Political Risk Concerns & Human Rights Abuses in the PRC
This is the first of a series of four articles examining the political risk concerns related to human rights abuses in the People’s Republic of China (PRC). While the present article provides a general overview of the topic, the next three articles will focus on human rights abuses in three specific regions: Tibet, East Turkestan (also known as Xinjiang), and Hong Kong. This series does not claim to be exhaustive, as there are many more regions (e.g., Inner Mongolia) and populations (e.g., Falun Gong practitioners) who also fall victim to specific forms of human rights abuses at the hands of the Chinese government.
Are economic and human development correlated? The answer to this question in the PRC’s case is ambiguous at most. While the country’s phenomenal ongoing economic growth has seemingly enabled the accession of many Chinese people to middle-class living standards, many sources (including reports from NGOs such as Human Rights Watch and Amnesty International) indicate that the overall situation in terms of human rights is meagre.
The PRC’s authoritarian rule (China was ranked 148th out of 167 countries on the EIU’s 2021 Democracy Index) relies on a pervasive surveillance and censorship apparatus which fundamentally negates the concept of freedom of expression. Protests and other advocacy measures instigated by human rights protestors are met with harsh repression in the form of arbitrary detentions and enforced disappearances, often synonymous with torture and other forms of ill-treatment. Labour rights violations are routinely disregarded in the name of profit. Discrimination based on gender and sexual orientation is ubiquitous. There have been instances where people with disabilities have been abused, sometimes even kidnapped and enslaved. Han nationalism is invoked to subject members of ethnic minorities to forced cultural assimilation, as we will study more in detail in the upcoming articles about Tibet and East Turkestan.
Since foreign direct investment became allowed in 1978, and especially since the boom of the manufacturing sector in the 1990s, many multinational companies have moved part of their supply chain to the PRC. The advantages of doing so were mainly low labour costs, and now also involve a growing consumer market, especially in discretionary spending categories such as luxury goods. Over the years, the PRC’s considerable economic leverage led foreign companies to turn a blind eye on questionable business practices and other ethical issues.
Recently, however, political risk concerns have pushed an increasing number of foreign companies to leave China. In particular, the aforementioned human rights abuses represent a significant risk for foreign companies on multiple levels.
A considerable reputational risk comes with collaborating with Chinese actors who have been politically compromised – and, more generally, with the PRC’s government. Indeed, conducting business in the PRC is generally synonymous with negotiating with the latter, which owns more than 76% of assets; in that case, foreign companies are expected to comply with the CCP’s ideological stance, which may involve praising the PRC on social media (as illustrated by Elon Musk’s recent online declarations).
As a corollary of this close relationship, any sign of disengagement may be interpreted as hostility, and potentially entail large-scale repercussions. In 2021, in response to foreign sanctions following the reveal of human rights abuses perpetrated in East Turkestan and Hong Kong, the National People’s Congress Standing Committee passed an anti-sanctions law “providing legal backing for sweeping retaliation against any individuals, their families and organisations” responsible for imposing said sanctions. This law “empowers Chinese authorities to seize assets from entities that implement sanctions against the country and hold businesses that refuse to help Beijing carry out countermeasures liable”.
There is also the risk of companies unknowingly contributing to the exploitation of local populations. Moving to the PRC to take advantage of the low labour costs is itself problematic insofar as it comes down to benefitting from - and encouraging - the lack of workers’ rights. Moreover, a certain number of foreign companies have been exposed for contributing to mass surveillance (Tesla), personal data collection (Apple), online censorship (Google), forced labour in East Turkestan (H&M, Nike, Adidas), among other cases.
On a pragmatic level, the lack of human rights also entails various constraints for companies operating in China. For example, the government’s online censorship has been described as “a trade impediment” for foreign businesses. Overall, in the words of Nicolas Tenzer, “disrespect for human rights often goes hand in hand with limited economic freedoms, feeble courts of justice, poor compliance with the rule of law and fair trial, endemic corruption, and disrespect for contracts”.
This matrix of concerns raises the question of corporate accountability and ESG in general when it comes to partnering with China. We will now examine more closely the cases of Tibet, East Turkestan, and Hong Kong.