China Passes Anti-Sanctions Law, as Multinationals Worry About Getting Trapped in the Middle

The National People’s Congress Standing Committee (NPCSC) has passed an anti-sanctions law that provides legal basis for retaliation against individuals and businesses responsible for imposing foreign sanctions against China. The law, which was not revealed until after it was passed in a closed-door session by the NPCSC, comes after the United States and its Western allies have imposed a slew of trade and targeted sanctions against Chinese businesses and officials over the last year. ’s Sarah Zheng and Tony Cheung reported on the details of the new law:

Tam Yiu-chung, Hong Kong’s sole delegate to the Standing Committee, said that under the new law, China’s cabinet the State Council and its agencies would be responsible for coordinating retaliatory measures.

[…] Tam said that under Article 6 of the new law, Beijing’s retaliatory measures could include denial of visa applications or entry into China. In the case of visa holders, authorities could declare their document invalid and deport them.

Individuals’ property or could be frozen or seized, and institutions could be restricted from conducting transactions with individuals or organisations targeted, he said.

The law also specified that no one in the country may help other countries implement measures against China, and people must instead help Beijing authorities to execute retaliatory measures. Individuals and organisations affected by sanctions could make claims in mainland courts, Tam said. [Source]

But the law has sparked worries among multinational companies who fear being forced to violate either Chinese or Western laws if faced with conflicting legal demands. On Wednesday, South China Morning Post’s Wendy Wu and Amber Wang reported on concerns by European businesses about being turned into “sacrificial pawns”:

“European companies in China are alarmed by the lack of transparency in this process – the first reading was never announced, and there is no draft to examine,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China.

“Such action is not conducive to attracting foreign investment or reassuring companies that increasingly feel that they will be used as sacrificial pawns in a game of political chess”.

[…] Observers said the law would put pressure on foreign businesses to stop complying with Western sanctions as they could face retaliation in China. [Source]

CDT has previously written about some of the multinationals, such as banking giant HSBC, increasingly caught in the middle amid worsening U.S.-China relations and the increasing imposition of sanctions.

But it’s worth noting that China is not the first country to pass legislation aimed at mitigating the effect of foreign sanctions–the E.U., for example, has a blocking statute that protects businesses doing trade with Cuba, Iran, and Libya, despite U.S. sanctions being imposed on those countries. But other provisions in China’s anti-sanctions law have also attracted concern, such as new powers to target individuals, families, and organizations involved in imposing sanctions on China. In March, a salvo of retaliatory sanctions announced by the Ministry of Foreign Affairs on diplomats, academics, law firms, and think-tanks in Europe attracted widespread criticism from Western governments for its broad scope and possible chilling effect on academic research and legal work.

The timing of the anti-sanctions law is also notable, coming shortly after the U.S. Senate passed a major industrial policy bill that, among other provisions, the to impose additional sanctions on Chinese officials for cyberattacks, human rights violations, and I.P. theft. And in recent weeks, Biden’s “Asia Czar” on the U.S. National Security Council has described the era of U.S.-China engagement as having formally ended, with the two powers now in a period of “competition.” On Thursday, the South China Morning Post cited an expert involved in consultations on the anti-sanctions law who said that the timing of the law was largely in response to Biden’s policies and hardening stance against China.

While much of the attention in recent months has been focused on the targeted sanctions against individuals in China and the West, the anti-sanctions law may also benefit companies such as Huawei and SMIC that have been battered by U.S. trade sanctions. For Nikkei Asia, Narayanan Somasundaram examined the impact of the anti-sanctions law for the dozens of Chinese companies impacted by punitive measures from overseas:

Last year, about 45 Chinese officials were sanctioned by the U.S., including 15 members of the NPC. The European Union, Canada and the U.K. have also imposed sanctions on Chinese officials for what they term as oppression against the Uyghurs of Xinjiang.

In addition, 59 companies including telecom majors Huawei Technologies and China Mobile have been slapped with a U.S. investment ban for aiding the Chinese military. Last year, the U.S. included Huawei and its affiliates on a so-called Entity List, banning them from buying components and technology from American companies without government approval.

Huawei, the world’s No. 1 telecom gear provider, was also once the largest smartphone maker. But its electronics business took a hit when the U.S. blacklisted the company, citing national security concerns. This restricted Huawei’s access to U.S. technology and supplies, including the latest updates and technical support for Google’s Android operating system.

[…] Under the new law, Huawei itself is likely to be able to sue such peers.

Henry Gao, an associate professor of law at Singapore Management University, said that while it remains unclear how foreign companies would be affected, China might be “cautious in its application, at least initially.” [Source]

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