How is Xinjiang's economy faring after years of U.S. sanctions?

The Impact of US Sanctions on Xinjiang's Economy

Chinese scholars have raised concerns about the economic consequences of US-led sanctions targeting Xinjiang, highlighting job losses and declining profits for some companies. However, they also emphasize the region’s resilience in the face of these challenges.

The research, presented at an academic seminar in Hong Kong, marks one of the first comprehensive assessments of the long-term effects of US sanctions on Chinese firms operating in Xinjiang. These sanctions, initially imposed during the Trump administration in 2019, have expanded under the Biden administration, particularly after the Uygur Forced Labour Protection Act came into effect in 2021. Over time, a growing number of companies from Xinjiang and other regions have been added to the US entity list, effectively restricting their access to the American market.

According to data from the US Department of Homeland Security, a total of 144 Chinese companies involved in sectors such as apparel, critical minerals, electronics, chemicals, and steel have been targeted. This includes prominent tech and AI firms like Hikvision, iFlyTek, and SenseTime. These companies now face restrictions on receiving technology or components from US firms without special government licenses.

Tuersun Aibai, an associate professor at Xinjiang University, shared findings from his research at the seminar, noting that the economic impact of the sanctions has become evident in recent years. He highlighted that some companies saw significant drops in revenue and net profits, with certain impacts becoming apparent by 2023. Despite this, the regional economy has shown signs of recovery, with growth rates rebounding after a dip in 2022.

Xinjiang has taken steps to mitigate the effects of the sanctions through investments in new energy, tourism, and modern agricultural technology. Additionally, local governments and state-owned enterprises have focused on creating employment opportunities, especially within ethnic minority communities. This approach aims to protect labor rights while responding to the economic pressures caused by the sanctions.

Aibai’s studies are based on company registration data and publicly available information. One key indicator he used is the decline in the number of employees enrolled in China’s social insurance schemes, which serves as a proxy for workforce size. His research found that more than half of the companies studied experienced a drop in insured employees between 2021 and 2022.

For example, Hoshine Silicon Industry Corporation saw its insured employee count fall from 7,636 in 2021 to 1,207 in 2022. Similarly, Ninestar Corporation reported a sharp decline in insured employees, from 2,870 in 2021 to 287 in 2022. Aibai argues that these reductions reflect the creation of forced unemployment in the region due to the sanctions.

While the Xinjiang regional government has not released direct data on unemployment linked to the sanctions, there are indications of unusual economic effects. Large industrial companies in Xinjiang experienced significant profit declines compared to national averages, with profit margins dropping sharply in 2023 and 2024.

To counter these challenges, Xinjiang has planned substantial investments in major projects, aiming to drive economic growth. Local government data shows that newly added jobs remained relatively stable between 2022 and 2024, with a notable increase in 2023.

Scholars from Xinjiang have also criticized the US sanctions, arguing that they are driven more by political motivations than genuine human rights concerns. They suggest that the measures aim to pressure Chinese producers to cut ties with Xinjiang cotton, boost US cotton’s dominance, and make China’s textile industry dependent on US supplies.

In conclusion, while the US sanctions have had significant economic repercussions on Xinjiang, the region has demonstrated resilience through strategic investments and policy adjustments. Scholars continue to highlight the need for further research into the long-term impacts of these measures, emphasizing the importance of understanding the broader implications for both the region and the global economy.