Exclusive | Beyond cotton, another thread in Xinjiang supply chain creates new snag for global textile firms
- An SCMP examination traces the supply chain for viscose rayon from Finland’s forests to state-run factories in Xinjiang – and then fanning out around the world
- Analysis reveals viscose producers with links to sanctioned entities and factories within miles of suspected detention camps in Xinjiang
Nestled among forests and icy lakes, a 54-year-old factory in the tiny Finnish village of Uimaharju churns out pulp made from the dense woodland that blankets the country.
It is a world away from the clothing stores of Helsinki, Hong Kong and New York – and even further detached from the vast deserts and state-run factories of China’s Xinjiang Uygur autonomous region.
The thread that binds them all is a soft, silky fibre called viscose. Made from wood pulp, viscose, or rayon, is the world’s third most commonly used clothing material after polyester and cotton.
Its highly chemical production process can be extremely hazardous to workers, but viscose could become even more politically toxic given the location of one of the fibre’s primary production bases.
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Viscose is produced in huge volumes in Xinjiang, a region where Beijing is accused of putting 1 million Uygurs and other Muslim ethnic minority groups in detention camps and subjecting many of them to forced labour.
Xinjiang cotton is already attracting the world’s attention, and state documents and customs records show that the authorities in the region have been working to turn it into a major producer of viscose and are already selling it to dozens of countries.
“Xinjiang has a relatively short history of making viscose,” the manager of a viscose yarn factory in Xinjiang said. “But it has improved greatly over the past few years. The quality has got a lot better.”
Chinese records show how the viscose supply chain in Xinjiang is intrinsically linked to entities already sanctioned by the United States for alleged ties to forced labour.
The factories used to make viscose fibre in Xinjiang are located within miles of suspected detention camps, according to satellite images seen by the South China Morning Post.
They were matched against open-source research compiled from official government documents, statistics and academic studies by the Australian Strategic Policy Institute (ASPI), a think tank that receives funding from the Australian and American governments.
Beijing has described the international backlash as “a strategic conspiracy with an attempt to disrupt China”, and demanded concrete evidence that the camps are used for forced labour.
Xinjiang factory managers and industry experts say viscose had been largely ignored by authorities in the US even as they crack down on Xinjiang’s cotton industry.
In 2015, the Chinese government called for Xinjiang’s viscose industry to expand its total workforce to 300,000 by 2017 and double that by 2020. Factories should use government subsidies to bring in more workers with “pre-employment training”, especially in the south of the region, which is largely inhabited by Uygurs, it said.
In the years since, the region’s apparel sector, particularly cotton, has come under intense scrutiny from foreign governments, rights groups and the global industry itself over accusations of forced labour, which Beijing denies.
Now, as clothing companies around the world scramble to cut Xinjiang cotton out of their supply chains – the US banned it in January – observers warn that other textile fibres might also be at risk.
Factory managers in Xinjiang said they were aware of the potential for more US sanctions but were not too worried as relatively few of their products were directly exported to the United States.
“The US is mainly targeting cotton from Xinjiang, but that has had an impact on viscose too,” said the yarn factory manager, identified by the pseudonym “Wang” to protect his real identity.
“Our downstream clients have told us that any exports labelled with ‘made in Xinjiang’ were not allowed to pass customs. Then they came up with a solution, which was to export through traders.”
Another factory manager, identified as “Li”, said: “If US clients want to buy our product, I think it should be OK because our company is not on the sanctions list. But we cannot guarantee there will be no problem in practice.”
Most of Xinjiang’s raw viscose fibre was not exported directly, the managers said. Instead, it was spun into yarn, then fabric and then garments, making it difficult to trace.
Xinjiang produces between 10 and 18 per cent of the world’s viscose, according to various estimates.
Chinese corporate records show the region’s top viscose manufacturer is a state-owned company that built its factories in areas dominated by the Xinjiang Production and Construction Corps (XPCC), the sprawling quasi-military organisation that was sanctioned by the US last year for human rights abuses.
