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  • Human Rights Research Center

IPO on Blood - How China Fashion Giant Gains from Forced Labour in Xinjiang

Author: Xun Jia

February 2, 2024


Protest outside of Shein’s London pop-up store in September 2023. [Featured Image credit: Venitia La Manna]


A recent attempt to launch an Initial Public Listing (IPO) in New York by Shein, a China-founded fast fashion retailer, raised public concerns over its role in forced labor in Xinjiang. The company was last estimated at 60 billion dollars, and the successful IPO launch could secure additional billions in making Shein even more successful in the fast fashion market. However, the allegations of using forced labor in the supply chain have created uncertainty over the potential IPO launch, as more and more evidence suggests that Shein is likely profiting from the ongoing Uyghur genocide. While there are numerous records of forced labor carried out by the Chinese authority in Xinjiang, Shein chooses to evade its corporate social responsibility by continually operating its business based on the violation of Uyghurs’ human rights. If the U.S. regulatory authority continues to ignore the fact that the public listing of Shein is based on the blood and tears of the Uyghur population, it would set a precedent that allows companies affiliated with significant human rights abuses to be exempt from accountability and raise funds to further exacerbate the on-going atrocities. 


Shein and the U.S market

Founded in 2008, Shein is now one of the largest fast fashion online retailers around the globe. It sells to more than 150 countries with nearly 10,000 employees worldwide. Shein’s success story is underpinned by its innovative business model: direct shipment from China, targeting the Gen-Z population, and low prices. Statistics show that in March 2020, Shein was the 2nd largest fast fashion company, sharing 18% of the market in the United States. Two years later, it became the largest, with more than 40% of the market share. Quantitatively speaking, Shein and Temu, another company facing similar accusations, amounted to more than 30 percent of de minimis imports into the U.S. in 2022. That is to say, at least 200 million duty-free shipments to the U.S. in 2022 were by Shein and Temu.


Ethnic Cleansing in Xinjiang

The Congressional Research Center categorizes the Chinese Communist Party’s (CCP) abuse of Uyghur human rights into two main categories: Forced Assimilation and Mass Interment. The former aims at indoctrinating the Uyghur population with pro-CCP political propaganda and transforming the Uyghur identity and society into the dominant and hegemonic culture of the Han ethnicity. The latter involves serious and explicit deprivation of human dignity among the Uyghur population, with more than 1 million ethnic Uyghur being detained in the so-called “re-education camps.” When the Chinese authority finds an ethnic Uyghur a potential threat to the stability of its authoritarian rule, they may be forcibly placed into a “re-education camp” where the stately goal is to provide vocational education with adequate consideration of the unique situation of the Uyghur people. However, the ethnic Uyghur population, detained in re-education camps without any form of due process or legal procedure, are often involuntarily employed in textile, apparel, agricultural, consumer electronics, and other labor-intensive industries.


Their labor, as it turns out, becomes an indispensable part of the Chinese export process. The use of forced labor in the cotton industry exemplifies the chain of exploitation from production to retailing. Cotton is probably the most important and widely used textile in the fashion industry. Xinjiang’s cotton lint production contributes to over 85% of China’s total cotton production and 20% of global output. However, Xinjiang’s cotton-picking industry relies heavily on manual labor, as the state media acknowledges that “the premium-grade long staple cotton grown in southern Xinjiang still cannot be harvested by machine.” When machines cannot be used, Uyghurs substitute with their manual power. Statistics show that more than a half million ethnic Uyghurs were sent to pick cotton under coercive programs in 2020. When considering the use of forced Uyghur labor, companies in the global supply chain focus on economic benefits, while CCP intends “to achieve Beijing’s wider ethnopolitical goals in the region,” according to a study published on Harvard Dataverse. 


Does Shein Profit from Forced Labour? 

Realizing the calamitous situation in Xinjiang, H&M expressed deep concern about reports on forced labor and other records of human rights violations against the Uyghur population. According to H&M’s public statement, the company “is deeply concerned about reports from civil society organizations and media that include accusations of forced labor and discrimination of ethno-religious minorities in Xinjiang Uyghur Autonomous Region (XUAR),” and stated “We do not work with any garment manufacturing factories located in XUAR, and we do not source products from this region.” The Chinese version of the announcement soon went viral on Weibo, the leading online communication platform in China, with multiple verified accounts belonging to the Chinese government criticizing H&M’s decision. Among the condemnations from the Chinese authority, the Communist Youth League of China's post implicitly called for a boycott of H&M’s product, saying “Want to make money while spreading rumors to boycott Xinjiang cotton? What a wishful thinking!” Simultaneously, companies like Uniqlo, Nike, and GAP were enduring similar situations that H&M suffered after explicitly standing against CCP’s wrongdoings: after they stated they would no longer use Xinjiang cotton in their products, they all suffered from constant administrative harassment, massive public defamation, and false accusation of “disloyalty to their country" towards the Chinese employees who work there. 


Although Shein claims to have “no suppliers in the Xinjiang region” and “zero tolerance for forced labor,” lab tests of products bought by Shein revealed a different story: it exports goods made of cotton that grew and harvested in Xinjiang. As mentioned earlier, part of Shein’s success story is its low pricing compared to its market competitors in the fashion industry. Low pricing is the result of low cost, and Shein’s competitive cost, to an extent, is the result of forced labor of ethnic Uyghurs who receive far less than what they should have earned. 


U.S. Responses

While Chinese authorities continuously commit substantial human rights violations toward the Uyghur population, the U.S. has taken several measures to counter companies economically benefiting from the CCP’s wrongdoings. The Uyghur Human Rights Policy Act of 2020, signed by then-President Donald Trump on June 17, 2020, aims to “impose sanctions on foreign individuals and entities responsible for human rights abuses in China's Xinjiang Uyghur Autonomous Region and requires various reports on the topic.” The Uyghur Forced Labour Prevention Act, signed by current President Joe Biden on December 23, 2020, “imposes various restrictions related to China's Xinjiang Uyghur Autonomous Region, including by prohibiting certain imports from Xinjiang and imposing sanctions on those responsible for human rights violations there.” 


In light of the underpaid circumstances due to discrimination against the ethnic Uygur population, 24 U.S. representatives sent a bipartisan letter requesting the Securities and Exchange Commission to take extra precautions for the approval of Shein’s IPO. Another recent bipartisan attempt was the Uyghur Genocide Accountability and Sanction Act of 2023. The bill, introduced by Senator Marco Rubio on May 31, 2023, aims to expand sanctions on official personnel responsible for the ongoing Uyghur genocide. As Senator Merkley stated, “This bill is a critical step in doing more to hold the CCP accountable for these atrocious abuses while taking actions to protect the victims of genocide.” 


To seriously question Shein’s compliance with U.S. regulations and international human rights laws is to examine any remaining loopholes it relies on to profit from enforced labor in Xinjiang. With many loopholes plugged and awaiting to be plugged, mega-corporates like Shein that were once or are currently colluding with the Chinese government would be compelled to cut loose from the CCP’s wrongdoings. 


 

Glossary


Initial Public Listing (IPO): the process of offering shares of a private corporation to the public in a new stock issuance for the first time. 


De Minimis Shipment: export items with values less than the duty threshold. In the U.S., imported goods are subject to duty tax if the value exceeds $800; While in China, the duty threshold is only 50 Chinese Yuan (roughly 7 dollars).


Wrongdoing: defined as illegal or dishonored behavior. In this context, wrongdoing refers to the human rights abuses that the Chinese authority carries to the ethnic Uyghur. 


Fast fashion: inexpensive clothing produced rapidly by mass-market retailers in response to the latest trends.



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