11 Jan 2021
China on Saturday issued a new order to prohibit firms from complying with foreign laws banning transactions with Chinese companies and individuals, effective immediately.
The so-called Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures apply to circumstances that “improperly prohibit or restrict” Chinese individuals, companies, and institutions from conducting normal economic, trade, and related activities with parties from the third countries, according to the Ministry of Commerce.
“[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,” the ministry said.
Under the new rules, Chinese individuals or institutions should report to the ministry within 30 days of their business being affected by foreign compliance laws.
The authorities will assess “whether the compliance violates international law and the basic norms of international relations” and the possible impact on “China’s national sovereignty, security and development interests”.
If the conditions are met, the ministry will issue an injunction against recognition, enforcement, and compliance with the foreign laws and measures. The reporting process will be confidential if necessary, according to the rules.
Article 8 of the rules says individuals and entities can apply to the ministry for an exemption from the injunction, and a decision on the application should be made within 30 days.
The Chinese government will also take countermeasures if necessary.
The order is the latest in a string of Chinese efforts to offset the impact of US trade actions, including Beijing’s unreliable entity list released in 2019, a move also partly aimed at raising the cost of compliance with US export controls.
Meanwhile, the United States this week threatened new sanctions on Hong Kong and mainland China over the arrest of more than 50 opposition politicians in a dawn raid.
There has been some speculation that the US could also try to restrict US dollar fundraising access for Chinese firms in Hong Kong in the final days of the Trump administration.
Analysts said the ministry’s new measures would squeeze multinational companies between duelling compliance regimes, with firms wondering whether they should choose sides.
By Cissy Zhou, South China Morning Post, 9 January 2021
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