The clothing brand H&M, based in Sweden, made a quiet statement last year about how it doesn’t use cotton from Xinjiang, and this week the issue exploded, with China’s state media excoriating the brand, and other brands making similar decisions. The first thing we find interesting about this is how public opinion in Europe particularly is becoming a driving force of government and corporate policy. The internet is responsible in some way, and a generational shift, in the West at least, with regard to attitudes on the environment, corporate social responsibility and other such topics, is clearly underway. H&M (and other brands) are caught between a rock and a hard place, and it’s difficult to see how they can dodge their way through this and avoid falling on one side or the other. Follow the money, they always say. The latest info we can see is that China is H&M’s fifth-largest market, accounting for around 10% of revenues, behind Germany, the US, France and the UK. So how does it play out for H&M? Its sales in China could go the way of Australian red wines, which would be a blow, but not fatal. What about production? China is one of the top places H&M makes clothes, and China is fast and efficient at such manufacturing work with a great logistics network to get goods to market (Suez Canal willing). But India, Bangladesh and Vietnam would do just as well. So the second thing that interests us about this is why the Center decided to highlight the issue at a moment when the whole Europe-China investment agreement has yet to be ratified. The answer, we speculate, is that as always and on all issues, domestic concerns are paramount. Highlighting this issue is useful in terms of domestic messaging, reinforcing a perception of China as being unfairly treated, while also indirectly encouraging Chinese consumers to shun foreign brands and buy Chinese brands instead. Dual Circulation rules!
Biden finally gave a press conference, the first of his presidency, now 65 days old. He was well-prepared, seemed intelligent and clear, and there was no indication that he is headed towards gaga-land. He said he was planning to seek re-election in 2024. On China, he pledged to prevent China from becoming the world’s “leading” and “wealthiest” country by continuing to close ranks with allies and boosting America’s investment in technology. “China has an overall goal, and I don’t criticize them for the goal, but they have an overall goal to become the leading country in the world, the wealthiest country in the world and the most powerful country in the world,” he said. “That’s not going to happen on my watch, because the United States is going to continue to grow and expand.” We’ll see how it plays out. Meanwhile, the massive Biden stimulus boost to the US economy is also going to boost China’s exports, and could create a movement of capital out of China and into the US markets.
Meanwhile, smart phone maker Xiaomi is fast gaining market share around the world at the expense of Huawei and Australian coal exports to China are down 40% as the ban on coal purchases from Australia moves into its sixth month. So it’s not just fast fashion.
Have a good spring weekend.