Foreign businesses shocked by rollout of China's anti-sanctions law

China’s quick rollout of a law against foreign sanctions has left European and American companies shocked and facing “irreconcilable” compliance issues, two top business groups said Friday, despite Beijing saying the move would unlikely impact investment.

The law came into effect on Thursday, adding to China’s toolbox as it builds its defences against US and EU pressure over trade and human rights.

The move also came just a week after US President Joe Biden expanded a blacklist of Chinese companies in which Americans are not allowed to invest — allowing Beijing to now hit back at those who formulate or comply with foreign sanctions.

“European companies in China are shocked by the lack of transparency and speed of this process,” European Chamber president Joerg Wuttke told AFP, referring to the passing of the new law.

With the fresh rules prohibiting organisations from implementing what Beijing deems discriminatory and restrictive measures, “foreign firms remain very much stuck between a rock and a hard place,” he said.

American Chamber of Commerce chairman Greg Gilligan cautioned that the new law “presents potentially irreconcilable compliance problems for foreign companies”.

Rushing through a new law without an opportunity for public comment severely jeopardises foreign investor confidence in China’s legal system as well, he added.

But Chinese foreign ministry spokesman Wang Wenbin told a regular press briefing on Friday he did not see a definite link between the new law and foreign investment.

“If anything, the enactment of the anti-foreign sanctions law provides a predictable legal environment… for foreign companies operating in China,” he said.

Wuttke, however, warned that the action was not conducive to attracting investment, or in reassuring companies that “already feel they may be used as sacrificial pawns in a game of political chess”. 

“There is a real concern that this will further destabilise EU-China relations,” he said.

In the European Chamber’s latest business confidence survey released this week, 41 per cent of respondents said China’s business environment had become more politicised last year.

Most reported they expect the situation to remain the same or deteriorate over the coming year.

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