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 strike back.
Organizations with a foothold in both the United States and China may face a tough choice in the future: By complying with U.S. sanctions against China, they face the possibility of harsh sanctions in China as a punishment for doing so.
On Thursday, Beijing passed a far-reaching new law aimed at countering numerous US and EU sanctions against Chinese officials and major Chinese companies. Those involved in the design or implementation of the US and EU sanctions could find themselves or their family members denied visas to China. Their property in China may be seized and any commercial transaction they attempt with a Chinese institution may be blocked.
“The law signals that when you have no status or power to be the boss of people around, then your law in the United States will not get you anywhere in China,” said Wei Jianguo, a former trade minister. “This law is like a bell ringing. It is a warning to the United States: You must be concerned. China will not endure this treatment as easily as it once did.”
It is not yet clear how often China will use its new legislation to combat foreign sanctions, or how widely. But this ambiguity has already sent a chill through the business required to develop China-specific standards and operations separate from their 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 impose sanctions on China in their home countries.
But the law on combating foreign sanctions is so broadly written that those in the foreign business community fear that they might find themselves at the geopolitical crossroads. Under the new law, decisions for sanctioning entities – such as companies or their employees – are final. There is no possibility of appeal.
“When you mix law with politics, you will inevitably get politics,” says James Zimmerman, a partner at the Beijing office of law firm Perkins Coie.
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 cooperation in China and protect their rights and interests in accordance with the law,” Wang said. “China’s door to opening only opens wider and wider.”
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 against their Chinese counterparts. But Beijing has also sanctioned defense companies Raytheon and Lockheed Martin over arms sales to Taiwan.
“Companies, no matter what country they come from, must comply with the laws of the host country when operating,” said He Weiwen, a former Chinese trade official who is now a senior fellow in Beijing-based think tanks.
This week, China also passed a new data security law that sets stricter limits on data generated in China and how it can be transferred out of the country. Last month, Tesla said, under fire for how it silos information taken from cameras and sensors on its electric cars in China, said it would store that data in China, as Apple already does.
“We do not want to deal with much of the uncertainty, and we need to operate in a predictable environment,” says Zimmerman, referring to its US business customers. “But if the justice system is subject to politics, it makes it very, very uncertain.”
Over the past three years, the United States and China have introduced several tariff rounds in a damaging trade war. Washington has also imposed sanctions on Chinese officials and companies for human rights violations in the Xinjiang region and Hong Kong.
China has been threatening legal measures to counteract these sanctions for years. Some of these threats are not yet present. In 2019, China warned that it would create an “unreliable unit list” for blacklists of foreign companies that it claims are harming the country’s interests. More than two years later, Beijing has not yet blacklisted any companies.
But as the United States continues to add new sanctions, there is increasing pressure in China to take more concrete action. Last week, the Biden administration announced it would extend sanctions to prevent US investment in 59 Chinese companies allegedly contributing to the Chinese military.
In January, China’s Ministry of Commerce issued its first order of the year – in fact, a hotline for reporting sanctions, tariffs or other foreign legislation that prevents a Chinese entity from “normal economic, trade and related activities.”
The Ministry of Commerce could then decide to block the measure from entering into force – prevent the company from complying with international sanctions – or let the sanctioned Chinese business or individual sue a foreign company in a local Chinese court.