The region’s viscose factories sit alongside huge industrial estates, just miles from suspected detention camps, which Beijing has described as job training centres. A third factory is jointly owned by the XPCC through a subsidiary. It recently modernised its equipment.
These revelations may lead to new troubles for a global apparel industry already reeling from bans on Xinjiang cotton.
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And as with cotton, experts say the opacity of the Xinjiang supply chain makes it impossible to prove whether viscose produced there is ethically made.
Supply chain experts say it has become impossible to conduct an effective audit of labour conditions in Xinjiang because Uygur workers are unable to speak candidly to any outside monitor.
In an illustration of the challenges faced, the Better Cotton Initiative (BCI), a non-profit organisation that says it supports sustainable cotton production, said it would suspend its auditing activities in Xinjiang for the 2020-21 cotton season “based on the recognition that the operating environment prevents credible assurance and licensing from being executed”.
The BCI had previously partnered with the XPCC.
Last week, Beijing pushed back at the forced labour allegations in Xinjiang’s cotton industry, leading a number of global clothing brands to delete statements from their websites that had expressed concerns about human rights there for fear of recrimination.
In response to the pressure, BCI was one of the organisations that appeared to remove a statement from its website about its troubles in Xinjiang. Its Shanghai arm issued a separate statement on Friday saying it had not found a single case of forced labour in Xinjiang over an eight-year period, despite the difficulty of conducting effective audits in the region.
Yet, for companies spooked by the allegations, the reputational risks are growing.
“US fashion companies are very serious about the forced labour issue,” said Sheng Lu, an associate professor in the fashion and apparel studies department at the University of Delaware. “In 2020 China’s cotton textiles and cotton apparel exports to the US went down by nearly 40 per cent.”
Viscose has so far escaped the public view, but Lu said that “should any new orders cover [the fibre], I won’t be surprised to see China’s viscose exports be affected also”.
Andrew Samet, a lawyer and former US labour department official, said that while viscose had not been named by customs, it was almost certainly on US authorities’ radars.
“If anything’s coming from Xinjiang, or it has a nexus to Xinjiang, it’s vulnerable today on several levels,” he said.
At the same time, the US Congress is attempting to pass the Uygur Forced Labour Prevention Act, which would effectively ban all imports from Xinjiang unless the importer can prove they are not connected to forced labour. Companies and industry groups, including Nike and Gap, have lobbied Congress against passing the bill.
In December, the European Union agreed a massive investment treaty with China that critics say only pays lip service to alleged human rights abuses in Xinjiang. As yet, the EU has not issued any bans on goods made in Xinjiang, but after imposing its first human rights sanctions on Chinese officials this week, there is pressure on Brussels to do more.
“We’ve prepared for any sanctions from the US,” said Wang the factory manager. “What we are concerned about is that Europe will follow suit, and the impact will be bigger then.”
Records show just how entwined Xinjiang viscose is in the global supply chain, including the EU and US.
Chinese customs data shows that almost all of Xinjiang’s dissolved chemical wood pulp imports come from Finland, whose prime minister in February accused Xinjiang of committing atrocities against ethnic minorities.
The pulp, worth US$68 million, was Xinjiang’s 10th-largest import last year. Since 2017, Finnish companies have made US$367 million from selling the pulp to Xinjiang.
Olli-Pekka Hilmola, a professor at LUT University in Finland and visiting professor at Taltech, Estonia, said one of the major mills exporting dissolved pulp to China belonged to the Finnish company Stora Enso.
It sits in Uimaharju next to a railway station where trains loaded with pulp chug across the Finnish hinterland, some go to coastal cargo ports to load up boats to China, others continue through Russia and Kazakhstan and eventually into Korla, Xinjiang – home to Xinjiang’s biggest viscose factory.
In a statement, Stora Enso confirmed it was exporting chemical pulp to Xinjiang via rail and ocean freight.
At the other end of the supply chain, Xinjiang’s viscose fans out around the world.
