China hits back at US and allies with anti-sanctions law

China’s new anti-sanctions law is believed to give its companies tools to fight back against Western penalties. (Photo by Akira Kodaka)

NARAYANAN SOMASUNDARAM, Nikkei Asia chief banking and financial correspondent | China

HONG KONG — China retaliated against international sanctions on Thursday, passing a law believed to provide legal tools for its officials and companies in responding to Western penalties.

The Anti-Foreign Sanctions Law was passed by the National People’s Congress Standing Committee, state media said. No details were immediately disclosed.

The bill underwent a secret first review in April and no draft was available for companies and other stakeholders to examine. But while the contents remain under wraps, experts have warned the impact could be significant.

The law may be a “game-changer as it would provide a mechanism for targeted Chinese entities to file a lawsuit against a foreign company that is complying with foreign-imposed sanctions,” A2 Global Risk said in a statement before the law was passed. “For those foreign companies, passage of the law will incur additional compliance and regulatory obligations and risks.”

China’s move comes amid an intensifying rivalry with the U.S., and in the wake of international sanctions imposed for alleged human rights abuses in Xinjiang and the erosion of Hong Kong’s autonomy. Beijing wants a blocking statute to allow targeted Chinese entities to avoid punitive measures imposed from abroad.

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 consumer 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.

China has fought back against the U.S. with sanctions of its own, but these have had very little impact given the role of the U.S. and the dollar in the global economy. Now Beijing hopes to add teeth to its sanctions regime and build on rules set in January by the Ministry of Commerce, which empowered Chinese courts to punish global corporations for complying with foreign actions.

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.”

The law was passed just hours after the Chinese and U.S. commerce ministers agreed to address concerns and promote the development of trade and investment links between the two nations, in the first such call since President Joe Biden took over.

Greg Gilligan, chairman of the American Chamber of Commerce in China, said it was difficult to comment until the specifics of the law come out. “However,” he added, “where there is any disagreement across borders, governments need to come together to reconcile this in a way that allows businesses to remain legally compliant within the jurisdictions in which they operate.”

Additional reporting by Nikki Sun.

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