BASF Defends Xinjiang Joint Ventures

A chemical giant whose material innovations are frequently used by the fashion industry faces scrutiny after a German newspaper raised questions about its joint ventures in China’s Xinjiang Uyghur Autonomous Region, where ties with a blacklisted company could implicate it in the widespread repression of Uyghurs and other Turkic Muslim minorities.

BASF, a geography-spanning chemical producer that is reportedly the world’s largest, has operated facilities producing polytetrahydrofuran and 1,4-butanediol with Xinjiang Markor Chemical Industry Co. in the Korla Economic Technology Development Zone (KETDZ) since 2016. Both chemicals are used in the production of stretch textiles commonly used in sportswear.

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But Markor is also a subsidiary of the Xinjiang Zhongtai Group—something that Zhongtai itself touts on its website, Handelsblatt reported earlier this month. According to “Built on Repression,” a report that Sheffield Hallam University’s Helena Kennedy Centre for International Justice published with open-access data Material Research in June 2022, Zhongtai has been a “prolific participant” in the Chinese government’s “notorious” labor transfer programs, involuntarily moving, by its own count, more than 5,000 “surplus laborers” from their homes in the name of “poverty alleviation” but experts say serve as a means of control.

While any inputs from the region are almost universally barred from the United States, thanks to the Uyghur Forced Labor Prevention Act (UFLPA), which went into effect last June, the Department of Homeland Security took the additional step of listing Zhongtai on the Entity List in September, further excluding its goods from entry. The agency said at the time that Zhongtai’s listing was the result of its “participation in business practices that target members of persecuted groups, including Uyghur minorities.”

In a statement to Sourcing Journal, BASF didn’t mention Zhongtai by name. It said that the company respects human rights as the “basis of its social responsibility in its business activities and relationships.” Its code of conduct, which applies to all of the geographies in which it operates, sets “behavioral requirements for all BASF employees in their collaboration with business partners, authorities, colleagues, and society, including human rights, labor and social standards,” allowing it to comply with applicable laws such as the UFLPA.

“We regularly review the working relationships at our joint venture locations in Korla,” a spokesperson said, adding that it commissioned internal and external audits in 2019, 2020 and the start of 2023. “We can confirm that none of these reviews have found any evidence of forced labor or other human rights violations.”

BASF said that the two joint ventures employ roughly 120 workers, none of whom are Uyghur. Neither Zhongtai and Markor could be reached for comment.

Last November, however, data analytics firm Kharon published a case study suggesting that two “Xinjiang-based joint ventures involved in chemical production” exhibited “key indicators” of forced labor use. Kharon didn’t identify BASF, instead describing the ventures’ co-owner as a “European multinational company based in Germany and one of the world’s largest chemical producers.”

Kharon noted that both Zhongtai and the KETDZ have received government-organized transfers of laborers in Xinjiang and provided patriotic or Mandarin-language education, practices that have been flagged by the Biden administration as indicators of forced labor and other discriminatory practices targeting Muslim minority groups. It pointed to a report from People’s Daily, a Chinese Communist Party-owned media group, that Zhongtai received more than 3,000 laborers from southern Xinjiang between 2017 and 2019. Another state-owned media report, Kharon said, described workers transferred to Zhongtai undergoing “centralized education training” to learn “gratitude” toward the state.

And KETDZ, for its part, accepted more than 1,000 laborers from other parts of Xinjiang between 2017 and 2018, uses “ideological education” as part of its “poverty alleviation” efforts, and has set up national language night schools and cultural training to “change the thinking of transferred workers,” said Kharon, referring to a 2018 press release. According to the Xinjiang edition of People’s Daily, such transfers to the zone continued into 2020.

“No evidence was found indicating that either joint venture has used forced labor, but each was…doing business in the Korla Economic Development Technology Zone while it was known to be participating in programs associated with forced labor,” it added.

Adrian Zenz, the German anthropologist who helped bring to light thousands of photos and official government documents from Xinjiang, including speeches from Chinese President Xi Jinping that were labeled “top secret,” agreed that Markor itself has not been implicated in labor transfers, meaning the connection is an indirect one at most. But it is an “ethical red flag.”

“Basically what we have here is the typical kind of complicity,” Zenz told Sourcing Journal. “And I think a much better way to frame this is to go back to what Xi Jinping said in the secret speeches in 2014: not only that idle Uyghurs are a threat and need to be employed [but that] through employment, Uyghurs can subtly be assimilated, meaning subtly acquire the [predominant Han] Chinese language and culture. And he also said that Chinese companies should be used in the project of deradicalization to integrate Xinjiang.”

Not only are enterprises like Zhongtai “at the forefront,” they are a “prime state instrument” helping Beijing achieve its goals, which many, including the U.S. government, have dubbed genocide, Zenz said. He said that audits are ineffective since no one is allowed to speak freely and everything is tightly controlled. In fact, it is “actually highly unethical” to attempt to conduct an audit in Xinjiang because “you are basically placing Uyghurs at risk and you are misrepresenting an unethical situation,” he added.

“In this case, it’s even more deceptive,” Zenz said. “Because what you have is a company—Markor—that’s not directly, from what we can tell, implicated in forced labor, but it is part and parcel of a system that oppresses the Uyghurs. So the ethical dimension here is very acute.”

His advice to BASF? Close down the joint ventures and withdraw fully from Xinjiang “because that’s the only way to get out of being complicit.” And these labor transfers are only intensifying, he added.

BASF said it is in “concrete discussions” with a “reputable” auditing firm to renew its external joint venture audit in 2024.

“As we consider human rights due diligence an ongoing task, we will continue to analyze the situation and take appropriate actions, including risk-based controls such as audits and assessments,” the spokesperson said. “We are also in continuous contact with representatives of non-governmental organizations to gather further information for our review.”