‘Nightmare’ ahead: EU companies warn of coming regulatory clash with China

Human rights and environmental audit requirements are expected to put European firms on a collision course with Chinese laws

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European Union legislation banning products made with forced labour does not name Xinjiang but was written with the cotton producing region of western China in mind. Photo: Xinhua

Published: 2:00pm, 27 Sep 2024Updated: 3:17pm, 28 Sep 2024

Europe’s business leaders are warning that a raft of incoming EU legislation will put companies on a direct collision course with laws in China, which could lead to partial “decoupling” of some supply chains.

One of the laws bans products made using forced labour and another requires big firms to conduct human rights and environmental audits of their overseas suppliers. Both have been adopted by the European Union but will take effect in 2027 after a three-year grace period.

Businesses will be required to prove their suppliers are in line with EU environmental and social standards, and also that there is no forced labour in their supply chains. Companies fear the new rules will put them in the cross hairs of Chinese authorities.

The EU Chamber of Commerce in China pointed to the example of US fashion giant PVH Group, which was this week subject to a Commerce Ministry investigation for “unreasonably boycotting Xinjiang cotton and other products without factual basis”.

While the ministry did not specify what PVH is accused of doing, it is thought to be related to its historical compliance with US rules outlawing the sale of cotton from Xinjiang because of concerns over forced labour.

“The announced investigation has therefore raised concerns among foreign companies operating in or doing business with China, given that many of them are subject to the same compliance challenges,” the EU chamber said.