China’s New Rules To Counter Foreign Laws

China says these rules are meant to safeguard national sovereignty. But what are they?

The New Rules

On January 9, 2021, China unveiled rules on counteracting unjustified extra-territorial application of foreign legislation and other measures. Woah, that’s a mouthful. These new rules, which came into effect immediately, would punish global companies for complying with Washington’s tightening restrictions on doing business with Chinese companies.

Before we get into how these rules will help China, we need to go back in time. (Where is the time stone when you need it?).

U.S x China

Earlier in November 2020, President Donald Trump signed an executive order barring Americans from investing in a batch of Chinese companies because these companies support or supply the Chinese military.

Later in December, the U.S added 59 Chinese companies to its trade blacklist because of their alleged ties to the country’s military, human rights abuses and theft of U.S trade secrets. The list included China’s top chipmaker SMIC and the world’s biggest drone maker, SZ DJI Technology Co Ltd.

The Trump administration also prohibited the sale of U.S technology to the Chinese telecommunications giant, Huawei. The Trump administration also tried to force ByteDance to sell the U.S division of its popular app TikTok. Also, the New York Stock Exchange said that it will delist three Chinese telecom companies.

Apart from the above, sources told Reuters that the Trump administration is considering adding tech giants Alibaba and Tencent to a blacklist of firms. It makes sense why China would make a rule which would punish companies that comply with the U.S’ restrictions because the U.S has been pretty hard on China since the trade war and the pandemic has affected the U.S-China relationship further.

How Will The Rules Help China?

The Ministry of Commerce has said, “The rules were issued to defend national interests, avoid or mitigate the adverse impact on Chinese enterprises, and maintain the normal international economic and trade order”. So, how can this help a Chinese company?

So, if you are a Chinese individual or institution, under the new rules, you should report to the ministry within 30 days of your business being affected by foreign compliance laws. Once you report it to them, the authorities will assess ‘whether the compliance violates international law and basic norms of international relations’ and the possible impact on ‘China’s national sovereignty, security and development interests’.

If such conditions are met, the ministry will issue an injunction against recognition enforcement and compliance with the foreign laws and measures. The Chinese government will also take countermeasures if required. So, yeah, Chinese companies can sue in court for damages and overturn foreign judgments with these new rules.

The Future

China isn’t stopping just with these new rules. Various reports suggested that they are talking about creating their own blacklists but it hasn’t named U.S companies to it yet. Recently, China outlined a legal foundation and procedures for the national security review of foreign investments in China. This sounds just like the Committee on Foreign investment in the U.S, which has led to a significant plunge in Chinese investment in the U.S in recent years.

At present, we don’t know how the U.S will react to this move but many are looking forward to seeing whether the Joe Biden presidency will change the U.S-China relationship or will it remain the same for years to come.

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