China’s Crackdown On Western Brands Hits Burberry, Nike, H&M And More

The list of western brands that have been boycotted, blocked or erased from Chinese social media and mapping software continued to grow on Friday (March 26), as a growing diplomatic row over human rights in the country’s cotton-growing region threatened to disrupt one of the world’s most important retail markets.

As of Friday, the London-based luxury retailer and designer Burberry had been added to the list of multinational companies that had been targeted, capping a week of retaliation from the Asian country that has also engulfed H&M, Zara, Nike, Adidas, Uniqlo and LaCoste.

Although the roots of the diplomatic dispute are tied to labor practices and the production of cotton from the Xinjiang region, a vast and rugged territory that lies about 2,000 miles west of Beijing, retailers and brands have found themselves at the frontline of the fight.

On Friday, just days after the U.K. imposed sanctions for alleged human rights abuses in the region, Reuters reported that China had sanctioned “organizations and individuals in the United Kingdom” for spreading “lies and disinformation” about Xinjiang.

As a result, the report said, Burberry’s contract with brand ambassador and actress Dongyu Zhou was terminated, and its iconic plaid design was even removed from a popular local video game because the company had not “clearly and publicly stated its stance on cotton from Xinjiang.”

In other instances, the disappearance of retailer profiles from mapping apps and repression of search results have been used to pressure businesses.

Timing and Importance

The timing of the cotton conflict comes on the heels of existing pressure on retailers to manage supply chain constraints caused by port delays, shipping container shortages and, most recently, the blockage of the Suez canal.

In its earnings report last week, Nike said it was experiencing delays of more than three weeks in getting its shoes into the U.S. from its factories in Asia, causing a double-digit decline in its inventory and a rare revenue miss.

“Starting in late December, container shortages and West Coast port congestion began to increase the transit times of inventory supply by more than three weeks,” Nike CFO Matthew Friend told investors on the company’s earnings call. “The result was a lack of available supply, delayed shipments to wholesale partners and lower-than-expected quarterly revenue growth.”

At the same time, several other global apparel brands and retailers this month, including both H&M and Burberry, have touched on the resilience of Chinese consumers and the growing importance the region plays in their overall sourcing of revenue.

Still, companies like Nike and Adidas are trying to lay low during the present spate of state-backed brand retaliation, despite having previously announced that they don’t use cotton or yarn sourced from Xinjiang cotton.

Better Cotton 

With over 1,500 apparel manufacturers and nearly 200 retailers and brands among its members, the Better Cotton Initiative, whose aim is to transform the sustainability and labor practices of the industry, has gained influence over a quarter of global production of the clothing industry’s most widely used ingredient in just 10 years.

“As both the world’s largest cotton producer and a major consumer of cotton, China is a key country for Better Cotton. Sustainable cotton production is a major challenge here, with 24 million farmers depending on cotton cultivation to earn a living and the environmental footprint this represents,” the group’s website said.

Just one month ago, the group released a report that highlighted the efforts and comments of H&M, as its members sourced 13 percent “better cotton” last year, despite the significant impacts of the pandemic. “H&M Group wants to lead the change toward circular and climate-positive fashion, and one of the key tools to do this is to shift from conventional cotton to cotton sourced in a more sustainable way,” said Cecilia Brannsten, environmental sustainability manager, H&M Group.

In the ensuing weeks of that study, the retail retaliation by China against the group’s members has only grown and accelerated.