Japanese brands Muji and Uniqlo have become the latest to be embroiled in the escalating controversy over cotton sourced from China’s Xinjiang region.
Ryohin Keikaku Co., the operator of the Muji chain of minimalist furniture and lifestyle stores, saw its shares tumble after it issued a statement saying it was “deeply concerned” about reports of human rights abuses in the area, while several Chinese celebrities abruptly cut ties with Uniqlo, the clothing brand owned by Fast Retailing Co.
The firms join the likes of Hennes & Mauritz AB and Nike Inc., which have both seen their shares slammed after facing calls to boycott their products from Chinese users online due to their stance on forced labor in the region.
Shares in Ryohin Keikaku, which advertises items using Xinjiang cotton, fell as much as 6.8% in Tokyo, the most since July. It said it had vetted its supply chain and would continue to monitor compliance with law.
The statement from Ryohin Keikaku “at this stage of the evolving saga puts the company in a similar position as H&M and Nike,” said Bloomberg Intelligence analyst Catherine Lim. “This may subject the company/Muji-brand to criticisms from Internet users in China and result in calls for boycotts.”
Ryohin Keikaku said it sourced cotton from many countries including China, but that it “thoroughly enforced compliance so as not to be directly or indirectly involved in transactions prohibited by law.”
In the e-mailed statement, the firm said an independent audit of plants in its supply chain in Xinjiang found “there is no significant issue identified except for those issues that can be corrected by farms or ginning factories taking actions on their own to make immediate improvements.”
Kyodo News reported in February that the firm was one of 12 major Japanese companies that had decided to cease doing business with Chinese companies using forced labor in Xinjiang.
Shares in Uniqlo operator Fast Retailing also fell in morning trading before recovering. The company was cited among firms that had previously made remarks about Xinjiang cotton in a social media post by the Beijing Youth Daily on Thursday.
The newspaper is the official paper of the Beijing Communist Youth League, which has led the campaign this week against foreign clothing firms. Several Chinese celebrities including actress Ni Ni and boy-band star Wang Yuan, announced the same day they were severing ties with the Uniqlo brand.
While Muji has not yet been actively targeted by Chinese consumers, investors are selling on concern that such a movement might grow, said Shoichi Arisawa, an analyst at Iwai Cosmo Securities Co. He also expressed concern that Ryohin Keikaku’s position on Xinjiang cotton could lead to an impact outside of China.
“If a movement spreads worldwide against products using raw materials produced by Uyghur forced labor, concern will increase,” he said.
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