A Xinjiang Solar Giant Breaks Ranks to Try and Woo the West

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(Bloomberg) — On the Daqo New Power Corp. manufacturing unit in China’s Xinjiang area, staff fastidiously processed tall columns of refined silicon final week as a bunch of reporters and analysts regarded on. It’s the primary time outsiders had been allowed to witness the mundane manufacturing unit scene since China’s dominant photo voltaic business has come below scrutiny for its labor practices. 

In contrast to three different firms in Xinjiang that produce polysilicon–a key ingredient in photo voltaic panels–Daqo hasn’t been linked to alleged human-rights abuses. But Daqo has upheld the identical secrecy as its friends with ties to the government-run labor program that’s below worldwide scrutiny. As not too long ago as March, the corporate declined interview requests for its executives and turned away international observers. 

Now the corporate’s management is breaking ranks in an try and protect itself from potential U.S. sanctions over China’s therapy of the Uyghur minority group in Xinjiang. 

READ MORE: Secrecy and Abuse Claims Hang-out China’s Photo voltaic Factories in Xinjiang

Daqo’s chief monetary officer, Ming Yang, acknowledges there’s a “good likelihood” that Xinjiang-made polysilicon will be banned by President Joe Biden. As the one U.S.-listed polysilicon firm based mostly in Xinjiang, Daqo can’t simply ignore considerations from abroad traders and regulators, he mentioned in an interview. “We perceive there are these notion dangers, particularly from the general public and media, and a few traders,” Yang mentioned.

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On Wednesday, U.S. local weather envoy John Kerry mentioned officers “consider in some circumstances” that Chinese language photo voltaic merchandise are being produced by pressured labor and confirmed the administration is mulling restrictions. Daqo’s greatest wager is to attempt to win an exemption. Chinese language smartphone maker Xiaomi Corp. this month managed to get itself faraway from a U.S. blacklist of military-linked firms, suggesting there’s a approach for particular person firms to keep away from penalties at the same time as tensions rise between the world’s two greatest economies.

Issues about pressured labor in Xinjiang stem from a state-run labor program that some Western governments and teachers have argued is used to compel primarily Muslim Uyghurs and different minorities to work in opposition to their will. Researchers have highlighted public paperwork displaying three different polysilicon factories–not Daqo’s–accepted staff from this system. China says the initiative helps poor ethnic minorities discover higher employment and that accusations of pressured labor in Xinjiang are lies invented by international adversaries.  

Daqo’s marketing campaign is being spearheaded by Yang, a Taiwan-born, Cornell-educated former McKinsey & Co. marketing consultant who joined the agency in 2015. The night time earlier than the tour, the 46-year-old held courtroom for 2 hours over dinner at a neighborhood resort, sipping Moutai liquor with a bunch of international journalists. A vegetarian, he picked at dishes together with tomato and egg soup and cauliflower stir-fry as he set out his case: Daqo doesn’t take part within the labor program and doesn’t make use of any Uyghurs.

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When requested later what he considered the federal government’s therapy of Uyghurs, together with internment camps that officers describe as vocational coaching services, Yang equivocated. “Do they exist or not? Really, I don’t know,” he mentioned. “However definitely in the event that they do exist, then I believe there are ethical requirements that this might be judged” in opposition to.

Yang and his staff plan to nominate an company to conduct a human-rights audit of their operations–and most likely these of key suppliers–to again up the corporate’s assertion that it has “zero tolerance” for pressured labor. Daqo has shortlisted three potentialities: a worldwide auditing agency and two fair-labor establishments referred to them by the U.S. authorities. 

It’s a chance. Conducting impartial, third-party inspections at random occasions would require cooperation from a neighborhood authorities that has for years prevented international journalists and diplomats from freely visiting the area. Yang mentioned the authorities have given Daqo “preliminary assurances” that the auditors might be granted entry.

