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Volkswagen has responded to fresh allegations of having benefited from forced labour in Xinjiang by announcing talks with its Chinese joint venture partner over “the future direction of business” in the region.
The short statement came after German newspaper Handelsblatt published allegations that VW’s joint venture with the Beijing-owned carmaker SAIC used forced labour when building a test track for cars in the region in 2019.
In December, VW said a long-awaited audit into its factory in Xinjiang had cleared it from allegations of forced labour, despite the majority of staff at Löning, the Berlin-based firm that headed the audit, publicly distancing themselves from the results. The audit helped the carmaker to lose its “red flag” ESG rating by index provider MSCI
On Wednesday, VW said that “various scenarios [were] currently being intensively examined” together with its joint venture partner SAIC, with which it conducts roughly half its business in China.
The company declined to say whether a complete withdrawal from the region, where Beijing has been accused of severely repressing the local Uyghur population and other ethnic minorities, was on the table. Company insiders have previously said cutting ties with the region would not be possible until current contracts expire in 2029 because of the risk of harming VW’s relationship with SAIC.
Citing a study by a prominent researcher on Xinjiang issues, Adrian Zenz, Handelsblatt on Wednesday reported that pictures of the track being built had shown Uyghur workers in military uniforms. This was a sign that the people had been part of forced labour programmes, it alleged.
It also referred to a report by the state-owned company that built the track, which noted that some workers had their irises scanned and the information sent to police in order to “strengthen ideological consciousness”.
VW told Handelsblatt that it had not encountered any evidence of human rights abuses during the building of the test track, but that it would review the new claims.
VW last year announced €5bn worth of investments in China, as it has come under pressure to halt its falling market share amid growing competition from Chinese electric vehicle start-ups. The Wolfsburg-based group was one of the first western companies to enter China in the late 1970s and makes roughly half of its profits in the country.
German companies have been facing increasing pressure to cease operating in the region.
Last week, German chemical maker BASF announced it would sell stakes in its two Xinjiang joint ventures following reports that employees at its local JV partner had participated in state-sanctioned home visits to the local population with the aim of identifying and exposing individuals deemed not loyal to the Chinese government.
BASF’s situation is different to that of VW because it has no business outside Xinjiang with its joint venture partner in the region, but also because its chemicals are more vital to the functioning of the Chinese economy than the cars that VW makes.
SAIC has been approached for comment.
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