China fired back against the Trump administration on Saturday with new rules that would punish global corporations for complying with Washington’s tightened restrictions on doing business with Chinese companies.
The Chinese Ministry of Commerce said the rules, which came into effect immediately, were intended to counter foreign laws that “unfairly prohibit or restrict” people or companies in China from doing normal business. She said her actions are necessary to protect China’s national sovereignty and security, and to protect the rights of Chinese citizens and corporations.
Although Chinese officials didn’t mention a specific country, the new rules could potentially put global corporations in the middle of the Washington-Beijing economic struggles. They could also send a signal to the future administration of President-elect Joseph R. Biden Jr., who ultimately has to decide whether to maintain, relax, or reconsider the Trump-era restrictions on Chinese companies.
As President Trump’s trade war against Chinese intensified, the Trump administration banned the sale of American technology to Huawei, the Chinese telecommunications giant, and other companies. Rules have also been passed punishing companies for their links with the Chinese military and for their involvement in Beijing’s surveillance and repression of predominantly Muslim ethnic minorities in northwest China’s Xinjiang region.
The new rules, released on Saturday, would allow Chinese officials and corporations to push back those who comply with these U.S. limits. The Chinese measures allow government officials to issue orders that companies are not required to comply with certain foreign restrictions.
Chinese companies that suffer losses as a result of another party’s compliance with these laws can seek damages in Chinese courts, according to the Ministry of Commerce. Such a case would likely lead to a victory for a Chinese plaintiff, as China’s courts are ultimately responsible to the Communist Party.
“This basically puts a lot of big companies between a rock and a hard place as they have to choose either to comply with US sanctions or comply with Chinese rules,” said Henry Gao, a Singapore Management University law professor who specializes in international Specialized in trading. “And either way, they’re going to lose one of their biggest markets.”
Economy & Economy
Jan. 8, 2021, 4:48 p.m. ET
It is unclear whether global companies in China will be penalized for complying with US sanctions. Under the rules enacted on Saturday, companies could apply to the Department of Commerce for a waiver to comply with American restrictions. They also require Chinese officials to set up an interacting body to determine which foreign laws fall within their scope.
In addition, much of the language of the regulation released on Saturday was vague, giving the Chinese government and businesses leeway for compliance. Still, the threat could lead large American companies doing business in China to press Mr. Biden to ease restrictions on Chinese companies. Mr Biden has not said whether he intends to press ahead with Mr Trump’s punitive actions that have contributed to the most toxic China-United States relationship in decades.
“China wants to stop the new administration from behaving like Trump,” said Professor Gao.
Under Mr Trump, Chinese companies found their access to the American market increasingly restricted. The government has banned companies around the world from using American software or machines designed by Huawei to make chips. It has imposed sanctions and blacklisted Chinese companies for systematic human rights abuses against Uyghurs and other Muslim ethnic minorities in Xinjiang.
Earlier this week, under pressure from the Trump administration and members of Congress, the New York Stock Exchange removed three major state-owned telecommunications companies from the stock exchange to comply with an executive order aimed at halting American investment in EU-affiliated companies in the Chinese military.
The new rules come just days after Secretary of State Mike Pompeo threatened additional sanctions against any person or organization involved in the recent round-up of dozens of pro-democracy figures in Hong Kong. It is not clear to what extent the new rules on restrictions might apply to Hong Kong, the Chinese city governed by its own laws but where Beijing has taken an increasingly stronger hand.
China has responded to American tariffs and sanctions with its own steps, but its actions have not been one-to-one. The United States is buying far more from China than it is selling to China, leaving Beijing with fewer opportunities to tax American goods.
The company also relies heavily on American products, including chips and software, and its economy depends in part on factories that manufacture goods for large American companies like Apple and General Motors.
Beijing has said little about its promise in 2019 to compile an “unreliable list” of foreign companies and individuals that could lead to further restrictions on business.