What Could the XPCC Sanctions Mean for Xinjiang and the US?

The Xinjiang delegation at the 2019 National People’s Congress (Reuters)

By Alison O’Neil

A Tense July: The US Sanctions XPCC

Recent events in Xinjiang – along with other domestic and foreign policy decisions encompassing everything from cybersecurity to maritime law to tensions over Taiwan and Hong Kong – have shifted the global conversation on China and its relations with the West. Since late 2019, the discourse surrounding China’s Uighur policies has shifted from the containment of radical Islam to the mass detention of up to one million Uighurs. The recent release of video footage showing blindfolded Uighurs being packed onto a train, as well as reports of forced sterilization of Uighur women, have prompted growing concern amongst the US and its allies. 

This report by researcher Adrian Zenz provides the most extensive look at China’s Xinjiang policies. According to Zenz’s widely-cited report, policies like forced sterilization have allowed Beijing to intentionally “enable the state to increase or decrease minority population growth at will, akin to opening or closing a faucet.” Other testimonies have also begun to leak out of Xinjiang, including one by a former Xinjiang camp teacher just published in The Diplomat. According to these reports, IUD implantation as well as more permanent forms of sterilization are being used to curtail population growth among Uighurs.

Chinese government sources themselves offer further insight into the extent of Xinjiang’s detention system. This New York Times report, for instance, records numerous specific, leaked policies the Chinese state has put in place to combat radical Islam in Xinjiang — surveillance strategies and the detention of those displaying “symptoms” of radicalism, including studying Arabic or giving up smoking. This archival report, too, offers a look at China’s proposed action against “illegal births” both amongst Xinjiang civilians and Chinese Communist Party members themselves. China maintains that the Uighur detention camps are training and education centers for Uighurs seeking gainful employment. Past terrorist attacks perpetrated by Uighurs, covered by Western media outlets and condemned by the US government, have shown that strong animosity exists between China’s minority Uighur population and majority Han population.

Tensions over Xinjiang came to a head on July 31, when the US Department of the Treasury released a new set of sanctions on Xinjiang Production and Construction Corps (XPCC). The United States Department of the Treasury described the Xinjiang sanctions as a response to “serious human rights abuse against ethnic minorities in Xinjiang, which reportedly include mass arbitrary detention and severe physical abuse, among other serious abuses targeting Uyghurs, a Turkic Muslim population indigenous to Xinjiang, and other ethnic minorities in the region.” The US government’s sanctions arrived in conjunction with a wider set of sanctions known as the Global Magnitsky Act, which aims to align states’ financial decisions with agreed-upon human rights principles.

Zeroing In: XPCC and Chinese Expansion

In light of these new sanctions, what is XPCC, what is its role in Xinjiang, and why should China watchers – and the West more broadly – pay attention to it?  As it turns out, XPCC itself is something of a black box. The company, which employs a vast swathe of Xinjiang’s population (one 2014 Foreign Policy piece estimated that 12% of Xinjiang works for XPCC in some capacity), appears to serve a multitude of purposes: counterinsurgency, farming, and everything in between. As Foreign Policy put it, “Beijing believes more urbanization and development will help win over the region’s approximately 10 million Uighurs … China’s government says the XPCC’s expansion is meant to pacify disgruntled Uighurs by improving their lives, and says the billions it has poured into infrastructure in the region has improved matters for everyone. But the XPCC in many ways exemplifies why Uighurs chafe under the government’s development model.” One prominent China analyst, for instance, has called XPCC “deeply colonial in nature” in response to a comparison between the company and colonial Britain’s East India Company. The EIC, much like the XPCC, also functioned as both a corporation and a military, state-building entity.

Researchers within China have likewise acknowledged XPCC’s mysterious nature. As Chinese researcher Dr. Yajun Bao points out in a 2018 article, “some say that XPCC is one of the most secretive organizations in China, and a ‘strange’ organization” that few scholars have analyzed. 

Bao assesses that XPCC’s work encompasses a variety of projects and initiatives: “XPCC’s economy was (and is) largely based on agriculture. It reclaimed farmland in remote barren lands and established regimental agricultural and stock raising farms. Based mainly on agricultural production, XPCC also established a multi-sector industrial system including food processing, light industry, textiles, iron and steel processing, coal mining, building materials, chemicals, and machinery. XPCC also developed its education, science and technology, culture, health, and judicial systems, and built infrastructure and electricity generation.” 

Bao goes on to point out that XPCC is composed mostly of members of the Han ethnic group, and that the organization and structure of the corporation is difficult to define: “XPCC (and its regiments) is not a private enterprise but a hybrid of state-owned enterprise and bureaucracy.” Approximately “60% of the population of XPCC is associated with the regimental farms, and the rest work in non-agricultural sectors such as industry, construction, and public services.”

