Volkswagen Group is weighing the future of a joint venture in northwestern China’s Xinjiang Uighur Autonomous Region, and another major German industrial company is facing new international scrutiny over forced labor by predominantly Muslim ethnic groups. In response, the company has begun selling shares in the Xinjiang Uyghur Autonomous Region.
Volkswagen announced last week that it was in talks with state-owned SAIC Motor Corporation, one of its main joint venture partners in China, following allegations of human rights abuses at its joint venture in Xinjiang.
VW said the two companies are considering “the future direction of the joint venture’s business activities in Xinjiang,” adding that they are “currently intensively considering various scenarios.”
Germany’s BASF, the world’s largest chemical company, announced on February 9 that it began selling its stake in two manufacturing joint ventures in Xinjiang late last year.
BASF said that although the audit found no human rights violations in either business, “recently published reports relating to our joint venture partners contain serious allegations of activities contrary to BASF’s values.” “There is,” he said.
The Chinese government has strongly opposed moves by multinational companies to distance themselves from commercial operations in Xinjiang, a sparsely populated region four times the size of California.
In a written response to questions about Volkswagen and BASF, the Foreign Ministry said on Sunday that allegations about forced labor in Xinjiang were “manufactured by anti-China forces to discredit China and cut off the Chinese economy from overseas markets.” “This is the lie of the century,” he said. “We hope that relevant companies respect the facts, recognize right from wrong, and cherish the opportunities for investment and development in Xinjiang,” the ministry added.
VW and BASF, which have invested and sold heavily in China for decades, are among the companies increasingly caught between Beijing and Western governments, shareholders and human rights groups. German companies have come under particular scrutiny as European governments grapple with how to reduce their dependence on China.
Pressure on multinational companies has increased in the past few months as U.S. customs officials gain experience investigating whether imports from China violate the Uyghur Forced Labor Prevention Act of 2021. The law prohibits the import of any goods from China that are made using forced labor. Especially products made with forced labor in Xinjiang. Uyghurs, who are mostly Muslim, are the largest ethnic group there, accounting for 45 percent of the population, according to the 2020 census.
Companies are finding it increasingly difficult to know whether their suppliers or joint venture partners are using parts or materials that may have been produced with forced labor from northwestern China. . China does not allow independent supply chain audits in Xinjiang and even detains employees of foreign due diligence firms working in less politically sensitive locations such as Beijing and Shanghai.
Volkswagen has announced that deliveries of some imported vehicles to U.S. dealers are being delayed due to “customs issues” at U.S. ports. The company said small electronic components needed to be replaced, but did not say how many vehicles would be affected.
VW did not say explicitly that the parts were sourced from Xinjiang, but said: “When we receive information regarding potential human rights risks or violations, we work to remediate them as soon as possible.”
Nathan Pikarcik, co-founder of Horizon Advisory, a supply chain geopolitical analysis firm in Washington, said hundreds, perhaps thousands, of Audi and other Volkswagen Group vehicles, mostly with four-cylinder engines, He said it was being held up at five American ports. Because they contain components from Xinjiang that cannot be easily replaced. VW is working to deliver cars by the end of March and will notify customers if delays occur. The Financial Times first reported that the car was parked at an American port.
Multinational companies are also under pressure from their shareholders. Union Investment, a major German asset management company, approved an investment in Volkswagen in December last year after a report found no forced labor. But the fund reversed course last week, saying its latest findings meant investing in VW was incompatible with the company’s sustainability goals.
Stefan Weil, governor of the German state of Lower Saxony and a member of Volkswagen’s board of directors, called the latest findings “alarming.”
China has engaged in a massive crackdown over the past decade to combat what it calls extremism among the predominantly Muslim ethnic minority in Xinjiang. The crackdown followed a series of attacks by armed groups in 2014, including attacks on two train stations and a morning market that officially killed a total of 71 people and injured more than 300.
Under Chinese leader Xi Jinping, Xinjiang has confined hundreds of thousands of Uyghurs, Kazakhs and other Muslims in vast re-education camps, mainly since 2017. Xinjiang has also launched an initiative to allocate factory jobs to Uyghur villagers and workers. Chinese authorities have presented these relocation projects as an effort to lift Uyghurs out of poverty and integrate them into the economic mainstream. However, research by The New York Times, other news organizations, and human rights researchers shows that the workforce transfers included coercive pressure, paramilitary discipline, and restrictions on movement.
Adrian Zenz, director of China research at the Victims of Communism Memorial Foundation, a nonprofit anti-communist group in Washington, said forced labor has been occurring in recent months at a chemical company in Xinjiang that has a joint venture with BASF. Found the evidence. He then discovered evidence of forced labor at the Volkswagen joint venture.
He first shared BASF’s evidence with Germany’s Der Spiegel news magazine and public television broadcaster ZDF. He first shared VW information with the German newspaper Handelsblatt.
of VW information It included photos of Uyghur workers in military uniforms who helped build desert tracks in Xinjiang to test cars in extreme heat.
BASF and VW each said they began establishing joint ventures in Xinjiang in 2013. At the time, the Chinese government was encouraging investment in the poorer regions of the far west, but before the crackdown on ethnic minorities began.
VW said the joint venture in Xinjiang’s capital Urumqi had 650 employees before the pandemic, but is now much smaller.
BASF said one of its joint venture plants, in which it has a majority stake, employs about 40 people and produces the main raw material for spandex. Another factory, in which BASF has a minority stake, employs 80 people making chemicals for a wide range of uses, from pharmaceuticals to plastics.
BASF said last year that it decided to liquidate the shares after concluding that both factories were not meeting climate goals. Factories in Korla, another large city in Xinjiang, use large amounts of coal. However, BASF said it would accelerate the process of exiting the venture.
Chinese Foreign Minister Wang Yi claimed on Saturday that government policies in Xinjiang are improving the lives of Uyghurs by providing jobs. “So-called forced labor is nothing more than a baseless accusation,” Wang said during a question-and-answer session at the Munich Security Conference.
Further problems may lie ahead for VW and other Chinese automakers. Human Rights Watch released a report on February 1 alleging widespread use of forced labor by companies in Xinjiang that produce more than 15 percent of China’s raw aluminum. The group accused automakers of not wanting to know where many aluminum component suppliers actually get their metal.
The United States has already banned products made from Xinjiang aluminum from entering the country over concerns that the aluminum is produced using forced labor.
VW said it would investigate any wrongdoing by its suppliers, adding: “Significant violations, such as forced labor, may lead to termination of the contract with the supplier unless corrective action is taken.”
christopher buckley I contributed a report from Taipei, Taiwan. melissa eddy I contributed a report from Berlin.