General

Recently, a number of media have pointed out in reports that the potential impact of the so-called "Uyghur Forced Labor Prevention Act" in the United States on the global industrial chain is worrying.

The "Uyghur Forced Labor Prevention Act" came into effect in June this year. The United States presumes all products produced in Xinjiang as so-called "forced labor" products and prohibits them from importing unless companies can provide "clear and credible" evidence that there is no so-called "forced labor" in the supply chain.

The media pointed out that the textile industry and solar power generation may be the two industries most affected by this bill, because Xinjiang is one of the most important raw materials for cotton and photovoltaic equipment in the world. Data shows that Xinjiang's cotton production will account for about one-fifth of global output in 2021; China's production of polysilicon, an important raw material for photovoltaic equipment production, accounts for nearly 80% of the world's output, of which about 42% comes from Xinjiang.

Dezan Shira & Associates pointed out in a report that Vietnam's textile industry is facing rising cotton prices. Recently, the price of cotton imported from Brazil, the United States and India has soared to US$1,625 per ton. Product restrictions will further push up cotton prices. Bloomberg pointed out that in early July, polysilicon prices rose for several weeks in a row, reaching the highest point since 2011. The polysilicon production capacity is extremely short, and it is expected to gradually ease until August.

According to the Nikkei, multiple industrial chains involved in Asian apparel companies, international retail chains, U.S. solar panel manufacturers, and Chinese ceramic tile companies will be impacted, and a large number of companies are still trying to figure out these impacts. American business people have warned that the implementation of the bill may be chaotic, which will not only make the global industrial chain devastated by the epidemic worse, but also "add fuel to the fire" of high domestic inflation in the United States.

The South China Morning Post reported that before the bill took effect, the American business community was worried that it might affect normal business activities. Some business people pointed out that the bill is vague on many specific issues, leaving companies at a loss. On the other hand, China's domestic industrial chain is intertwined, and companies have little ability to "self-certify their innocence" as required.

The South China Morning Post also pointed out that given that economies such as Canada and the European Union currently do not have similar legal provisions, the bill may drag down the competitiveness of American companies in the international market.