The CCP Attacked H&M, Which Immediately Caved

People walk by an H&M clothing store at a shopping area in Beijing, China, on March 30, 2021. Chinese state media and social networking platforms called for boycotts of H&M and removed the retailer from online shopping sites and map apps after statements made by the company in the past about Xinjiang cotton resurfaced online. Kevin Frayer/Getty Images

News Analysis

The story of H&M in China is the story of a global brand getting bullied into not only silence on human rights issues, but likely active support for the priorities of the Chinese Communist Party (CCP).

H&M is a small entity compared with the CCP, which controls an economy of $14.7 trillion ($24.3 trillion when considering how far a dollar goes in China). H&M, a fast-fashion clothing manufacturer, has just about $1.8 billion in annual revenue. H&M’s leadership is desperate to increase that number by expanding in China’s market. Doing so will increase its personal marketability and compensation.

Helena Helmersson, H&M’s chief executive officer, made over $14 million in compensation in 2020.

But to increase her earning power yet further through higher sales in China, she apparently must ensure that H&M appeases the CCP, which is a gatekeeper for the company’s access to 1.4 billion Chinese consumers.

As detailed in a March 14 Bloomberg report by Yasufumi Saito, Daniela Wei, Jinshan Hong, and Anton Wilen, as well as prior reporting by The New York Times, H&M was doing fine until 2021, when the powerful Chinese Communist Youth League (CYL) found an undated company statement expressing concern about forced labor in Xinjiang, where an ongoing genocide is being perpetrated by the regime against Uyghurs and other Muslims.

On Sept. 15, 2020, H&M had already announced the termination of its relationship with a Chinese supplier accused of using forced labor. The company’s stock was rising at the time, and didn’t stop.

In March 2021, however, the CYL and official CCP media launched a campaign against H&M.

“Want to make money in China while spreading false rumors and boycotting Xinjiang cotton? Wishful thinking!” the CYL posted.

The post went viral, suddenly politicizing the wearing of H&M in a country where grades, jobs, and promotions depend on being political in just the right way—that is, in virtue signaling through public support of the CCP.

The People’s Liberation Army (PLA) attacked H&M verbally, and the company closed approximately 60 stores in China.

Between mid-March and April 1, 2021, H&M stock dropped over 12 percent, wiping out billions in shareholder value. That’s the kind of fall that could get the CEO fired, so Ms. Helmersson was likely paying attention.

An online avalanche of criticism of H&M in China was of major concern. According to research by Ryan Fedasiuk and published by the Jamestown Foundation, the CCP’s online propaganda drew from approximately 2 million paid internet “trolls” in 2021, plus approximately 20 million part-time volunteers, “many of whom are university students and members of the Communist Youth League.”

A primary consumer base of H&M are youth seeking fashion at reasonable prices—getting targeted by the CYL hits at the company’s core demographic in China.

A policeman tries to prevent photos being taken outside a store of Swedish clothing giant H&M in Beijing, on March 25, 2021. H&M faced calls for a boycott as a backlash brews against Western firms speaking out on human rights. Greg Baker/AFP via Getty Images

But according to the latest Bloomberg report, the company’s own research ascribes causality for the bad press and drop in sales to its own lack of support for the regime.

“An H&M review found the fast-fashion giant wasn’t particularly valued by local authorities, according to people familiar with the matter who didn’t want to be identified because of fears of reprisal,” according to Bloomberg.

“The amount the brand paid in tax was not significant, and its failure to sponsor government-backed events was taken as a sign that building relations with the Chinese Communist Party—arguably the most important force in Chinese business—wasn’t a priority.”

In other words, H&M was not paying enough protection money (taxes) to the CCP, and not virtue signaling in a country where virtue signaling for a genocidal regime is necessary for success.

This is a potential explanation for H&M’s trouble, which according to Bloomberg, H&M is working to fix. But there are others.

Business analyst Mark Tanner told Bloomberg that the Swedish government is one of the most publicly critical of Beijing. As a small and outspoken country, Sweden and its companies in China—like Canada and its company Canada Goose during and after the Meng Wanzhou crisis—were relatively easy targets for Beijing’s retaliation. Meng, the chief financial officer of Huawei, was detained for almost three years in Canada on an extradition warrant from the United States for alleged fraud.

In early December, just a couple months after Meng was freed, CCP media claimed that Canada Goose was “discriminative” in its returns policy. Shortly after, its stock dropped over 20 percent.

H&M is licking its wounds in China by retreating from public view, donating to the “right” charitable causes (according to the CCP), and participating in the right CCP-supported trade show. One wonders whether H&M is also lobbying Swedish politicians to soften their criticism of Beijing. The regime has urged companies seeking China’s favor to do so.

The unfortunate Swedish company, and its belated knuckling under to the regime, is being portrayed by Bloomberg as an object example of what not to do to succeed in business. The more successful business strategy in China, the authors appear to suggest, is that of Nike, Adidas, and Uniqlo—all of which “leaned in to the Party’s focus on fitness and competition, sponsoring the national basketball and athletics teams as well as top athletes such as tennis player Li Na,” as well as investing “in state-run sports partnerships.”

The Bloomberg authors conclude, “H&M’s experience shows that in an increasingly nationalistic China, which Xi is reorienting toward the [communist] principles of old after years of opening up to the West, global brands can’t afford to ignore politics in China—or elsewhere.”

A businessperson reading the article is likely to conclude, with the authors, that public support for the CCP is necessary to succeed in China, which is necessary to succeed as a global CEO as China’s economy and massive middle-class consumer base is growing so rapidly relative to the rest of the world.

But if Western business leadership continues to fall in line with the CCP, as they have been, the West’s power, and its support for democracy, will continue to erode. Business will not effectively engage and change China. China will engage and change business, which has outsized political influence in Western capitals.

In other words, the more companies like H&M fall into the CCP’s orbit, the more democracy and markets are at risk. With the downfall of markets, would come the near-permanent loss of shareholder value on a macro-economic scale. So companies, in the pursuit of short-term gains, are gradually destroying themselves, along with the freedoms that make them so efficient.

One of the only hopes in reversing this illiberal trend is the world’s biggest democratic economies—including the United States, the European Union, and Japan—taking tougher action against Beijing, for example, by increasing economic sanctions and tariffs on China.

These measures should gradually increase until the regime not only improves human rights, which is insufficient since it leaves the regime in place, but democratizes itself, which would remove the CCP as a threat. China could then finally stand tall within the international community as a protector, rather than a destroyer, of human freedoms and political equality.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.