European companies in China are concerned about the growing political risks of doing business in the country. They fear that they are more likely to suffer arbitrary punishments in China, but they also see pressure on their own country to justify the company’s activities in the people’s Republic.

In the annual report of the European Chamber of Commerce, a lobby club, nearly half of the companies claim to experience increasing political pressure from the Chinese government. 43% of respondents refer to Chinese state media, often a grateful tool for Beijing to put pressure on countries, companies and individuals.

That fear is not out of the Blue. After dissident Liu Xiaobo was awarded the Nobel Peace Prize in 2010, a boycott of Norwegian salmon was announced through the Chinese state media. The arrest of the daughter of Huawei founder Ren Zhengfei in Canada was reason for China to stop importing Canadian rapeseed oil.

Most recently, Australian exporters of barley and beef ran into high import duties and restrictions on the Chinese market. That’s what happened after the prime minister of the country, had called for an independent investigation into covid-19, and there was criticism of Chinese provocations in the South China Sea.

Also from outside the people’s Republic, President Jörg Wuttke of the European KvK sees pressure on companies increasing. “Hong Kong, the South China Sea, Tibet and the Uyghurs in Xinjiang: files that also cause a lot of trouble in our home markets, in our parliaments,” says Wuttke. “Not least among consumers. We are under increasing pressure to account for how we do business in China, ” he notes.

In that light, investing in Xinjiang means suicide for companies, warts Wuttke. “That’s impossible to explain,” he says. “We are under great pressure from all our stakeholders, with a consumer boycott as a nightmare scenario. I hope that the Chinese authorities also understand that public opinion in our home market plays an important role in how we run our businesses here.”

Activists from various quarters have been calling for a boycott of Mulan, the latest Disney film, in recent weeks. Before filming, the Xinjiang company worked with the local Department of the Ministry of Public Security, which is partly responsible for locking Uighurs and other Muslim minorities in re-education camps.

It is too early to say to what extent consumers actually respond to the calls for boycotts: there are no figures yet. But Wuttke is sure that there is work to be done for European companies to avoid such a scenario. “Few companies have vetted their production chains in Xinjiang to make sure there are no irregularities,” he says.

“If you are already active as a company, extreme transparency is the only right thing to do about it.”

Despite the increasing complexity, few companies are considering turning their backs on the country. “From an economic point of view, that would make no sense,” says Wuttke, who still has a wish list for the Chinese government. ‘We do want better access, such as Chinese companies that also enjoy in the European Union. In many sectors, unfortunately, we still have access to the platform only after the train has left.”