China cracks down on Calvin Klein, Tommy Hilfiger parent companies

China’s Ministry of Commerce (MOFCOM) announced on Tuesday that it has added PVH, the parent company of Calvin Klein and Tommy Hilfiger, and US biotechnology firm Illumina to its ‘unreliable entity’ list. The decision, which comes amid heightened US-China trade tension, accuses the two companies of violating market principles by halting normal dealings with Chinese enterprises and implementing discriminatory practices. MOFCOM stated that these actions have “significantly threatened the legitimate rights and interests of Chinese companies”.

PVH has already been under scrutiny from Chinese regulators for alleged “improper” conduct related to the Xinjiang region, where accusations of forced labour have drawn international controversy. The company said it would continue engaging with relevant authorities to resolve the issue. PVH’s presence in China has been a key driver of its global performance, with Calvin Klein and Tommy Hilfiger seeing a 44% revenue increase in the region in 2023. However, PVH’s shares have been under pressure, declining by 8% in 2024, as the company faces growing regulatory challenges in the Asia-Pacific market.

For Illumina, which derives about 7% of its global sales from China, its inclusion in the list appears to reflect broader geopolitical tensions rather than direct retaliation, according to Reuters. The US biotech firm has long competed with Chinese rivals BGI and MGI. Both Chinese companies were named in a US bill restricting business with certain biotech firms on national security grounds. An Illumina spokesperson said the company is “assessing this announcement with the goal of finding a positive resolution” and emphasised that Illumina complies with all local laws and regulations wherever it operates.

The timing of the announcement underscores the broader context of the US-China trade war, which reignited with the imposition of sweeping 10% tariffs on Chinese products by the US. China has responded with additional tariffs on US goods, set to take effect on February 10.

On the same day, China’s State Administration for Market Regulation also launched an anti-monopoly investigation into Alphabet, the parent company of Google, though no details were provided on the alleged violations. These actions highlight Beijing’s increasing scrutiny of US corporations operating in its domestic market.

While the trade dispute continues to evolve, US financial markets showed cautious optimism, with the three major stock indexes closing higher on Tuesday. Shares of PVH dipped slightly by 0.97%, while Illumina’s stock fell more sharply, dropping over 5%, reflecting investors’ concerns about regulatory risks in China.

The ‘unreliable entity’ list, introduced by China in 2020, serves as a countermeasure to US sanctions on Chinese companies such as Huawei and ZTE. Companies placed on the list face potential fines, restrictions on investment and trade, and limitations on future business opportunities in China. For multinational firms like PVH and Illumina, being blacklisted in China presents significant operational and reputational challenges.

Campaign Asia-Pacific has reached out to PVH and Illumina for further comment. Both companies now find themselves navigating the complexities of a rapidly evolving economic and political landscape, as US-China tensions continue to reshape global business dynamics.

Last September, MOFCOM initiated the investigation into PVH under the ‘unreliable entity’ list framework. This investigation is due to allegations that the company engaged in discriminatory actions and other practices that violate market trading principles. PVH was suspected of boycotting cotton products from China's Xinjiang Uygur Autonomous Region and terminating normal transactions with Chinese companies.

China started the ‘unreliable entity’ list back in 2020. Companies added to the so-called blacklist could face fines and other sanctions, such as restricting sales, investment and more business opportunities.