BASF to sell holdings in two Xinjiang chemical plants

BASF is to accelerate the sale of its stakes in two plants in Xinjiang, following “serious allegations” of human rights abuse by employees of its local joint venture partner.

The German chemical company, which has been criticised for investing heavily into China while downsizing in Europe, on Friday said it would sell its shares in two plants making chemicals that go into elastic fibres such as spandex.

BASF’s move follows recent reports by German news outlets ZDF and Der Spiegel that contained what the chemical group described as “serious allegations that point to activities that are incompatible with BASF’s values”. The company said it would “accelerate” a hitherto unannounced sale process that had been initiated last quarter due to a global supply glut of one of the chemicals.

The German media reports alleged that employees at BASF’s joint venture partner, Xinjiang Markor Chemical Industry, had carried out “home visits” to Uyghur families to gather evidence that would be passed on to authorities. According to corporate social responsibility reports published by Markor and reviewed by Spiegel, the aim of the visits was to “expose and criticise” people not loyal to the Chinese state.

The two plants, one of which is majority-owned by BASF while the other is controlled by Markor, began production in 2016 — a time when Chinese authorities had already begun interning Uyghurs and other ethnic and religious minorities in mass detention camps.

BASF said it had not seen evidence that allegations against its joint venture partner were true, adding that “regular” audits had revealed no evidence of human rights violations at its Xinjiang factories.

Nevertheless, Janne Werning, head of ESG capital markets at Union Investment, which holds just under 1 per cent of BASF, said the firm welcomed BASF’s decision to “withdraw from this controversial region”.

Zhongtai Group, the Xinjiang-based owner of Markor, did not immediately respond to a request for comment.

BASF’s decision in Xinjiang follows a recent controversy surrounding an independent human rights audit for Volkswagen’s plant in the region. The German carmaker is another of the handful of western companies that operate plants in Xinjiang.

VW managed to get rid of its “red flag” ESG rating from index provider MSCI after an independent audit found no evidence of forced labour at its plant in Xinjiang. However, the majority of 20 employees at the firm that oversaw the audit publicly distanced themselves from the results. VW declined to comment.

BASF’s decision could risk harming its business in China — the world’s biggest market for chemicals. In 2021, Nike and H&M were forced to U-turn from earlier decisions to stop sourcing cotton from Xinjiang, due to widespread boycotts.

The German group is currently building a €10bn state-of-the-art petrochemical plant in Guangdong, which started construction in late 2019. Ma Xingrui, who was governor of Guangdong at the time of early negotiations over the plant and who hosted several delegations of BASF executives including its chief executive Martin Brudermüller, has since become the Communist party secretary of Xinjiang.