forcing the same companies to comply with incompatible laws
The Chinese State Council has published two decrees which do not leave much room for interpretation: One on security of industrial supply chains, signed on March 31. And another on improper extraterritorial jurisdiction, published April 13. Together they form the most explicit legal arsenal the Chinese government has yet built to combat Western sanctions, and to warn foreign companies that choosing sides has consequences. Good or bad. Why is it important. For years, China has responded to pressures from across the Pacific with tools ad hoc and implicit signals. Now it does so by decree of the Council of State, the supreme executive body. It’s actually the same written strategy as before, but now black on white. The context. The first of the documents, known internally as Decree 834, is linked to the Chinese national security law and obliges ministries and local governments to identify, optimize and protect industrial supply chains considered strategic. The immediate trigger has been the war in Iran, which has interrupted the flow of sulfuric acidurea and other chemical inputs that China needs for its industry and agricultural sector. But the document comes from further afield: it is the culmination of decades of policy of self-sufficiency in resources, from rare earths to lithium. Between the lines. The most striking thing about Decree 834 is not what it regulates, but what it threatens. It includes explicit language about China’s right to investigate and take countermeasures against any foreign actor that “disrupts the normal functioning of markets” or imposes “discriminatory restrictions” on Chinese supply chains. The definition is broad on purpose. A Western company that pressures its government to sanction a Chinese competitor could find itself in the spotlight, as It already happened with Micron in 2023. The question. The second decree is even more direct. Their Regulations on Improper Extraterritorial Jurisdiction of Foreign Countries They say that if China considers foreign regulations that affect Chinese interests illegitimate, companies that comply with them are exposed to Chinese sanctions. Put another way: If the United States prohibits you from selling to China and China considers that prohibition “improper,” you will have to choose who you disobey. Possible sanctions include fines, bans on entry and exit from the territory, and export and import restrictions. The decree establishes a formal review mechanism: companies can ask the Chinese government for an exemption if they demonstrate that compliance with the foreign standard is unavoidable. This exemption can be granted or denied, which will turn the companies themselves into negotiating leverage between governments. Like Huawei in 2018. Yes, but. If a foreign government imposes a regulation that China does not want to abide by, it can announce that it is “improper,” wait for the affected companies to ask for an exemption, and use them as bargaining chips in diplomatic negotiations. It will happen because it is predictable and because that is where the incentives fit. The background. Since the 2018 trade war and semiconductor export controls, China has built a legal repertoire of response that includes Antitrust Lawthe List of Untrustworthy Entities and the Anti-Sanctions Law. These two new decrees do not open doors that no longer existed, but they do mark them with a neon sign. The message for foreign companies that do lobbying in the United States against Chinese competitors is crystal clear. Featured image | Xataka In Xataka | China has banned another AI startup from exporting talent and research: little by little, it is “nationalizing” AI
