Asia St: What China’s New Anti-Sanctions Law Could Mean for Companies

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What China’s New Anti-Sanctions Law Could Mean for Companies 

June 22, 2021

The Great Hall of the People in China (Photo Credit: Wikimedia Commons).

BGA’s China team wrote an update to clients on China’s new anti-sanctions law passed on June 10.  The update addressed the significance of the development as well as its potential implications for foreign companies and other key affected stakeholders.

Context

The law, known as the Anti-Foreign Sanctions Law and passed by the China’s National People’s Congress Standing Committee on June 10, seeks to punish foreign firms that comply with international sanctions on China.

The move is widely recognized as retaliatory because it follows international sanctions that the United States and Western countries imposed on China for human rights abuses in Xinjiang and for undermining democracy and civil liberties in Hong Kong.

Significance

The new anti-sanction law establishes the legal framework for China to sanction companies that comply with U.S. or EU sanctions that target Chinese individuals, government entities and companies.

The law is seen as providing the legal basis for earlier regulations issued by Beijing, including the “unreliable entity list” last year and the “blocking statute” this January. These moves had initially been viewed as lacking legal basis.

The law is largely a political statement and will likely be used to target foreign companies aggressively implementing foreign sanctions and relevant U.S. government officials involved in the design and implementation of U.S. sanctions law.

Implications

The new law will have some supporting infrastructure. This includes a new leading group to coordinate and enforce the new law, with representatives from the foreign and commerce industries as well as the National Development and Reform Commission.

While we can expect all future announcements to include an explicit reference to the new anti-sanctions law, the exact impact of the law remains to be seen. It will be contingent on how the Chinese government chooses to enforce the law and which companies it will target — both of which are political decisions.

Companies and individuals may be increasingly forced to pick sides between the Chinese market or the U.S. and European markets if the retaliatory legal context remains.

The BGA China team will continue to keep clients on updated on new developments as they occur. If you have any questions or comments, please reach out to BGA China Advisor Eric Wang at ewang@bowergroupasia.com.