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Xi Jinping’s China is forcing investors to run, hide or hire

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Xi’s decision to formally overhaul Hong Kong’s electoral system could spark yet another round of criticism.

For any company doing business in China, the choice is now clearer than ever: avoid commenting on controversial topics or risk losing access to the world’s second-largest economy.

In recent weeks, President Xi Jinping’s government has approved a boycott of retailers like Hennes & Mauritz AB and imposed sanctions on various organizations – including a group of lawyers in the UK – because of the statements made. on allegations of forced labor in Xinjiang. Then, on Tuesday, he approved sweeping changes to Hong Kong’s electoral system to give Beijing a veto over all candidates.

China’s more aggressive stance, triggered in part by collective action by the United States and its allies to sanction Chinese officials, is forcing companies to quickly weigh what they will do to maintain access to 1.4 billion consumers with ever greater purchasing power. So far, with sluggish growth in the rest of the world, most companies are hanging their heads or stepping up their investments.

While it was previously easier for companies to operate in China and manage corporate social responsibility, it is now difficult to show that outside influence has an impact on changing the actions of the Communist Party, according to Margaret Lewis, law professor and China scholar at Seton Hall. University.

“You find yourself in this dilemma of staying and being an accomplice or withdrawing,” she said. “It’s getting harder and harder to strike a balance between those two things. It’s a harder decision now.”

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The best strategy for brands like H&M facing a boycott in China is to stay low-key and wait for the backlash to “pass,” Joerg Wuttke, head of the European Union Chamber of Commerce, told Bloomberg TV on Tuesday. China. Indeed, several companies have removed statements about Xinjiang from their websites.

‘Complicated picture’

“It’s a complicated picture,” Wuttke said. “On the one hand, China saved the skin of a lot of companies last year,” he said. “At the same time, of course you have this kind of political pressure hanging over you, and again a subject like Xinjiang is a dead end.”

Many foreign companies with good connections are expanding their presence in China, and Hong Kong’s financial sector is booming this year due to an influx of IPOs and work on SPAC listing offerings. Companies such as Baidu Inc. and Bilibili Inc. have raised nearly $ 17 billion through the sale of shares for the first time in the city so far this year, nine times more than a year earlier, according to data compiled by Bloomberg.

New York-based Citigroup Inc. plans to hire up to 1,700 employees in Hong Kong as it seeks to tap the growing links between the financial hub and the growing wealth of southern mainland cities such as Guangzhou and Shenzhen. Pandemic-induced hunger for tech stocks and the threat of delisting in the United States have been a boon to the financial center, leading to increased sales of initial and secondary stocks.

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However, for some international law firms that advise companies, the working environment in Hong Kong has become much more delicate. China’s retaliatory sanctions against the UK included court chambers in Essex, which a prominent lawyer said could have far greater consequences for investors.

After being hit by the sanctions, the UKTN reported that chambers removed from its website a reference to a legal opinion by some of its lawyers implicating the Chinese government in an alleged genocide in Xinjiang. The Communist Party-backed Global Times newspaper said the action showed China’s sanction was “an effective rumor deterrent.”

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But Guy Sandhurst, former chairman of the England and Wales Bar, said the move would affect “all UK companies that do business with Chinese clients” as lawyers involved in resolving disputes for law firms. Hong Kong could be denied access to the territory. He called on the “western world” to insist on dispute settlement mechanisms outside of China for all future contracts.

“Today it is the members of the Essex Court Chambers who are being sanctioned,” Sandhurst wrote on the Society of Conservative Lawyers website. “But tomorrow it might be Clifford Chance, Freshfields, or some other big city law firm or law firm that knowingly or otherwise offends the Chinese state.”

Xi Jinping’s decision on Tuesday to formally overhaul Hong Kong’s electoral system could trigger a new round of criticism and potential sanctions against Western countries, which have failed to change China’s behavior. The changes allow a small group of mainland and Hong Kong national security officials to scrutinize each candidate for election, ensuring that only those loyal to Beijing are able to implement the policy.

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“ Dangerous decisions ”

In a letter printed Wednesday on the front pages of several Hong Kong newspapers, leader Carrie Lam said the changes would help alleviate “excessive politicization” in society and allow the territory “to develop the economy and improve living conditions of our citizens “. Former general manager Leung Chun-ying echoed this in an interview on Tuesday.

“Lots of opportunities,” he said, when asked about Hong Kong’s economic future. “It’s about opening our minds, eyes and ears to these opportunities and then sharing them with the international community.”

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Carrie Lam speaks at a press conference in Hong Kong on March 30.

But while Xi’s actions in Hong Kong and Xinjiang may seem difficult, and Chinese officials talk to the world “like now they have nothing more to learn,” these moves actually reveal a paranoia that could end up backfiring. against companies and countries, according to Jean-Pierre Cabestan, professor of political science at the Baptist University of Hong Kong, author of several books on Chinese foreign policy.

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“It’s kind of nervousness, which is a sign of weakness and a sign that they don’t feel safe,” he said. “And this is worrying, because when you are not sure of yourself, you can engage in dangerous decisions and actions towards others.”

(Except for the title, this story was not edited by UK Time News staff and is posted Platforms.)

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