An anti-sanctions law implemented by the Chinese government last June and slated for Hong Kong sounded the alarm bells and represented the latest development amid growing tensions between China and the United States. The law came amid the United States imposing several new rounds of economic sanctions against China, which in turn elevate new security restrictions and an anti-sanctions list against individuals and businesses operating in the country.

However, the Chinese government recently announced that the new law will not be imposed on Hong Kong … at least for now. This has provided temporary relief to businesses and financial institutions around the world, but the political and economic ramifications of the proposed law (and knowing that it could still be implemented in Hong Kong in the future) hangs in the balance. make you feel.

In this article, we’ll explore the details of this anti-sanctions law, why China has decided to at least temporarily suspend the imposition of the law against Hong Kong, and how the law represents the overall Chinese government’s “long arm” policy. »Competence in the ongoing struggle between the two largest economies in the world.

What are the fears surrounding the anti-sanctions law?

China’s broad anti-sanctions law was passed in general response to sanctions imposed on China by the United States, Canada, the United Kingdom and the European Union. These sanctions were introduced in the wake of China’s widely condemned abolition of democratic elections in Hong Kong and the mass internment of Muslims living in Xinjiang province.

Article 1 of the new law implemented last June aimed to preserve “national sovereignty, security and development interests”. It gave the Chinese government the legality to take action against foreign organizations (or even individuals) engaged in what Beijing would consider “discriminatory restrictive measures that violate international laws and basic standards.”

In other words, it means that foreign companies operating in China could be punished for staying in compliance with the requirements set by foreign countries but the Chinese government decides that they are detrimental to its own interests.

The exact details of what this law means for businesses and businesses are, to say the least, a bit vague. For example, could Canadian companies operating in China and also working to stay PIPEDA (Personal Information Protection and Electronic Documents Act) compliance instead find themselves violating “development interests?” »Dictated by the Chinese government?

The only thing that is not vague is that the risk of companies not complying with Chinese laws is much greater today than before. Since the intensification of the trade war between the United States and China under the Trump administration, the Chinese government has pursued an aggressive policy of increased state control over the economy.

This included measures such as the merger of state-controlled companies, requiring all companies operating in China to apply for Beijing’s seal of approval before providing data to companies and governments abroad, cracking down on the use of cryptocurrencies in the country, and (in the case of the new sanctions law) imposing strict sanctions on companies for non-compliance or applying sanctions imposed by other countries.

Examples of sanctions the Chinese government could impose on companies or individuals found to be “guilty” include seizure of assets, civil lawsuits, visa denials, deportation or imprisonment. Meanwhile, financial institutions and international organizations around the world are forced to choose between following the compliance regulations of the United States and its allies on one side and China on the other. As an example, companies operating in Hong Kong would be forced to follow US sanctions only to face lawsuits from Beijing as a result … at least until it was announced that the law would be not applied in Hong Kong.

Why did China decide to suspend the law for Hong Kong?

Beijing announced in early October that the new anti-sanctions law would not be imposed on Hong Kong, at least for now. This was good news for global banks and businesses around the world, and especially for those operating in the Asian financial sector.

Supposedly, the move was made when Hong Kong-based financial executives spoke forcefully to Beijing about their concerns that the implementation of the law had collapsed Hong Kong’s financial markets. (whose effects would have reverberated on China and other Asian countries as well).

Indeed, forcing Hong Kong companies in the midst of the US-China trade war, and especially at a time when the city’s financial markets have already been hit hard by the Chinese government’s crackdown, would likely have resulted in more Foreign investments. in rival financial sectors like Singapore. The result, at an absolute minimum, would likely have been a destabilization of the Hong Kong economy.

Another issue raised was that legal advisers to legal and financial firms in Hong Kong could face prosecution if they advise organizations applying foreign sanctions or fail to apply China’s own anti-sanctions law.

That being said, the National People’s Congress Standing Committee is due to meet in late October, and a vote on imposing the anti-sanctions law against Hong Kong is now awaiting further study by Chinese officials. In other words, you can rest assured that the Chinese authorities are investigating whether the imposition of the anti-sanctions law against Hong Kong would be financially feasible … or how the law can be written or enforced in a way that does not frighten people away. Foreign investments.

China v. Long-armed jurisdiction

China’s anti-sanctions law can broadly be seen as a counterattack to the new sanctions imposed by the United States. China has already demonstrated on several occasions that it has no problem sanctioning American companies and corporations.

For example, the government has put in place sanctions against the aviation conglomerates Lockheed Martin and Boeing for their arms sales to Taiwan. Both companies have a long history of selling their products to China, as the country already has the world’s largest fleet of Boeing 737s, for example.

This is an example of how companies or businesses that rely heavily on U.S. financial systems are still equally vulnerable to Chinese regulations. All payments, transactions or operational processes carried out in China or in a territory claimed by China are subject to Chinese law which has become much stricter and more severe.

And as new tariffs and retaliatory tariffs are imposed by the two countries, the base costs of purchasing goods have increased. In fact, it can be argued that the owners of American small businesses are the real victims of the economic struggle between the United States and China. Large businesses and financial firms are more resistant to tariffs than small and medium-sized businesses, which have been hit the hardest.

This has been made worse by lockdowns from the pandemic. According to a recent survey by Freshbooks, more than two-thirds of business owners surveyed said they were extremely concerned about the financial impacts of the pandemic. The uncertainty about the future of small business owners is just as great if not greater than that of corporations and financial institutions.

China’s anti-sanctions law, perhaps, can be best viewed not only as the next strike in the US-China trade war, but also as part of the government’s policy to oppose it. interference by the long-armed court in its economy. In other words, the anti-sanctions law is not just a retaliatory measure against the sanctions implemented by the United States and the EU.

Instead, it’s China telling the world that organizations and businesses need to adhere very closely to Beijing’s goals and rules (rather than Washington’s), with stiff penalties if they don’t. -respect. Will companies bet on the United States or China? We don’t have any actual use cases to answer this question yet.

What is the result ?

Trade and financial investment have become a battleground of confrontation rather than collaboration between the United States and China. Hong Kong was poised to become the last front in the economic conflict, and while China may have at least temporarily withdrawn the law from being imposed on the city, that ultimately means nothing in terms of what might then happen in the very near future.


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