Menu Close

'Terror capitalism' and the ethics of investing in Xinjiang

view original post
  • Oppression and mass incarceration of Uyghurs in Xinjiang by the Chinese Communist Party described as ‘Terror Capitalism’ by an expert on the region, who says ethical investment in the region is now near impossible.
  • AAA-rated Ping Zhou claims not to have seen any evidence of forced labour following a visit to a Xinjiang holding, adding he does not believe any mass detention has occurred.
  • European funds with holdings in the same company remain silent on the issue.

Xinjiang site visit

Fourteen years had passed since Citywire AAA-rated manager Ping Zhou, who founded Bin Yuan Capital in Shanghai in 2005, last visited one of his holdings in the Xinjiang Uyghur Autonomous Region.

His written commentary from the time recounted site visit he undertook in May 2021. In it Zhou referenced ‘recent concerns about the situation in Xinjiang’, but said the purpose of his trip was ‘not to argue, nor prove’ whether those claims were true.

Zhou, who has 27 years of market experience, said he and his colleagues wanted to see for themselves how the area had developed over recent years, visit old friends, and see how their holdings in their Greater China equity fund were doing, and whether ‘the consumption wave’ had spread to the region. 

Aier Hospital site visit

Among the companies Zhou visited was Aier Hospital, a multi-million-dollar franchise with sites in multiple countries, and one which does not fall among the sectors whose products are now banned from being imported into the US as of 21 June this year.

In the commentary, Zhou detailed a number of visits made to four ethnic minority families, among them Uyghurs.

In conversations with school aged children, Zhou and his team asked whether they wanted to be farmers or raise sheep like their parents. Zhou said they all answered that wanted to be doctors and scientists, and more importantly, live in cities ‘just like we do’.

Ping Zhou site visit commentary (extract)

‘We talked with representatives of Aier Hospital, C&S Paper, and SF Holdings in Xinjiang, and visited four minority ethnic families (Uyghurs, Kazak, Hui, and Tajik) during the trip.

‘Just like every civilization, the Xinjiang nomadic economy has moved to farming and industrialization. Through education, people are working in more sophisticated jobs such as technology development and high skilled services.

‘We asked all the school aged children we met whether they would like to do the work as their parents are doing today (farming or raising sheep): all answered no. They have their dreams to be doctors, scientists, and teachers etc. and most importantly, to live in the cities, just like we do.’

Concluding his commentary, Zhou added: ‘The culture is diversified across the whole country, however the desire of people to pursue a happier life is consistent and identical.

‘Xinjiang was a place of cultural communication and trade exchange in the past. This openness is needed for future development.’

Speaking to Citywire Selector via video call in October 2021, Zhou was asked whether he saw any evidence of forced labour of Uyghur people, or believed it was happening.

He said: ‘We travelled by ourselves which is important to say because some people are claiming there are 1 million people in forced labour. I think it’s very difficult to believe that.

‘It is unbelievable to me that there are 1 million forced Uyghurs working there. I travelled to different spots in the region, and no one mentioned it to me. If nobody mentioned it, it feels impossible that it is happening, Chinas human rights laws are very advanced.

‘We are automating everything, so you don’t need people in factories, I think people in the western world still imagine it is like the Second World War with Jewish people in camps.

‘We met a few ethnic groups, and they were all happy, and no one mentioned anything to me about forced labour. I asked the people I met whether they had seen any forced labour and they all laughed.’

‘Terror capitalism’

Despite Zhou’s positive commentary, the reported reality on the ground for so many is very different. Think of a region with seven times more land than the UK, which produces more coal than Germany, with oil reserves as large as Iraq.

A province where one group has the monopoly on wealth and power, while many others are detained in gulag-like environments where they are ‘educated’ to think and speak differently. Such is the far-western region of Xinjiang.

For those for whom Xinjiang has become synonymous with the forced labour and detainment of the Uyghurs, which came to public attention in 2017. In that light, Zhou’s commentary reads, at the very least, as unusual. 

One American academic, Darren Byler, who has published books on the forced labour of the Uyghurs, including In the camps: China’s high-tech penal colony, said Xinjiang is run and controlled in a way not dissimilar to any other oppressive colonial power.

But one which controls citizens’ daily lives through dehumanising tracking and biometric technology. Even those who have avoided being detained cannot live in a way which defies the will of the Communist Party. 

‘Any operation, or company, is somehow benefiting- directly or otherwise – from the detention and displacement of the Uyghurs,’ said Byler.

‘If you are operating a business which does not use forced Uyghur labour, by being there, you are leveraging off the dispossession of the Uyghurs from their land, homes, and freedoms. You are being complicit in a very systemic high-tech form of colonialism; therefore, I would say to investors that there is no way to ethically invest in the region.’ 

While detention camps are arguably the most galling example of Beijing’s oppression of the Uyghurs, Byler – who wrote the book on life in the camps, based on interviews with former detainees, as well as those who worked in the camps as well as masses of government documents – said the camps feed into a larger system of surveillance, which have been made possible by cutting-edge technologies.

For Byler, the concept of any ethical investing – regardless of sector – in Xinjiang is next to impossible. He has even referred to the system as ‘terror capitalism.’

