Xinjiang’s sprawling conglomerate may be biggest ever to face US sanctions
25 Aug 2020

One of China’s most secretive and expansive organisations, the Xinjiang Production and Construction Corps, has moved into an international spotlight it would probably rather avoid after the entity and three of its officials were put on a United States sanctions list for links to alleged human rights abuses.

Known as XPCC, the organisation operates in the area of China that shares its name, Xinjiang, an autonomous region three times larger than France in China’s far west that borders Afghanistan, Pakistan and India.

The US move against XPCC and its majority owned subsidiaries could be the biggest case in the history of the Office of Foreign Assets Control, the agency under the US treasury department that enforces financial sanctions, for the potential number of holdings affected. The sanctions have multiple implications for XPCC, from choking off bank loans to curbing its farm exports, such as cotton and tomatoes. They could also threaten its investments.

XPCC, which is involved in a myriad of industries, from construction and infrastructure to property and farming, has stakes in more than 800,000 companies and groups in 147 countries, according to US consultancy and commercial intelligence firm Sayari, which prepared a report on the conglomerate’s structure.

The sanctions are linked to what China’s authorities call re-education camps for local Uygurs and other ethnic minority groups in Xinjiang, but what the US and United Nations have said are forced labour internment camps holding as many as 1 million people. Legal experts said enforcement of the sanctions would face challenges due to the sheer size of XPCC, dubbed a “state within a state” by China scholar Thomas Cliff at Australian National University.

That description seems to fit with how XPCC sees itself. According to a 2018 report by the privately held organisation, it reports its revenue as GDP, listing US$5.88 billion in net exports as part of its total GDP of 251.5 billion yuan (US$36.4 billion). It functions like a government in running schools, policing and health care facilities across a number of cities in Xinjiang for its employees and their families.

Fred Rocafort, a former US diplomat to China who now works for international law firm Harris Bricken, said the sanctions were a positive development in the US tackling what is happening to Uygurs in Xinjiang, but taking on the XPCC was still a surprise.

“It’s a big deal. I was slightly surprised in terms of the magnitude of this action,” he said. “It’s comparable to sanctioning a Chinese province or a very large Chinese city … There are probably not many entities in China, whether they are political or business, which has that size. [XPCC] is a weird beast.”

XPCC did not respond to four email requests for comment on the sanctions.

Most of XPCC’s investments are managed by XPCC State-owned Asset Management Co, itself a wholly owned subsidiary of the parent company, according to Sayari. The investments include 13 publicly traded companies in China, such as Xinjiang Chalkis Tomato Products and Xinjiang Yilite, a liquor company.

The sanctions by the Office of Foreign Assets Control (OFAC) cover the organisation and its current and former officials Chen Quanguo, Peng Jiarui and Sun Jinlong. This puts them on the Specially Designated Nationals and Blocked Persons list, which bans US persons or entities from receiving or providing services and property of XPCC and its majority-owned subsidiaries.

By Linda Lew, South China Morning Post, 24 August 2020

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