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China’s New Commerce Rules Fight Back Against US Sanctions

China’s Commerce Ministry has unveiled new rules that prohibit companies from complying with sanctions it deems “unjustified” — regulations that, if enforced, could take the teeth out of some U.S. diplomatic measures.

The introduction to the rules, posted on a Chinese government website in English, states they “are formulated in accordance with the National Security Law of the People’s Republic of China and other relevant laws, for the purpose of counteracting the impact on China caused by unjustified extra-territorial application of foreign legislation and other measures, safeguarding national sovereignty, security and development interests, and protecting the legitimate rights and interests of citizens, legal persons and other organizations of China.”

The order goes on to state that Chinese citizens or companies must report any compliance with foreign government sanctions, and in some cases may be compensated if the cost of doing so is substantial. Failure to report compliance with foreign sanctions could lead to fines or other punishments.

The Financial Times quoted Bert Hofman, director of Singapore’s East Asian Institute, as having said that if enforced rigidly, the new rules could leave “foreign, especially U.S., companies in China in a real bind.”

Henry Gao, a law professor at Singapore Management University, told the New York Times: “This basically puts many big companies between a rock and a hard place, because they either have to decide to comply with U.S. sanctions or with the Chinese rules … and either way, they are going to lose one of their biggest markets.”

The new measures come as the administration of outgoing U.S. President Donald Trump shows an appetite for continuing to move against what it has characterized as security threats posed by some Chinese companies.

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