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China hits back at foreign sanctions on Chinese firms

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HONG KONG, CHINA - OCTOBER 24: China national flag is seen prior to the Hong Kong Sapling Cup Group B match between Eastern Long Lions and Happy Valley at the Siu Sai Wan Sports Ground on October 24, 2020 in Hong Kong, China. (Photo by Yu Chun Christopher Wong/Eurasia Sport Images/Getty Images)
The rules mean that China can strike back at countries or companies that comply with US bans such as president Donald Trump’s ban on Huawei. Photo: Yu Chun Christopher Wong/Eurasia Sport Images/Getty Images

China has fired back at the US with new rules to counter foreign sanctions on Chinese companies and citizens as economic relations between Beijing and Washington fray.

The order, which went into effect on Saturday, empowers China to tell firms and citizens to ignore foreign restrictions and sue global businesses for complying.

This means that China can strike back at countries or companies that comply with US bans such as president Donald Trump’s ban on Huawei.

Last year the US, citing national security fears, imposed restrictions on the Chinese telecom and consumer hardware giant, that deprive Huawei of critical components and could cripple its smartphone business.

Huawei also lost many relationships with global companies and countries.

In July, the UK government decided to block the Chinese firm from having a role in the country’s 5G network. As a result, British telecoms firms were instructed to remove Huawei equipment from the 5G network by 2027 and stop buying new 5G equipment from the company by the end of 2020.

READ MORE: How the US-Sino trade war is impacting global companies

The Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures are meant to counter foreign laws that “unjustly prohibit or restrict” people or firms in China from doing normal business, the country’s commerce department said.

It said that the measures were necessary to safeguard China’s national sovereignty and security and to protect the rights of its citizens and entities.

A Chinese person or organisation that is restricted by foreign legislation from “engaging in normal economic, trade and related activity with a third State or its citizens,” may report it to the commerce department within 30 days.

China’s commerce department will then assess a case for its potential violation of international law, impact on China’s sovereignty and national security, and impact on Chinese citizens.

Under the rules, “relevant government departments may provide necessary support” to a citizen or organisation that “suffers significant losses” from non-compliance with foreign laws.

While the Chinese commerce department didn’t single out any country, the new rules could see global companies put in the middle of the ongoing trade war with America.

It also puts more pressure on incoming president-elect Joe Biden, who will take over from incumbent Trump on 20 January. Biden must decide whether to maintain Trump-era restrictions against Chinese firms or not.

Meanwhile, the New York Stock Exchange (^AMZI) reversed its decision to delist three Chinese telecom firms in compliance with Trump’s orders.

It said that it dropped the plans after “further consultation with relevant regulatory authorities in connection with Office of Foreign Assets Control.” On Thursday, NYSE said it would delist American depository shares of China Telecom (CHA), China Mobile (CHL) and China Unicom (CHU).

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The world’s two biggest economies have been locked in a bitter trade war since Trump took office in 2016.

When they are not fighting over trade, technology and security, they are at odds over the coronavirus pandemic, or as Trump calls it the “China virus.”

Social media and chatting apps have also fallen victim to the ongoing tiff, with TikTok and WeChat both narrowly avoiding being banned from downloads in US app stores.

The Trump administration has accused China of unfair trading practices, intellectual property theft and using personal data from apps to spy on Americans. Beijing in turn believes that America wants to dim its rising star on the global economic stage.

A study by the United Nations Conference on Trade and Development, laid bare the impact of the trade war.

The research showed a sharp decline in bilateral trade and that consumers in the US bore the “heaviest brunt” of US sanctions on China, as importing firms were charged more, which meant higher prices for consumers.

Figures revealed that US tariffs caused a 25% export loss, inflicting a $35bn (£27bn) blow to Chinese exports in the US market for tariffed goods in the first half of 2019.

READ MORE: China implements new national security rules on foreign investment

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