Mark Schiefelbein / AP
BEIJING – Over the past three years, the United States and the European Union have imposed a series of sanctions on Chinese officials and companies. Now China has created a new legal tool to fight back.
Organizations with one foot in both the United States and China may face a difficult decision down the road: By complying with US sanctions on China, they face the possibility of severe sanctions on China as a penalty for doing so.
Thursday, Beijing approved a powerful new law designed to counter numerous US and EU sanctions on Chinese officials and major Chinese companies. Those involved in the design or implementation of the US and EU sanctions could see themselves or their family members being denied visas to China. Your property in China can be seized and any business transaction they attempt with a Chinese institution can be blocked.
“The law indicates that when you don’t have a position or power to command the people, then your law in the United States will now bring you here in China,” says Wei Jianguo, a former vice minister of commerce. “This law is like the sound of a gong. It is a warning to the United States: they should be concerned. China will not bear this treatment as easily as before.”
It is not yet clear how often China will use its new legislation against foreign sanctions, or to what extent. But that ambiguity has already sent a chill through the business community, which is required to develop China-specific standards and operations separately from its global operations as China creates its own legal landscape.
On the surface, the law simply codifies a series of retaliatory actions that Beijing has already taken in response to Western sanctions. The law also appears to be aimed primarily at foreign politicians who pass sanctions on China in their home countries.
But the Anti-Foreign Sanctions Act is so broadly worded that members of the foreign business community fear being targeted by geopolitics. Under the new law, decisions to sanction entities, such as companies or their employees, are final. There is no possibility of appeal.
“When you mix law with politics, it can become politics,” says James Zimmerman, a partner in the Beijing office of the Perkins Coie law firm.
At a foreign ministry briefing on Friday, spokesman Wang Wenbin defended the new law, arguing that the measure provides greater legal stability. “China always welcomes and supports foreign companies to conduct business and cooperate in China, and protect their rights and interests in accordance with the law,” said Wang. “China’s door to opening will only open against and against “.
Over the past year, China has already sanctioned more than a dozen European academics and politicians, as well as US officials, including former Secretary of State Mike Pompeo, in retaliation for previous sanctions on their Chinese counterparts. But Beijing has also sanctioned defense companies Raytheon and Lockheed Martin for arms sales to Taiwan.
“Companies, no matter what countries they are from, must comply with the laws of the host country when operating,” said He Weiwen, a former Chinese trade official who is now senior member of the Beijing-based think tank.
This week, China approved a new data security law that sets stricter limits on the data generated within China and how it can be transferred out of the country. Last month, Tesla, criticized for how it stores information taken from cameras and sensors in its electric cars in China, saying would store that data in China, as Apple it already does.
“We don’t want to deal with a lot of uncertainty and we need to operate in an environment that is predictable,” says Zimmerman, referring to his commercial clients in the United States. “But if the legal system is subject to politics, that makes it very, very uncertain.”
Over the past three years, the United States and China have imposed numerous rounds of tariffs on damaging trade. Washington also imposed sanctions on Chinese officials and companies for human rights abuses in the Xinjiang and Hong Kong region.
China has been threatening legal measures to counter these sanctions for years. Some of those threats have yet to materialize. In 2019, China warned that it would create a “list of unreliable entities” to blacklist foreign companies that it claims harm the country’s interests. More than two years later, Beijing has yet to blacklist any company.
But as the United States continues to add new sanctions, China increases the pressure to take more concrete action. Last week, the Biden administration announced that it would extend sanctions to avoid US investment in 59 Chinese companies that allegedly contribute to the Chinese military.
In January, the Chinese Ministry of Commerce issued its first order of the year, effectively a hotline to report sanctions, tariffs or other foreign legislation that prevents a Chinese entity from conducting “normal economic, commercial and related activities.”
The Commerce Ministry could then decide to block the entry into force of the measure, preventing the company from complying with international sanctions, or allow the sanctioned Chinese company or individual to sue a foreign company in a local Chinese court.