[guest post by Dana]

Oh:

Tesla Inc. has opened a new showroom in Xinjiang, the remote region where Chinese authorities are carrying out a campaign of forcible assimilation against religious minorities that has become a public-relations quagmire for Western brands.

The Austin, Texas-based electric car maker started operations at the new showroom in Urumqi, the capital of Xinjiang, the company said in a Dec. 31 post on its official account on China’s popular Twitter-like social-media platform Weibo.

“On the last day of 2021, we meet in Xinjiang. In 2022, let us together launch Xinjiang on its electric journey!” Tesla wrote in the post, which was accompanied by pictures from an opening ceremony that included traditional Chinese lion dances and people posing with placards reading “Tesla (heart) Xinjiang.

Telsa’s opening in Xinjiang comes on the heels of President Biden signing the Uyghur Forced Labor Prevention Act which is part of an effort to push back against Beijing’s ongoing genocide of the Uyghurs. Here are just a few of Congress’s findings that compelled the U.S. to put into law the prohibition “on the import of all goods, wares, articles, or merchandise mined, produced, or manufactured, wholly or in part, by forced labor from the People’s Republic of China and particularly any such goods, wares, articles, or merchandise produced in the Xinjiang Uyghur Autonomous Region of China…”:

(1) In the Xinjiang Uyghur Autonomous Region of China, the Government of the People’s Republic of China has, since 2017, arbitrarily detained as many as 1.8 million Uyghurs, Kazakhs, Kyrgyz, and members of other Muslim minority groups in a system of extrajudicial mass internment camps, in addition to arbitrarily detaining many in formal prisons and detention centers, and has subjected detainees to forced labor, torture, political indoctrination, and other severe human rights abuses.

(2) Forced labor exists within the Xinjiang Uyghur Autonomous Region’s system of mass internment camps, and throughout the region, and is confirmed by the testimony of former camp detainees, satellite imagery, official media reports, publicly available documents, official statements, and official leaked documents from the Government of the People’s Republic of China as part of a targeted campaign of repression of Muslim ethnic minorities.

(3) In addition to reports from researchers and civil society groups documenting evidence that many factories and other suppliers in the Xinjiang Uyghur Autonomous Region are exploiting forced labor, the Department of Commerce’s Bureau of Industry and Security on July 22, 2020, added eleven entities to the entity list after determining the entities had been “implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, forced labor and high-technology surveillance against Uyghurs, Kazakhs, and other members of Muslim minority groups in the Xinjiang Uyghur Autonomous Region”.

(4) Audits and efforts to vet products and supply chains in the Xinjiang Uyghur Autonomous Region are unreliable due to the extent forced labor has been integrated into the regional economy, the mixing of involuntary labor with voluntary labor, the inability of witnesses to speak freely about working conditions given government surveillance and coercion, and the incentive of government officials to conceal government-sponsored forced labor.

(5) The Department of State’s June 2020 Trafficking in Persons Report found that “Authorities offer subsidies incentivizing Chinese companies to open factories in close proximity to the internment camps, and to receive transferred detainees at satellite manufacturing sites in other provinces. Local governments receive additional funds for each inmate forced to work in these sites at a fraction of minimum wage or without any compensation.”.

Ironically, Elon Musk was just named by TIME as its person of the year. This is from their write-up:

Many people are described as larger than life, but few deserve it. How many of us truly exceed our life span? How many will make it into the digital textbooks our spacefaring descendants will study? As Shakespeare observed in Julius Caesar, it’s far easier to be remembered for doing evil than doing good. How many will leave a mark on the world—much less the universe—for their contributions rather than their crimes? A few short years ago, Musk was roundly mocked as a crazy con artist on the verge of going broke. Now this shy South African with Asperger’s syndrome, who escaped a brutal childhood and overcame personal tragedy, bends governments and industry to the force of his ambition.

And there is a brief mention of Musk’s business relationship with China:

In 2018, the Chinese government repealed a law against foreign ownership to allow Musk to build a factory in Shanghai. Now Tesla appears to make about half of its cars in China, but it risks losing its hold on the world’s largest car market as the one-party state turns to favor homegrown rivals like NIO and BYD. Musk has faced criticism for pandering to America’s increasingly assertive authoritarian rival. “Overall, Tesla has a good relationship with China,” Musk told a business conference on Dec. 6. “I don’t mean to endorse everything China does.”

Just endorsing what will financially benefit him, I guess. So maybe that pandering to China has paid off. Barron’s notes:

China… represents roughly a quarter of Tesla’s sales. So far, Tesla’s announcement on New Year’s Eve hasn’t created much angst: Shares are up 10.7% to $1,169.82 Monday late morning.

The stakes are great though: In a recent research note, Wedbush analyst Dan Ives described China as a “linchpin to the overall bull thesis” on the stock, estimating China will represent 40% of deliveries for the electric-vehicle maker this year and said the country was worth roughly $400 a share to Tesla in 2022. Tesla didn’t respond to a request for comment.

The question now is can he, or any business and its investors, be politically neutral in China these days? Despite him um, bravely saying that he doesn’t agree with everything China does, what do his actions say by opening a showroom in Xinjiang?

“Opening a Xinjiang plant is a flagrant middle finger to anyone who cares about the plight of Uyghurs,” says Perth Tolle, founder of Life + Liberty indexes and the Freedom 100 Emerging Markets exchange-traded fund (FRDM) that excludes China. “There is no political neutrality when it comes to doing business in China anymore. Because Chinese companies have to put the interests of the state before the interests of all other stakeholders, they expect multinationals to do the same. And that’s often counter to the interests of shareholders, not to mention the majority of Chinese and Uyghur people.”

P.S. On a side note, more than 500,000 Teslas were recalled as recently as last week

–Dana

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