China’s new law to counter foreign sanctions: Ramifications?

Last Thursday, China enforced a law that has spurred ambivalent feelings among foreign companies and officials alike. But before we delve into the intricacies of the matter, it’s important to understand the falling-out between certain Chinese-based companies and those in the Western World that has exacerbated in the past year.

It’s well-known that Beijing has been accused of unfair industrial practices, campaigns targeting Uyghurs in Xinjiang and the subduing of civil liberties in Hong Kong. In light of these events, some Western governments, including the Department of the United States, have expanded the economic and political sanctions against China.

For example, not long ago the Biden administration announced that sanctions would be ramped up to prevent American investment in 59 Chinese companies that are said to contribute to the Chinese military.

Chinese officials were worried that these sanctions will hamper the progress of China’s economy and businesses. Hence, they decided to retaliate. As per their new law, Chinese individuals and entities can file lawsuits in the courts of China to solicit compensation for damage caused by foreign sanctions.

What will the Chinese government do, you ask. Well, Chinese officials have not revealed the exact scale of the potential repercussions until now. But what is known is that anyone involved in designing or executing the US and EU sanctions could be denied visas to China, their property in China may be seized, and commercial transactions through Chinese institutions can be blocked.

This law has been in the making for quite some time, but in absolute stealth – state media revealed only on Monday that the draft was ready for its second hearing, after which the standing committee of the National People’s Congress would pass the final legislation. Although the bill had been reviewed by senior lawmakers in April, the reading was not announced back then, something which has resulted in disapproval from many in the Western World.

For example, Joerg Wuttke, president of the European Union Chamber of Commerce in China, expressed, “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.”

Another thing foreign businesses are sceptical about is China’s lack of transparency in the implementation of the law. China skipped public consultation, gave no notice about such a law being proposed in April, and also reviewed the bill only 2 times, instead of the usual three times.

"China seems to be in a hurry. 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," Mr Wuttke highlighted.

As Wall Street Journal puts it, it’s evident that the “The passage of the new law follows a rash of tit-for-tat sanctions between China and Western governments over the past year or so.” Chinese academics, on the other hand, claim that the law is pivotal to resist Western coercion.

The exact ramifications of the law are hard to predict, for the Chinese government has not disclosed specific details. Only time will tell where this battle between the Western world and China will take the world.

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