Li, the viscose factory manager, said most of the raw fibre his facility produced was used locally, with some being exported to India, Pakistan and Southeast Asia.
A report published in January by the Chinese state-owned firm Guosen Securities said that only a relatively small amount of the raw viscose made in China was directly exported, but that a quarter of the exports went to the US.
Even big companies trying to be transparent cannot trace the origins of their fabric, textile expert Sheng Lu said.
When the clothing brand Esprit released a list of its suppliers in the name of transparency, it included a yarn company with no obvious ties to Xinjiang. But Wang said that particular supplier used viscose manufactured by Xinjiang’s biggest producer.
Esprit said it “does not allow any forced labour in any level of our supply chain”.
“We do not have any suppliers in Xinjiang and informed our suppliers that we do not allow production in this region.”
China makes about two-thirds of the world’s viscose, and Xinjiang’s biggest producer – state-owned Xinjiang Zhongtai Chemical – accounts for about 20 per cent of the Chinese total, according to the research firm OilChem.
British researchers, who asked not to be named, estimated the region’s viscose output at 650,000 tonnes in 2012 and said it was set to grow to 950,000 tonnes this year.
“[Cotton’s] use in the apparel industry was five times that of viscose at its peak,” said a Chinese textile analyst who asked not to be named. “But now with the progress of chemical fibre technology, more cotton will be replaced by viscose in the long run.”
Feeding the boom is Finnish pulp. Stora Enso said Zhongtai Chemical had been a major customer since 2012.
“Over the years [we] regularly visited the company’s production sites. During those visits we have never seen signs of forced labour. We are nevertheless deeply concerned by reports of forced labour and discrimination of minorities in the region of Xinjiang,” a spokesman said.
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As with many industries in Xinjiang, the goals of the viscose sector intertwine with those of the XPCC, which has said publicly that it wants the region to produce more of the wood-based fibre.
In 2020, the then CEO of Zhongtai Chemical, Wang Hongxin and senior XPCC official Li Bin agreed to “make a joint contribution to the employment of millions of people in Xinjiang by vigorously developing the textile and garment industry”, according to media reports.
Zhongtai Chemical said it could ramp up viscose production because it owned various crucial parts of the supply chain. One subsidiary, Alaer Zhongtai Textile, is the largest enterprise in the XPCC’s south Xinjiang jurisdiction, according to the XPCC’s media website.
Zhongtai Chemical’s other Xinjiang viscose plant is in Korla, home to the XPCC’s Second Division.
Zhongtai Chemical declined to comment.
Beyond the XPCC, Xinjiang authorities in 2017 set a goal to increase viscose capacity by 25 per cent between 2021 and 2023.
In February, Zhongtai Chemical disclosed a new subsidy of nearly 100 million yuan (US$15.5 million) from the Xinjiang government.
And after Chinese leader Xi Jinping used a September speech to call for “the transformation and upgrading” of Xinjiang’s industrial base, Korla officials said the city should “go all out” to connect viscose fibre production to the rest of the apparel industry.
Viscose production is a dirty business because of the chemical used to make it, carbon disulfide. The US no longer manufactures it within its borders.
According to a 2009 US government report about carbon disulfide, a 27-year-old woman working in a viscose plant in the 1930s, after being exposed to the chemical, erupted in a fit of screams, weeping and laughter, fell unconscious and was spitting blood.
“If you were an epidemiologist, you would be looking to see an increase in the amount of admissions to a local insane asylum,” said Paul Blanc, professor of medicine and endowed chair in occupational and environmental medicine at the University of California San Francisco and author of the 2016 book Fake Silk: The Lethal History of Viscose Rayon.
Meanwhile, Xinjiang’s viscose sector continues to expand into the global supply chain. Li, the factory manager, said the price of viscose had risen about 50 per cent since November.
“Our products are recognised by the market,” said Wang, the yarn factory manager. “Even if they are not exported directly, they are still indirectly exported to many places around the world.”