Daqo’s push for transparency may additionally find yourself elevating extra questions in regards to the different key gamers within the business–Xinte Power Co., GCL-Poly Power Holdings Ltd. and East Hope Group Co.–and China’s labor practices within the area. Collectively, the 4 factories present nearly half the worldwide provide of polysilicon, serving to to energy a surge in photo voltaic vitality around the globe. 

Working within the area has turn out to be problematic for firms after China started a “strike-hard” marketing campaign in Xinjiang within the 2010s in response to a collection of lethal terror assaults by Uyghurs searching for higher political and cultural autonomy. The insurance policies, which have seen Muslims positioned below tight surveillance and separated from their households, have been characterised by the U.S. authorities as genocide. 

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For Daqo, distancing itself from the labor program may very well be nearly as dangerous as going through U.S. sanctions. The corporate should be cautious that in defending its personal practices it doesn’t look like agreeing with Western criticisms of Chinese language insurance policies, or failing to indicate solidarity with Beijing and its business friends. That’s why Daqo has tailor-made its message for 2 completely different audiences.

Throughout the manufacturing unit tour, which was additionally attended by analysts from HSBC Holdings Plc, JPMorgan Chase & Co. and Credit score Suisse Group AG, Yang insisted that Daqo wouldn’t participate within the labor program. “If the federal government did ask us, we’d not take part,” he mentioned. As a foreign-invested firm, Yang mentioned Daqo wouldn’t be obligated to adjust to such an order. Daqo has “very excessive integrity requirements,” he mentioned.

There are early indicators that Daqo’s allure offensive could also be working. “There isn’t any proof of any human-rights violations and solely allegations,” Jefferies Monetary Group Inc. analyst Johnson Wan wrote in a word to shoppers after watching a digital video tour of the plant. Wan has a purchase ranking on Daqo, which is planning to lift 5 billion yuan ($778 million) in an inventory this 12 months on Shanghai’s Star board.

Kevin He, Daqo’s head of investor relations, struck a special tone from Yang at a press convention organized by the international ministry in Beijing in early Might. Sitting subsequent to Xinjiang authorities officers, he lashed out at a U.S. photo voltaic business foyer’s efforts to kind an anti-forced labor alliance. The purpose, he mentioned, was to sabotage China’s participation within the international market. “We specific our robust indignation and condemnation,” He mentioned.

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Issues about Daqo’s perceived ties to Xinjiang Manufacturing and Building Corps, or XPCC–a state-affiliated group that’s been sanctioned by the U.S. authorities for alleged human-rights abuses together with mass arbitrary detention–are one other “potential threat,” Yang mentioned. The group oversaw the event of Shihezi, the town the place Daqo’s manufacturing unit relies.

“We have now no affiliation with the XPCC,” Yang mentioned. “We’re not owned by them. We’re a completely foreign-owned enterprise and we’ve no collaboration.” Yang mentioned Daqo will cease increasing its Shihezi operations after this 12 months, citing diminishing vitality worth benefits and a need to be nearer to prospects. The corporate is taking a look at Yunnan and Interior Mongolia as potentialities for future progress.

However Daqo faces an uphill battle because it tries to flee the shadow of Xinjiang. Final week, for instance, researchers Laura Murphy and Nyrola Elima launched a report detailing what they referred to as “a long-term, mutually useful relationship” between Daqo and XPCC. In addition they cited public paperwork that point out a few of Daqo’s main suppliers might have employed staff from the labor program. Daqo mentioned it didn’t discover any proof of pressured labor on the crops.

Firms “should permit unannounced, unfettered, unmonitored audits that heart Uyghur staff’ voices and that assure zero repercussions for whistleblowers,” mentioned Murphy, a professor at Sheffield Hallam College. “No firm can assure any of these circumstances in Xinjiang as long as internment camps stay in operation. And positively none of that is achieved by guided excursions of manufacturing unit flooring.”

Meaning the strain on Daqo might be troublesome to evade, irrespective of how open the corporate makes itself. “We’re making an attempt to be as clear as potential,” Yang mentioned. 

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