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Tools of trade

 The Anti-Foreign Sanctions Law states that if foreign entities implement sanctions that hurt China, they can be subjected to penalties.

Statesman News Service |

The global debate on the frictions between the America and China have focussed primarily on USled trade sanctions against China. It would be useful, for a change, to focus on the sanctions imposed by China against its adversaries. In June 2021, when Beijing enacted the Anti-Foreign Sanctions Law allowing Chinese authorities to launch countermeasures against entities they believe have harmed the communist state, it confirmed for many a shift in China’s tools of trade, as it were. Increasingly, says Carnegie Senior Fellow and former World Bank China Director Yukon Huang, Beijing is using sanctions to communicate its unhappiness with other countries, particularly America and its allies. The factors that influence China’s decisions to implement economic sanctions and its implications are significant.

The Anti-Foreign Sanctions Law states that if foreign entities implement sanctions that hurt China, they can be subjected to penalties. This follows the introduction over the past couple of years of Chinese versions of several US regulations ~ including an export or trade law and an entity list ~ allowing China to penalise foreign companies for actions interpreted by Beijing as contrary to its interests, adds Huang. Of course, unlike in democratic countries, an absolutist state can use its coercive powers at any time. But the fact that China is codifying its powers and giving them a legal basis implies it is in the game for the long run. The backdrop is important. Experts say that as China dramatically increased its overall export volumes at the beginning of the 21st century and took on a central role in critical supply chains, it began to gain the clout it needed to leverage sanctions.

This strategy of imposing costs on adversaries ~ individuals, companies, and states ~ using restrictive trade and investment measures is a massive change from earlier decades when China would typically express its “unhappiness” with a foreign nation by banning cultural exchanges when it did/said something the Chinese Communist Party did not approve of. One level up, when Beijing thought its “core interests” ~ Tibet, Taiwan, and the like ~ were being impacted, it would trigger diplomatic and economic actions to signal displeasure. But there was nothing like the architecture of punitive sanctions at their disposal which the Chinese leadership now possesses. Having assiduously built its power premised on economic liberalisation and enhanced military heft over the decades beginning in the 1970s, China is now unapologetic about projecting its power.

The question analysts are grappling with in these changed circumstances is whether Chinese sanctions or the threat thereof could result in altering the policies of entities against which they are imposed or threatened. When it comes to individuals and businesses, the answer to that question in at least some cases would be in the affirmative. But sovereign countries do have the wherewithal to withstand such actions and explore alternatives. Provided, of course, they are not dependent on Chinese investment for growth and do not need Beijing’s military-poitical-diplomatic support to meet their own security challenges.