U.S. and European retail brands in China are suddenly facing a dilemma: Embrace cotton from the contentious Xinjiang region and come under attack in the West, or reject it and risk a boycott in the world’s second-biggest economy. Investors are getting spooked by that prospect, sending shares lower on Thursday. Hennes & Mauritz AB was blasted by the Communist Youth League and the People’s Liberation Army Wednesday after social-media users dug out an undated company statement about accusations of forced labor in Xinjiang. Calls to boycott the Swedish retailer, which gets 5.2% of its global revenue in China, quickly spread to include Nike Inc., which has previously said it won’t source products from the region due to labor concerns. Brand ambassadors in China for both firms cut ties with the companies in recent days. “Want to make money in China while spreading false rumors and boycotting Xinjiang cotton? Wishful thinking!” the Communist Youth League said in a post on Weibo, referring to H&M. One of the PLA’s Weibo accounts called H&M’s statement “ignorant and arrogant.” The Communist Party’s move to target companies over Xinjiang shows President Xi Jinping’s government is seeking to impose real costs for governments and businesses that criticize China’s human-rights record as the Biden administration aims to unite allies over the issue. Beijing slapped reciprocal sanctions on European Union officials on Monday, following coordinated sanctions and statements by the EU, U.S., Canada, Australia and New Zealand. H&M shares fell as much as 4.4% in Stockholm. Nike shares fell as much as 5.4% in New York before the start of regular trading Thursday. At a testy meeting between top diplomats of the U.S. and China last week, Politburo member Yang Jiechi made extended remarks attacking the U.S.’s human-rights record and calling on the world to stop interfering in China’s “internal affairs.” Foreign Ministry spokeswoman Hua Chunying, who this week hit the U.S. and Europe over everything from the slave trade and Nazism to the killing of George Floyd and alleged hoarding of coronavirus vaccines, on Thursday called the Xinjiang forced labor allegations “malicious lies fabricated by anti-China forces.” “We can’t tolerate any forces bringing shame on and tarnishing the pure and flawless Xinjiang cotton,” Gao Feng, a spokesman for the Commerce Ministry, said at a separate briefing Thursday. “Chinese consumers have acted in response to the so-called business decisions made by some companies based on false information. We hope the relevant companies will respect market laws, correct wrong practices, and avoid the politicization of commercial issues.” Chinese firms are now rallying around Xinjiang, which produces more than 80% of the country’s cotton. Anta Sports Products Ltd., the Chinese sneaker giant that owns the Fila brand, and Hongxing Erke Sports Products Co. were among companies that issued statements saying they will continue to source the material from the region. Shareholders rewarded firms that displayed patriotism, while punishing those with links to Western brands. H&M China said on Wednesday that its global supply chain complies with sustainability commitments, and doesn’t reflect any political position. The company also said it doesn’t purchase cotton directly from suppliers, but uses third parties. But those remarks did little to stem the growing anger in China. H&M no longer appears on Alibaba Group Holding Ltd.’s e-commerce platform Tmall, where the retailer had previously had a presence. Alibaba didn’t immediately respond to a request for comment. Subscribe to our YouTube channel: https://bit.ly/2TwO8Gm Bloomberg Quicktake brings you live global news and original shows spanning business, technology, politics and culture. Make sense of the stories changing your business and your world. To watch complete coverage on Bloomberg Quicktake 24/7, visit http://www.bloomberg.com/qt/live, or watch on Apple TV, Roku, Samsung Smart TV, Fire TV and Android TV on the Bloomberg app. Have a story to tell? Fill out this survey for a chance to have it featured on Bloomberg Quicktake: https://cor.us/surveys/27AF30 Connect with us on… YouTube: https://www.youtube.com/user/Bloomberg Breaking News on YouTube: https://www.youtube.com/c/BloombergQuickTakeNews Twitter: https://twitter.com/quicktake Facebook: https://www.facebook.com/quicktake Instagram: https://www.instagram.com/quicktake Subscribe to our YouTube channel: https://bit.ly/2TwO8Gm