SHANGHAI — The latest spate of ethnically-motivated violence and social unrest in Xinjiang has done little to directly affect business in Urumqi, the capital of the far western Chinese province, but the tension does appear to be a source of growing concern for businesses already there or planning to open in the region.
Louis Vuitton, Piaget, Ermenegildo Zegna and Salvatore Ferragamo are among the luxury brands with existing stores in Urumqi, a city on the radar screen of fashion labels searching for new, increasingly wealthy consumer markets in the country’s interior. The Xinjiang region has a turbulent past, peppered with clashes between Han Chinese, the country’s dominant ethnic group, and Uighurs, a Turkish-speaking Muslim ethnic minority group.
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Unlike in July 2009, when nearly 200 people were killed after rioting erupted between the groups in Urumqi, February’s violence took place in a remote area near the city of Kashgar. At least a dozen people were killed as a result of the clashes, according to reports in Chinese state media. Many of the foreign fashion companies have shops in Maison Mode, one of the city’s main shopping malls.
According to a spokesperson for Maison Mode whose last name is Xue (she declined to give her first name), the mall has struggled to find tenants since it opened several years ago. Now, Xue said, Maison Mode is fully occupied; however for a long period of time many of its higher floors were virtually empty as interested brands reneged on deals or simply lost interest.
She said the vacancies were not directly related to problems in Urumqi; however those in the real estate sector say social issues in the area have been a definite cause of hesitation for companies interested in opening there. “The simple answer is yes, there is caution opening or continuing to operate in such places as Urumqi right now,” said Sebastian Skiff, executive director of the Asia retail division of real estate firm CBRE. “In terms of business there are plenty of cities across China that are on retailers’ radar that can offer equal or better commercial opportunities right now to replace plans they had for any troubled regions.”
Skiff added that the caution in Xinjiang is “likely to be short term with the [Chinese] government particularly keen on ensuring the basic rights of safety for all.” “The situation is not just a China story though, the Middle east and parts of Northern Africa are also in a state of turbulence that has directly affected both shopping center developers and retailers plans,” he said.
Short term situation or not, retailers with stores in Urumqi say they are making long-term contingency plans for their operations in the capital if tensions were to arise there again in the future. Godwin Lam, managing director of Trinity Ltd.’s China operations, which has four stores in Urumqi for its brands, including Cerruti and Gieves & Hawkes, said plans are underway to find a local partner in the city and to put in place a local management team that can ensure employees are safe and retail operations unscathed if violence were to erupt again. “A lot of people, not only us, a lot of people are thinking about using a local agent to run the business,” Lam said. “We want to use a local agent to run the business as a franchisee or consignee so they will handle the safety of the staff in case anything happens.”
Currently, Trinity’s management team for Urumqi is based in the southern city of Chengdu, which is a four-hour flight away from Xinjiang.
During the violence that erupted in 2009, Lam said communication was cut off with stores in Urumqi after the government suspended phone and Internet access there in an effort to quell further protests being organized via social networks online and, in part, to prevent information about the uprisings being disseminated across the country.
“There was no communication between us and our shops,” he said. “The computers were down, so that was a disaster. Fortunately we had no injures, but the worry was from the fact that we were in the darkness. We didn’t know what happened so that really frightened us.”