China Accuses Walmart of ‘Stupidity’ Over Missing Xinjiang Goods

(Bloomberg) -- China issued a stern warning to Walmart Inc. following allegations that the company's warehouse stores in the country stopped selling items from Xinjiang, ramping up pressure on the retail giant amid rising tensions with the U.S. over the western province.

The Central Commission for Discipline Inspection, the Chinese Communist Party's anti-graft watchdog, rejected suggestions that inventory management was behind the shift at Sam's Club, Walmart's members-only chain. Consumers will respond with “practical actions” if the company doesn't “respect the feelings of the Chinese people,” the commission said Friday.

The warning underscores how Walmart and U.S. businesses are becoming ensnared in geopolitical tensions over Xinjiang, where the U.S. and United Nations have accused China of suppressing the predominantly Muslim Uyghur population. U.S. President Joe Biden signed a bill on Dec. 23 banning companies from selling goods in the U.S. that were made with components from the province -- unless they can prove forced labor wasn't involved.

“To take down all products from a region without a valid reason hides an ulterior motive, reveals stupidity and short-sightedness, and will surely have its own bad consequences,” the Central Commission for Discipline Inspection said in a statement on its website.

Walmart shares advanced 1.2% to $144.89 at 2:21 p.m. in New York.

Chinese social media platforms erupted in criticism of Sam's Club last week as customers accused the company of de-stocking items from Xinjiang.

Walmart declined to comment. China's statement was reported earlier by Reuters.

Thorny Issue

Xinjiang has become a tricky issue for foreign multinationals. Brands such as Hennes & Mauritz and Nike Inc. have been boycotted for saying they won't use Xinjiang cotton, with the Swedish retailer being taken off local e-commerce platforms for its stance. Intel Corp. apologized to Chinese customers last week after asking suppliers not to use any labor or products sourced from Xinjiang to ensure compliance with the U.S. law.

Chinese officials deny that forced labor is used in Xinjiang and call the U.S. legislation interference in the nation's domestic affairs.

Walmart faces a highly competitive supermarket industry in China, its largest foreign market except for Mexico and Canada. While the Bentonville, Arkansas-based company pioneered the hypermarket format in China decades ago, pressure is growing from local rivals such as e-commerce giant Alibaba Group Holding Ltd.

At the same time, Sam's Club has been the bright spot for Walmart in the country, where the chain is seen as a premium grocery destination selling mostly imported goods. Walmart plans to have 100 Sam's Club stores in China by 2028, roughly tripling the count from its current level.