Volkswagen and BASF are facing international scrutiny and pressure to review their business practices in China’s Xinjiang region, following allegations of human rights violations and forced labor by predominantly Muslim ethnic groups. Both companies are responding by reviewing their future directions and divesting from joint ventures in the region, prompting backlash from the Chinese government and challenges with their business operations.
With multinationals increasingly caught between Beijing and Western governments, shareholders, and human rights groups, German companies like Volkswagen and BASF are grappling with how to address the allegations while navigating their long-standing investments and sales in China. Importantly, American customs officials are now investigating imports from China to determine if they violate the Uyghur Forced Labor Prevention Act of 2021, signaling that these allegations are gaining traction internationally.
As a result, companies are finding it difficult to audit their supply chains given China’s opposition to independent audits in Xinjiang, leading to concerns about the source of materials and potential components linked to forced labor. Volkswagen has already experienced delays in delivering imported vehicles to the U.S. due to “a customs issue” at American ports, ultimately putting pressure on multinationals to ensure their suppliers are not using forced labor or materials from Xinjiang.
Multinationals like Volkswagen and BASF are increasingly caught between geopolitical conflict, shareholder expectations, and supply chain challenges, especially as the Chinese government rejects international accusations of forced labor and continues to engage in extensive policies in Xinjiang. The tension between these companies’ business interests and international human rights concerns gives a unique backdrop to the ongoing debate over foreign investments and practices in China’s turbulent regions.