Events in Xinjiang carry important security implications not just for China, but for Central Asia and the broader world. This is because, as Bao points out, “Xinjiang has been selected as an important oil and gas energy foundation for China’s future. It is also an important conduit to central Asia for the implementation of the [Belt and Road] Initiative. For example, the Altataw Pass between Xinjiang and Kazakhstan is an important station on the ‘second Eurasian continental bridge’ railway line. Thus, Xinjiang’s stability is substantially important for China’s development.” 

Cottoning On: XPCC’s Global Position

Evidently, the XPCC sanctions can only be understood within the context of China’s plans for Xinjiang, a key node of the ambitious Belt and Road Initiative (BRI). The BRI is an extensive infrastructure program encompassing everything from literal roads to projects designed to enhance energy security and soft power. BRI projects are often just as difficult to map and categorize as XPCC itself. For one, the initiative goes by several other names – “One Belt, One Road” (OBOR) and the “New Silk Road,” for instance. As CSIS analyst Jonathan Hillman (whose book on the BRI, The Emperor’s New Road, is slated to come out in September) has written, “There is no agreed-upon definition for what qualifies as a BRI project…The BRI banner hangs over a wide and ever-expanding list of activities … By design, the BRI is more a loose brand than a program with strict criteria.”

Where does Xinjiang fit in? Specifically, Xinjiang makes up a key component of the China-Pakistan Economic Corridor (CPEC), the most “complete” and likely most strategically significant of the BRI’s six overland economic corridors. China and Pakistan have long lauded their economic and strategic relationship, which has remained strong in spite of economic strains. For its part, CPEC and its counterparts will allow China to import far more oil and natural gas through overland routes, straight through the Central Asian heartland that famed geographer Halford Mackinder once christened the “geographical pivot” of the world. These overland routes will allow China to overcome one of its greatest strategic liabilities: reliance on oil shipped from overseas via sea lanes of communication (SLOCs). Oil shipped over SLOCs could theoretically be blockaded at a number of strategic chokepoints – the Strait of Malacca or the Andaman-Nicobar Archipelago, for instance. CPEC and its sister BRI corridors could help China overcome this strategic weakness, rendering victory in a great-power engagement all the more likely.

With this in mind, will the recent US sanctions impact the progress of the BRI through Xinjiang – or, for that matter, in any of the other corridors? In all likelihood, the XPCC sanctions will probably not impact designated “BRI” projects as much as they will impact more global industries – namely, the cotton trade – that implicate the US as well as China. As Bao himself pointed out, XPCC’s infrastructural endeavors seem to revolve mainly around agriculture. And as one Washington Post report finds, at least a third of China’s and at least 7% of the world’s cotton production – a staggering amount – falls under the purview of XPCC. Much like the BRI itself, supply chains out of Xinjiang are incredibly difficult to map. The intertwined nature of the US and China’s systems of production has created chaos as US companies struggle to divest from the XPCC before September 30, the onset of the sanctions. Meanwhile, cotton’s fungibility renders any meaningful product tracing extremely difficult. As one anonymous industry executive, speaking to the South China Morning Post, put it: “Taking Xinjiang cotton out of your supply chain is like telling a company not to use oil from the Middle East.” As the Washington Post reported, clothing from other parts of China or even other Asian countries could hypothetically contain XPCC-produced cotton. In the meantime, an American “blacklist” of eleven Chinese textile and fashion companies could serve as a kind of stopgap – after all, as SCMP reports, companies on the blacklist “cannot buy components from US companies without US government approval.”

So, what are the ultimate implications of the XPCC sanctions if not the weakening of BRI infrastructure or even substantial divestment from Xinjiang cotton? At the end of the day, the sanctions still create one more sticking point in a fraught US-China relationship – a relationship that in one summer has already endured a pandemic, a consulate crisis, and pressure from ongoing, low-simmering geopolitical disagreements. Even if the July 31 sanctions “fail” to prevent cotton transfer between Xinjiang’s fields and America’s retailers, they still symbolize a bold stance against the XPCC and in favor of the Uighur cause. Meanwhile, the sanctions could strengthen existing ties between the US and its allies regarding China, representing a further point of common ground.

Moreover, China can always take economic retaliation into its own hands: the US-China trading relationship can always worsen, especially in the wake of such a tense summer. If liberal IR theory is to be believed, divestment from trade with China – the US and China’s strongest common tie – could put both states on the path to war. But realist theory tells a different story: as realist historians might point out, Germany and Britain remained fast trading partners leading up to the onset of World War I. If realist theory is to be believed, attempting to divest from Xinjiang’s cotton – or from any Chinese business, for that matter – will not necessarily catalyze a war. If a war is to come, it won’t be over cotton.

Alison O’Neil is a recent graduate of the University of Notre Dame. She majored in history and political science, with a minor in energy studies, and was a member of Women in International Security. Her areas of focus include insurgencies and counterinsurgencies, geopolitics, and great-power competition, especially with regard to Asian and Middle Eastern security issues.

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