Xinjiang’s exports to the EU boom, despite political concerns over forced labour

The bloc’s imports of products from the region rise 131 per cent in the first six months, according to an assessment of Chinese customs data
Some volatility in figures to be expected but debate on labour appears to be having little impact, analysts say

Xinjiang

Finbarr Bermingham

Published: 4:30pm, 25 Jul, 2021

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The European Union’s imports from Xinjiang more than doubled over the first half of this year, despite concerns over the use of forced labour in the western Chinese region.

Shipments to the EU rose by 131 per cent year on year in the first six months, compared with a 35 per cent increase in exports from China as a whole to the bloc, according to calculations by the South China Morning Post, based on Chinese customs data.

The strong exports were led by some commodities – including tomato-based products, cotton goods, components for artificial fibres, and wind power equipment – that the US and campaigners have linked with forced labour in Xinjiang.

The EU has not banned such imports but it is drawing up a supply chain due diligence plan to restrict the flow of goods made using forced labour into the market. A first draft is expected later this year.

China has repeatedly denied the allegations of forced labour and any other form of human rights abuses in Xinjiang, claiming that it has established vocational training centres in the region to improve the employment prospects of members of the region’s Uygur ethnic community.

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While the huge leap could be partly due to the disruption to trade caused by the coronavirus pandemic, exports were also up 103.5 per cent on the same time in 2019, before Covid-19 hit.

The bloc’s biggest economy, Germany, bought 143 per cent more goods from Xinjiang in the first six months compared to a year earlier, while exports to Italy rose 32 per cent and the Netherlands 187 per cent. Exports were up 1,591 per cent to Belgium, although from a small base.

In total, the EU imported US$373.2 million worth of Xinjiang-made goods between January and June, more than triple the value of such goods shipped to the United States.

Xinjiang’s exports to the US fell 20.8 per cent over the period, but rose 30 per cent from levels two years ago.

Britain, which is no longer in the European Union, bought 192.2 per cent more goods from Xinjiang in the first half.

Xinjiang’s exports remain a small part of China’s trade economy. They accounted for around 2 per cent of China’s exports to the EU, roughly in line with Xinjiang’s overall share of the Chinese economy of 1.6 per cent.

At such levels, analysts said, it was not uncommon for some volatility in export data.

“One issue with trade data for a province like Xinjiang is that, unlike export powerhouses such as Guangdong and around the Yangtze River Delta, it doesn’t export a broad range of mainstream items. That can make its data bumpy and not always easy to square with macroeconomic trends,” said Louis Kuijs, Asia-Pacific economist at Oxford Economics.

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Nonetheless, after the EU sanctioned four Chinese officials earlier this year and after multiple statements from Brussels over suspected use of forced labour, it has become a focus of attention.

The European Parliament has called for more sanctions and a total ban on goods made in Xinjiang that can be linked to forced labour.

The EU is drafting supply chain legislation designed to restrict the flow of such goods into the market, but it has yet to take action. It is likely to have used a new German law as its framework, which will compel large companies to take responsibility for forced labour in their supply chains from 2023.

However, the latest data suggests that despite the noise on Xinjiang, business continues largely as usual.

“Despite the discussion about Xinjiang here, I think it’s having very little impact on trade. You have the trade story and you have the political discussion here and so far, there’s very limited overlap,” said Max Zenglein, chief economist at the Mercator Institute for China Studies in Berlin.

“The supply chain laws that are coming into effect, are just beginning to be rolled out so nobody needs to care about this necessarily. Their buying patterns do not have to be adapted yet, but I think this will change.”

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Brussels has yet to prohibit goods made in Xinjiang, unlike Washington, which has effectively banned a range of products including cotton, tomatoes and solar parts.

In a business advisory note issued last week, US President Joe Biden said: “Given the severity and extent of these abuses … businesses and individuals that do not exit supply chains, ventures and/or investments connected to Xinjiang could run a high risk of violating US law.”

Yet these products are still flowing into the European market. Some US$54 million worth of tomato paste products were sold to the EU between January and June, with the vast majority going to Italy.

Importers along Italy’s southwest coast have long been buying up cheap tomato paste from Xinjiang in triple concentrate form, before adding salt and water to convert it to double concentrate, when it is stamped with an Italian production label. It is then shipped to markets in Africa and the Middle East.

Germany, Spain and Italy each imported almost US$10 million worth of polybutylene terephthalate (PBT), a texturised polyester with natural stretch, similar to Spandex and often used in swimwear.

An investigation by the Post in March revealed how Chinese authorities were viewing alternative fibres to cotton as a way to boost the regional economy, and established links to companies involved in Xinjiang’s controversial vocational centres.

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The subject of the investigation was viscose rayon, a wood-based fibre which was added to US watchlists for the first time this month. The day after the Post’s story, Finnish pulp giant Stora Enso – which had been providing most of the raw ingredient needed to make the fibre – said it would divest from the market.

But the latest custom data shows that shipments from Finland to Xinjiang continued apace, with Finland selling US$80 million worth of dissolved chemical wood pulp in the year to June, up 136 per cent on a year earlier. This was by far the biggest EU export to Xinjiang, more than 10 times larger than the second, Austrian heat exchange units.

A spokesman for the company said it “remains firmly committed to our decision of changing the strategic direction of our Enocell pulp mill”, where the bulk of the product is made before being shipped to Xinjiang.

“Chemical pulp, including dissolving pulp, is an annual contracting business why the volumes we supply to our customers follow agreements made for 2021. We have, however, agreed with all dissolving pulp customers about a complete market exit by end of 2021,” he said, adding that a paper strike in Finland last year might also help explain the year-on-year deviations.

This article appeared in the South China Morning Post print edition as: E.U. imports from Xinjiang soar despite rhetoric