Johnson said.
A year ago, Xi looked set to cruise to a major victory at the 20th Party Congress in late 2022. …
Things started to go wrong just as the Winter Games opened, however. Xi met with his Russian counterpart, Vladimir Putin, on the sidelines of the opening ceremony and declared a “no-limits” partnership between China and Russia just three weeks before Putin launched his war of aggression in Ukraine. Media reports and commentators suggested that Xi had made a terrible strategic blunder with the pact, or may even have been duped by Putin entirely. Just over a month later, the omicron variant of COVID-19 arrived in China and quickly spread across the country, resulting in punishing lockdowns brought into stark relief across the globe with the paralysis of the financial capital of Shanghai for more than a month. With omicron’s even more contagious subvariant, BA.5, now also loose in the country, Shanghai and many other cities stand on the precipice of additional crippling lockdowns.
Nor have things improved in other areas. Xi and his Politburo colleagues are grappling with a stubbornly anemic economy in which all indicators of the traditional growth drivers — real estate, consumption, private investment, and, probably soon, even exports — are flashing red, and unemployment, especially among the key 16–24 age group, is running very high and likely to climb as universities disgorge a record number of fresh graduates into the job market. Even social stability is looking a bit wobbly, with protests, both physical and digital, breaking out in response to bank failures in Henan Province and homebuyers refusing to pay mortgages on their unfinished properties, respectively.
The UN’s new report on Beijing’s human rights abuses in Xinjiang - much of which has taken place during Xi’s tenure - is, yet, another blow to China’s reputation abroad which cannot help but open its leader up to political attacks at home.
But that is not to say that Xi won’t win his unprecedented third term at this year’s party congress, which has been moved up to mid-October just six weeks from now. Rather, this year’s event will be a political thriller for China watchers everywhere as we wait to see if the Communist Party will bestow unlimited power - unseen since the days of Mao - on this princeling or if there might be some correction.
The question of “tian ming” 天命, or “mandate of heaven,” may be for the Party to answer. But what it decides will determine Taiwan’s fate which impacts global peace and security.
Decoupling accelerated
When we talk about decoupling from China, we are really referring to a very simple idea that is very difficult for businesses to implement. A recent Los Angeles Times piece explained the issues well: It’s not that companies don’t want out - many, maybe even most, - do - but globalization has created a dependency on China’s manufacturing ecosystem and local business in a way that is wholly unprecedented.
Nevertheless, decoupling is, indeed, occurring and has been for some time. (I wrote about it here.) But what might have been a barely noticed drip back in 2017 when manufacturers realized local wages were rising, flowed openly after Trump’s trade-war, and Xi’s zero-Covid lock-downs. And you can bet that the the UN’s report will bring a deluge.
Why? Because boardrooms cannot promise the investor parent of a 10-year-old who just learned in class that the UN has found China “potentially” guilty of crimes against humanity - that they can effectively “conduct independent third-party audits” for every company product that is in any way connected to Xinjiang as the European Union Chamber of Commerce said in the Wall Street Journal last week. Those that try open themselves up to lawsuits for breach of ethical and management duties.
Further, it will get too difficult (and too costly) for businesses to comply with new regulations that will be passed or amended on the basis of new evidence contained in the UN’s report. Lawmakers in many countries are likely to shift the burden of proof that products manufactured in China were not made using forced labor onto individual firms, as the US’ Uyghur Forced Labor Prevention Act does. Adherence to such rules is all but impossible as Xinjiang-produced goods permeate many, if not all, of China’s global distribution and supply chains.
Watch on YouTube.
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Have a great weekend.