China is expanding its toolkit to counter foreign sanctions and export controls, placing multinational companies in the line of fire as Beijing, Washington and Brussels exchange tit-for-tat punitive measures.

Since March, Beijing has passed two new regulations that expand its ability to retaliate against foreign entities deemed to have threatened its supply chain security or enforced sanctions with “improper extraterritorial jurisdiction”.

A third law, still in draft form, would allow Chinese prosecutors to bring cases against foreign organisations and individuals whose “unlawful acts harm the country’s national interests or social public interest”, according to state media.

James Hsiao, a Hong Kong partner with the multinational law firm White & Case, said that firms are concerned about how to comply with opposing rules and regulations. “Some companies have expressed some concern that these measures could affect ordinary commercial transactions, particularly where companies face potentially conflicting legal obligations,” Hsiao told Al Jazeera.

Firms could face fines, visa cancellations, asset freezes, investment restrictions and curbs on the import or export of goods from China if they implement measures with “improper extraterritorial jurisdiction” under State Council Decree No. 835, which was passed in April.

Under State Council Decree No. 834, passed in March, companies can face penalties if they “disrupt, undermine or discriminate against China’s industrial or supply chains”.

These changes are likely to complicate firms’ efforts to adhere to Western sanctions and assess supply chain risks, exposing them to “increased scrutiny where business decisions or compliance measures could be perceived as implementing foreign discriminatory or otherwise restrictive measures”, according to the US multinational law firm Paul Hastings.

Hanscom Smith, a senior fellow at Yale Jackson School of Global Affairs, said the expanded regulations should be seen as a sign of things to come. “In a ‘rule by law’ system like China’s, regulations are a form of signalling and won’t necessarily be applied uniformly,” Smith told Al Jazeera.

Beijing-based advisory firm Trivium China said in a March research note that foreign companies will be “increasingly caught between an American rock and a Chinese hard place”.

Since introducing its “Unreliable Entities List” in 2020, China has built up its arsenal of measures to counter foreign sanctions and export controls, which Western capitals have imposed in response to claimed national security threats and alleged human rights abuses in places such as Hong Kong and Xinjiang.

In May, Beijing for the first time invoked its 2021 “blocking law” to bar Chinese citizens and companies from complying with US sanctions imposed on Chinese “teapot” oil refineries for buying Iranian oil.

Source: www.aljazeera.com