The Chinese Communist Party (CCP) has announced new regulations in response to U.S. sanctions, which may accelerate foreign capital exodus, according to China experts.
On March 24, China’s State Council released the order, titled “Regulations for Implementing the Anti-Foreign Sanctions Law of the People’s Republic of China,” which provides specific enforcement measures for the law that was announced in June 2021.
Wu Shaoping, a U.S.-based rights lawyer originally from China, said that the so-called Anti-Foreign Sanctions Law and its regulations by the Chinese Communist regime are primarily aimed at countering various sanctions imposed by the United States.
“At present, on a global scale, only the United States has the capability and power to impose influence on other countries’ human rights violations, breaches of international rules, or violations of U.S. law and international law. The U.S. can use its relevant laws to exert influence, thereby maintaining a normal world order,” he told The Epoch Times. “Only the U.S. can impose international sanctions now. Even the European Union is weak.”
“The CCP itself is notorious for its severe wrongdoing, which is widely known. It is often affected by U.S. laws due to its violations of international law, including its domestic human rights abuses. The enactment of this law, in my opinion, is primarily aimed at the United States.”
David Huang, a U.S.-based economic researcher and commentator, believes that the new regulations are the CCP’s response to external pressures and challenges.
“This reflects Beijing’s attempt to use an internationally recognized approach to maintain its political and national sovereignty interests in the face of external sanctions pressure,” he told The Epoch Times.
“This has accelerated [the introduction of] the ‘Regulations for Implementing the Anti-Foreign Sanctions Law,’” he said.
Seizing Foreign Intellectual Property
Analysts of the new regulations, which consist of 22 articles in total, have drawn particular attention to Article 7, which addresses Article 6 of the “Anti-Foreign Sanctions Law.”“Article 6, Item 2 of the Anti-Foreign Sanctions Law states that the measures of ‘seizure, detention, and freezing’ shall be implemented by relevant departments of the State Council, including public security, finance, natural resources, transportation, customs, market supervision, financial regulation, intellectual property, and other relevant authorities, in accordance with their respective duties and powers,” the regulations read.
“Item 2 of Article 6 also includes other types of property, such as cash, negotiable instruments, bank deposits, securities, fund shares, equity, intellectual property, accounts receivable, and other assets and property rights.”
Wu said he believes that this article allows the CCP to openly seize foreign businesses’ intellectual property.
“Many foreign companies in China bring patents that are registered in the United States or even internationally to communist China. According to this sanction measure, I can openly seize your intellectual property. Your intellectual property will no longer belong to you,” he said.
Huang shares the same view, believing that Article 7 is a devastating blow to foreign-invested enterprises, even those without physical investments in China.
“Many foreign investors, foreign enterprises, or foreign political entities may not have many investments in China that can be frozen,” he said.
“However, by freezing intellectual property, such as the intellectual property of Windows or other software, or even trademarks and brands, if sanctions are imposed, these products could be prohibited from being sold in China. Their advertisements might even be banned, which would be a devastating blow to their industries.”
Wu holds that this presents a huge risk to foreign businesses, making it difficult for them to operate in China.
“Undoubtedly, for foreign businesses, their risk levels will further increase. Many foreign companies rely on research and development and intellectual property to capture market share. If, in communist China, intellectual property can be seized at will, what kind of security do foreign businesses have? It’s as if their key profit-making assets are being taken away,” he said.
Foreign Capital Exodus
Wu further noted that if the CCP truly enforces the “Regulations for Implementing the Anti-Foreign Sanctions Law,” the exodus of foreign businesses would accelerate due to the rising risks.“For foreign businesses, the risks are increasing exponentially. As China’s relations with the international community continue to deteriorate, the friction and conflicts will only grow. This means that the risks for foreign enterprises will also rise. Therefore, [the result] will inevitably be a faster departure of foreign capital,” he said.
On the other hand, Wu believes that between U.S. sanctions on China and China’s retaliation against the sanctions, many foreign businesses, when choosing sides, will flee China simply because they dare not confront the United States.
“If the U.S. decides to implement and enforce sanctions, no company can withstand it,” he said.
“These foreign-invested companies will definitely comply with U.S. laws and not confront the U.S. The result, I believe, is that foreign businesses in China will continue to flee in large numbers. They will realize that the risks of staying there are too great. They have no idea when they might be suddenly shut down and targeted.”
Huang takes a more cautious stance.
“The response of foreign-invested companies will vary depending on the industry, scale, and their level of reliance on China,” he said.
Lower Legal Effectiveness with Propaganda Aim
Wu pointed out that the CCP issued regulations rather than legislation this time to implement the 2021 “Anti-Foreign Sanctions Law.”The former Chinese lawyer said that regulations have less legal power than legislation and can be replaced at any time, which highlights that the CCP may be afraid of foreign capital leaving on a large scale. Instead, the regulations seem to serve more as a propaganda tool aimed at a domestic audience.
“[The CCP] has an internal propaganda purpose. In the past few years, it didn’t issue formal legislation. Now, it issues a downgraded version of regulations, which shows that the CCP itself knows that if this law really faces challenges, it will be very hard to enforce,” he said.
“It’s just an internal propaganda [move], showing that ... the CCP [is] now also able to counter foreign actions and extend [its] reach through long-arm jurisdiction.”
Huang said the CCP is also seeking a new balance between maintaining its political regime and openness to foreign investment.
“Beijing is still actively attracting foreign capital now, while also strengthening its countermeasures,” he said. “It is seeking a new balance, trying to find a new balance point between maintaining the country’s political sovereignty interests and remaining open to the outside world.”
