China is facing mounting international criticism over its systematic repression of Muslim Uighurs in western Xinjiang province, where an estimated 1 million people have been detained in “re-education” camps and subjected to prolonged physical and psychological abuse.

But Chinese leaders remain defiant, telling the UN and human rights activists last week, in effect, to mind their own business. The stand-off highlights one of the most challenging 21st century dilemmas for western democracies: how to sustain the pretence that an increasingly totalitarian China is a “normal” country with which they can do business.

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The crackdown on the Uighurs, who make up about 11 million of Xinjiang’s 24 million inhabitants, has intensified since Xi Jinping became Communist party leader in 2012 and president in 2013. Xi claims the campaign is necessary to defeat Islamist terrorism and the “ideological virus” of separatism, despite anecdotal evidence that it is having the opposite effect.

Uighurs say the harsh measures, effectively criminalising an entire ethnic group, are intended to erase their identity, religion, culture and language while assuring the party’s ascendancy. Hundreds of thousands – exact figures are unobtainable – have been sent to the camps, where they are indoctrinated in party dogma, forced to learn Mandarin, and ordered to correct their thinking through self-criticism.

Uncounted thousands more are held in prison, while the remainder of the population is subject to an Orwellian surveillance system comprising cameras placed in Uighur homes and neighbourhoods, networks of local snoopers, biometric data collection, and voice and face recognition technologies. As in Stalin’s Russia, children are encouraged to inform on their parents. Winston Smith of George Orwell’s 1984 would have recognised Xi’s Xinjiang.

A UN human rights panel challenged China last month over “credible reports” that up to 3 million ethnic Uighurs had been subjected to detention or forced re-education. Xinjiang, it was claimed, had become “a massive internment camp”.

Chinese officials responded with a variation on Vladimir Putin’s “Skripal defence”, in which truth is fungible, or fluid. China’s policy towards minorities promoted unity and harmony, said Hu Lianhe, a senior cadre: “There is no such thing as re-education centres.” Not only were reports of repression in Xinjiang incorrect, the events complained of had never actually happened.

When Michelle Bachelet, the newly appointed UN human rights chief and former president of Chile, proposed last week that international monitors be allowed into Xinjiang, Beijing accused her of listening to “one-sided information” and demanded the UN respect China’s sovereignty. In other words, butt out.

Telling the UN to get lost is one thing. Telling the Americans to do so is another. Following pressure from Congress, the US confirmed last week that it was considering sanctions on named Chinese companies and officials, including a Xi loyalist, Chen Quanguo, the party’s Xinjiang chief who transferred to the province after a career of repression in Tibet.

Facebook Twitter Pinterest Theresa May and her husband Philip visiting Shanghai as part of a trade mission to China in February. Photograph: Stefan Rousseau/PA

Beijing was taken by surprise. Donald Trump, the US president, after all, has shown scant interest in human rights abuses, and has praised Xi as a strong leader. But this was no sudden change of heart. The threat originated in what is becoming known as Washington’s parallel government, where senior officials routinely bypass the president.

Human Rights Watch added to the chorus of condemnation last week. Its new report on Xinjiang, based on detailed interviews with former detainees and their relatives, concluded that China was daily violating fundamental rights to freedom of expression, religion and privacy and breaking international law on discrimination against minorities. “Those detained have been denied due process rights and suffered torture and other ill-treatment ... The human rights violations in Xinjiang today are of a scope and scale not seen in China since the 1966-76 Cultural Revolution,” the organisation said.

The gathering furore over Xinjiang, and China’s flat rejection of international concerns, is likely to draw attention to other aspects of what Chinese liberals and western analysts say is a broader regression into Mao-era totalitarianism under Xi.

What is happening in Xinjiang mirrors China’s behaviour in Tibet, where Buddhist pro-independence forces have suffered brutal repression since the Chinese occupation began in 1949. The fact they have still not been crushed suggests there is hope for the Uighurs.

Xi’s success in abolishing term limits and establishing himself, de facto, as unelected “paramount leader” for life, his aggressive stance over the South China Sea, Taiwan and Hong Kong, his party purges, and his nationwide curbs on religious freedoms, free speech and independent media all add up to a wider challenge to western double standards. European countries seek a “golden era” of trade, investment and new markets, exemplified by Theresa May’s Beijing visit in February. At the same time, their most cherished beliefs and values, long enshrined in international law, are being shredded by a regime that treats their opinions with disdain.

In this sense, Xinjiang is a test case. So far China has avoided any significant political costs. Its UN security council veto protects it from meaningful censure. But the western democracies are not without leverage and influence, from the use of economic sanctions to political and moral pressure applied across a range of international platforms. If the abuses suffered by Rohingya Muslims in Myanmar require investigation by an international criminal tribunal, as the UN has suggested, then so too does Beijing’s pitiless war on the Uighurs. China’s slide into totalitarianism is accelerating. But who among western leaders will admit that the price of doing business is too high?