The escalating trade tensions between the United States and China have taken a new turn as the U.S. Department of Commerce announced plans to ban Chinese-made automotive internet hardware and software. In response, the Chinese Ministry of Commerce announced an investigation into the American fashion giant PVH Group to determine if it is involved in boycotting Xinjiang cotton, potentially placing it on the “Unreliable Entity List.”
Assistant Research Fellow at the National Institute for Global Strategy in Taiwan, Wang Xiaowen, told Epoch Times that China’s move may be an attempt to show that they can also conduct trade investigations or retaliate against major European and American brands. “If you investigate my electric vehicles, I will investigate your clothing manufacturing. This shows that China’s (Chinese Communist Party) ability to escalate further trade war with Europe and America is very limited.”
Chinese-American economist David Huang believes that “China’s approach in international relations draws a red line, intertwining political and economic issues in its decision-making process.”
On September 24, the Chinese Ministry of Commerce announced an investigation into American fashion brands Tommy Hilfiger and Calvin Klein (CK) owned by PVH. The evaluation aims to determine if the avoidance of purchasing cotton raw materials from Xinjiang region to evade Western sanctions constitutes “discriminatory measures.” PVH may potentially be listed on the “Unreliable Entity List,” leading to restrictions on product sales to China, procurement from China, and investments in China.
PVH Group (NYSE: PVH) is a clothing company headquartered in New York, with a history of over 140 years. Its brands Calvin Klein and TOMMY HILFIGER are internationally recognized names that have gained popularity in both the U.S. and China.
Public data indicates that the Chinese “Unreliable Entity List” system targets foreign entities or individuals that pose a threat to Chinese national security or related industries through actions that inflict substantive harm on Chinese companies, or threaten or potentially threaten China’s national security.
China’s authorities have escalated the use of the “Unreliable Entity List” policy tool with this investigation. Previously, the list was used against large U.S. defense contractors like Lockheed Martin and Raytheon for their business operations in Taiwan.
Regarding the specific targeting of two renowned clothing brands by China, David Huang told Epoch Times that China aims to set a red line for foreign enterprises investing or doing business in China that must not be crossed.
He stated, “What I am offering you now falls within the red line. Companies can continue operating within this space, it is a clear signal to them.”
Due to China’s repression of Uighur Muslims in Xinjiang, the U.S. government has accused China of committing “genocide and crimes against humanity.” The U.S. Uyghur Forced Labor Prevention Act came into effect in June 2022, prohibiting the import of goods produced through forced labor from Xinjiang.
On September 25, Representative John Moolenaar, the Republican chairman of the Congressional Executive Commission on China, stated that their primary task is to legislate to curb U.S. investment in China, stating, “We should not support genocide.”
Prior to China’s investigation into PVH, the company had warned investors in its annual report about the potential risks in profits and reputation associated with its Xinjiang strategy.
PVH Group’s “Xinjiang Uyghur Autonomous Region Global Compliance Statement” on its official website also affirms compliance with the laws and regulations of the regions where they operate, including U.S. government policies regarding Xinjiang.
PVH is not the only company targeted, as Swedish fashion brand H&M faced backlash for not using Xinjiang cotton, with subsequent statements from international brands like Adidas, New Balance, and UNIQLO announcing a halt in the use of Xinjiang cotton.
Regarding the targeted investigation of PVH, Wang Xiaowen believes that it might backfire, but China places more importance on “face” than economic interests.
David Huang expressed that China’s actions are driven by political considerations, willing to confront even significant economic losses, “Some areas they’d rather suffer severe economic losses just to resist.”
China’s investigation of PVH comes at a time when more Western companies are leaving China. Data from the Chinese Ministry of Commerce shows a significant 29.6% decrease in foreign direct investment in China in the first seven months of this year compared to last year. Additionally, there was a net outflow of $22 billion in foreign investment, reaching a historic high in withdrawals.
To attract foreign investment, China has rolled out a series of measures, including allowing foreign-owned hospitals in developed regions like Beijing, Tianjin, and Shanghai, as well as opening up the telecommunications sector.
Huang believes that China has relaxed its investment policies with the EU and the U.S., signaling some compromises, “It knows that the old ways of inviting foreign companies lacked attraction, so now it’s opening up profitable sectors like hospitals and telecommunications to foreign investment.”
In this context, China’s investigation into CK and Tommy may have a negative impact on its overall international image and trade relations. Wang Xiaowen noted that China may not prioritize economic concerns as much, focusing more on maintaining political stability without triggering a systemic crisis.
In conclusion, China’s actions reflect its efforts to balance political imperatives with economic considerations, navigating a delicate path in international trade relations.