Byler made his last trip to Xinjiang in 2018, where the grave reality of the situation, and the seriousness with which investors should take the situation became abundantly clear. 

‘On my last visit to Urumqi in 2018 [the region’s capital], people would tell me of their relatives who had ‘been taken’. I saw the evidence of it myself, walking through certain areas you could see entire streets of houses were now empty.

‘Parents talking about how their grown sons had been taken to detention camps, or were just missing, all of which was evidenced in the rows of vacated houses I saw. The atmosphere had very much changed since my last visit. Entire communities who once lived and worked in the area, were just gone.’

European funds in focus

With increased scrutiny being levelled at companies to take a stand on the forced labour in the Xinjiang area, combined with the unusual nature of the Zhou’s site visit commentary Citywire Selector examined funds with the largest Aier Hospital holdings domiciled in Ireland and Luxembourg.

Funds which had recently bought and sold positions in the hospital were also contacted for this article. 

Asset managers running these strategies were asked whether they engaging with Aier Hospital about corporate governance site visits, how often they visit the region, and what questions their representatives ask about the forced labour of the Uyghurs.

All funds listed below were contacted for comment and all, bar one, declined to respond.

A Eurizon spokesperson told Citywire Selector: ‘We can tell you that as of today Eurizon has no exposure to stocks that are under restriction for persecution of the Uyghur minority in the Xinjiang region.’

Name Fund Size Date Fund Size EUR (Millions) Portfolio Weighting %
JPM China A-Share Opps A (acc) RMB 30/06/2022 6,432.14 1.26
Allianz China A Shares AT USD 31/05/2022 7,159.66 1.24
Invesco China Health Cr Eq A CNH Acc 30/06/2022 149.40 4.9
JPM China A (dist) USD 30/06/2022 6,002.64 0.67
JPMorgan China A Shares Opps FAM I Acc 30/06/2022 204.00 1.6
Hereford Fds Bin Yuan Grter China L1 USD 31/03/2022 684.27 2.46
Allianz All China Equity AT USD 31/05/2022 1,612.40 1.05
Bellevue (Lux) Bellevue APAC HC B USDAcc 30/06/2022 384.75 3.53
Allianz China A Opportunities WT EUR 31/05/2022 844.00 1.58


 Name Fund Size Date Fund Size EUR
Invesco China Health Cr Eq A CNH Acc 11/07/2022 159.24
TAMAC Qilin China Champions A EUR Inc 08/07/2022 40.54


Fund Name
abrdn China A Share Sus Equity Fund
abrdn All China Sus Equity Fund
Citibank QDII-Blackrock Glb Allocation
HSBC QDII-MLIIF Global Allocation Fund
BGF Global Allocation Fund
HSBC Pothook QDII-MLIIF Gl Allocation Fd
Invesco PRC Equity Fund
Invesco PRC Equity Fund
Invesco PRC Equity
Invesco PRC Equity
abrdn (SLI) China Equities Fund
Allianz Total Return Asian Equity
River & Mercantile Em Mkt ILC EqFd
BGF Global Dynamic Equity Fund

While broad condemnation is held against the detention camps, not all companies want to see an export ban on Xinjiang goods.

Defenders of continuing trade in the region, such as Apple who lobbied against the recent US ban on certain imported goods from Xinjiang, however, have claimed not to have seen any evidence of forced labour. Making Zhou by no means an outlier in his statement. 

Investor Alliance for Human Rights view

Official guidance on investing in Xinjiang from the Investor Alliance for Human Rights (IAHR) said companies and investors are among the first to be able to detect any wrongdoing in an area, and thereby have a responsibility to conduct site visits to the area.

Byler added that it is near impossible to carry out an independent site visit in the area, adding that locals have been told what to say when visited by outsiders.

An IAHR spokesperson said: ‘While the predominant focus has been on the exportation of goods, such as cotton, the question around corporate governance due diligence applies to all companies within the region.

‘Given this body of evidence, the Uyghur Region must be considered a high-risk environment. And yet, it continues to be deeply connected to global supply chains. Thereby making site visits to the region a vital part of any investment process.’


  • Citywire Selector found 119 active funds with holdings in Aier Hospital according to Morningstar Data. Funds with passive keywords (index, idx, tracker, trckr, ETF, MSCI, S&P, iShares) were then removed to identify the actively managed strategies. Funds domiciled outside of Europe were also removed, which left 57 funds in total.
  • Homing in on funds domiciled in either Luxembourg or Ireland Citywire Selector found 9 funds with Aier Hospital holdings worth more than €10m.
  • Additionally, Citywire Selector found 16 funds which had recently established a position in Aier Hospital. Funds domiciled outside of Europe were also removed.
  • Citywire Selector contacted two Ireland and Luxembourg domiciled funds to ask what their due diligence process is before investing in the Xinjiang region.
  • Citywire Selector also found 188 funds which had sold their positions from the time period between April to June 2022. Funds domiciled outside of Europe were removed. Ireland and Luxembourg domiciled funds were then contacted by Citywire Selector asking why Aier hospital was excluded from the funds.