China on Saturday issued a new order prohibiting firms from complying with foreign laws that ban 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, reported South China Morning Post (SCMP).This order comes in the backdrop of the US threatening to impose sanctions and other restrictions on any and all Hong Kong and Chinese individuals in wake of the arrests of over 50 politicians and pro-democracy advocates by Hong Kong authorities.
“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 of Commerce 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, after which 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.
According to SCMP, this development 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.
There also have been speculations that the US could also try to restrict US dollar fundraising access for Chinese firms in Hong Kong in the final days of the outgoing President Donald Trump’s administration.
Analysts said that the new measures would squeeze multinational companies between duelling compliance regimes, with firms wondering whether they should choose sides.
Furthermore, Henry Gao, an associate professor of law at Singapore Management University, said the rule was “much harsher” than he had anticipated.
This comes amid increasing tensions between Washington and Beijing, as the former has imposed a series of sanctions on Hong Kong officials and companies.
The US has also blacklisted dozens of other Chinese firms, and the Trump administration is reported to be considering prohibiting Americans from investing in Alibaba and Tencent, China’s two most valuable publicly listed companies there, SCMP reported.
On Monday, the New York Stock Exchange will delist US-traded shares of China Telecom, China Mobile, and China Unicom to comply with an executive order signed by President Donald Trump.