China probes Calvin Klein over Xinjiang cotton

China has launched an investigation into PVH Corp, the parent company of popular American fashion brands Calvin Klein and Tommy Hilfiger, over allegations of discriminatory practices against cotton sourced from Xinjiang. This inquiry is part of a broader effort by the Chinese government to counter claims made by western officials and human rights advocates, who assert that cotton and other products from the Xinjiang region are produced using forced labor from the Uyghur ethnic minority. In response to these concerns, the United States imposed a ban on imports from Xinjiang in 2021. The Ministry of Commerce in China has accused PVH of boycotting Xinjiang cotton and other related products without any factual basis to support such actions. PVH, which has a significant market presence in both China and the United States, has stated that it is currently in communication with Chinese authorities regarding the investigation. The company has been given a 30-day period to respond to the allegations, and failure to do so could result in being added to China's 'unreliable entities' list, which could lead to further sanctions. PVH has emphasized its commitment to complying with all relevant laws and regulations in every country where it operates, and it is actively engaging with the Chinese Ministry of Commerce to ensure a proper response to the situation. A spokesperson from the Ministry of Commerce has denied that the investigation is linked to any specific issue, asserting that China handles the unreliable entity list with caution, targeting only a small number of foreign companies that violate market rules or Chinese laws. They reassured that law-abiding foreign entities have nothing to fear from this process. Cullen Hendrix, a senior fellow at the Peterson Institute of International Economics, expressed uncertainty about the timing of the investigation into PVH. However, he noted that the announcement could damage the company's reputation among Chinese consumers and serve as a warning to other global firms about the potential repercussions of yielding to western concerns. Hendrix remarked that China is, in a way, flexing its economic power and reminding western companies that their actions can have consequences. He pointed out that this tactic of naming and shaming, which has been used by human rights organizations in the west, can also be employed by China. The investigation into PVH comes amid rising tensions between China and western nations over various issues, including electric vehicles and manufacturing practices. Recently, the United States proposed new regulations citing security threats, which adds to the ongoing strain in relations. China has previously placed American companies on its unreliable entities list, particularly defense contractors like Lockheed Martin and Raytheon, due to their involvement in Taiwan. Hendrix noted that the decision to target PVH, a consumer-facing brand with a recognizable American identity, indicates that the disputes between the two nations are expanding beyond traditional areas such as defense and advanced technology. He warned that these tensions could spill over into various sectors of the economy, affecting a growing number of supply chains. In its annual report, PVH cautioned investors about potential revenue and reputational risks arising from the ongoing controversy surrounding Xinjiang. The company acknowledged that the issue has been a subject of intense scrutiny and debate in China, the United States, and other regions, leading to criticism directed at multinational corporations, including itself. PVH was also named in a report by the Australian Strategic Policy Institute, which identified numerous companies allegedly benefiting from labor abuses in Xinjiang. At that time, PVH stated that it took these reports seriously and would continue to work towards addressing the matter. With over 29,000 employees worldwide, PVH generates more than 65% of its sales outside the United States, highlighting the global nature of its business operations and the potential impact of geopolitical tensions on its performance.