China has developed a legislative arsenal against foreign sanctions against it. The text, which does not mention the United States, is vague enough to create legal uncertainty which worries European companies in particular.
To counter foreign sanctions, China has adopted a text that risks placing multinationals facing serious geopolitical dilemmas between Beijing and the West.
This new legal arsenal, adopted on June 10 by the Chinese National People’s Congress, comes a week after the Biden administration expanded a blacklist of Chinese companies in which Americans are prohibited from entering. invest, in the name of national security. China had deplored the initiative and promised to take measures to “defend” its companies.
The text, made up of 16 articles, entered into force on June 10 as soon as it was promulgated. It aims to “protect” any Chinese individual or organization, in the event that a country “uses[rait] various pretexts or its laws ”to take“ discriminatory ”measures against them.
No country is explicitly named, but Beijing has long complained about extraterritorial application of US law via trade sanctions and restrictions. The new law now legalizes reprisals which can be “suspended, modified or canceled”, specifies the text.
What does the new Chinese law provide?
Among them is the ban on visas and access to Chinese territory to individuals falling under the law, but also to their families. The text legalizes “the sealing, seizure and freezing of property” of people or companies that would apply sanctions against China. The law also opens up the possibility of having recourse to unspecified “other measures”.
Angela Zhang, a specialist in Chinese law at the University of Hong Kong quoted by AFP, believes that the wording of the law is vague enough to “affect a large number of people and businesses”. “It’s a bit crazy,” says Julian Ku, professor of law at Hofstra University in the United States. “Academics, experts and their families, as well as think tanks, risk being sanctioned for their support of sanctions against China,” he warns.
For his part, Joerg Wuttke, president of the European Union (EU) Chamber of Commerce in China, quoted by AFP, reacted by declaring that European companies were “in shock at the lack of transparency and the speed of this process ”. For the European representative, this law risks placing European companies in China in “an increasingly precarious position”.
For multinationals, caught in the midst of the Beijing-West rivalry, “the effect is likely to be devastating”, warns Angela Zhang, estimating, however, that Beijing will only use these sanctions “if necessary” but “not in the immediate ”, because it“ would heighten the concern ”in foreign business circles and would be“ costly ”for Beijing.
She believes that foreign companies will be tempted to relocate their production outside of China, thus accelerating a decoupling which is “contrary to the interests” of Beijing, anxious to maintain employment.
But this new law will inevitably pose “a real dilemma” for foreign companies in China, notes Julian Ku, in allusion to the difficult choice they will have to make: comply with American sanctions and risk Chinese reprisals, and vice versa. Some companies could, according to Angela Zhang, come to “put pressure on their governments” to lift sanctions against China.
Is it really a novelty?
In a context of worsening tensions with Washington in the last weeks of Donald Trump’s mandate, Beijing had announced in January rules to respond to “unjustified” decisions against China.
Very vague, these measures already gave the possibility to Chinese individuals and entities targeted by foreign sanctions to “retaliate”. But also to initiate legal proceedings in China. More generally, foreign companies are regularly targeted by Chinese Internet users, who do not hesitate to denounce them on social networks, when they make statements or adopt measures perceived as anti-Chinese.
In March, Swedish ready-to-wear giant H&M and several foreign brands drew wrath and boycott calls for pledging to stop sourcing cotton from Xinjiang. These companies justified their decision on the basis of allegations by Western governments and media of “forced labor” in this region of northwest China.