ExplainSpeaking | Xi’s new law: How China aims to hit back at the US and its allies

Global Times, a mouthpiece of the Chinese Communist Party, stated the following: “China’s top legislature passed the Foreign Relations Law on Wednesday, marking a milestone significance as it is the first fundamental and comprehensive foreign relations law that aims to fix the loopholes in the rule of law in foreign-related affairs amid new challenges in foreign relations, especially when China has been facing frequent external interference in its internal affairs under the Western hegemony with unilateral sanctions and long-arm jurisdiction.”

Growing US sanctions on China

It is no secret that US-China relations have been nosediving for a while, with the US complaining about Chinese trade and currency practices.

For instance, the US has often accused China of manipulating its currency — essentially keeping the yuan weak — in a bid to gain an upper hand in trade. A trade deficit with China was a key issue that President Trump talked about repeatedly.

Similarly, the US has also been concerned about China stealing US technological secrets and in October last year, President Biden unveiled a sweeping set of export bans that essentially meant that Chinese companies were not able to buy advanced microchips and related equipment.

The US’s increasing proximity to India too has been seen in the same light — that the US is hoping to use India to counter China’s rise. China’s broken relations with India since border clashes have also played their role.

The Covid pandemic saw many countries, especially the US, increasingly trying to devise a strategy to de-risk from their involvement with China.

However, this is easier said than done.

The fact is, over the past three decades, China has become the factory to the world. Moving out of China is not easy because there are no immediate and ready replacements. Few countries can boast of the human and physical infrastructure available in China. Moving out of China, even driven by geopolitical and foreign policy concerns, will not be without costs.

China’s response

Not surprisingly, China has repeatedly criticised US’ bans and restrictions, refuted allegations of corporate espionage and currency manipulation, and argued for a more open global economic order.

But its stance, too, has been becoming more and more aggressive especially since economic confrontation with the US also spills over territories such as Hong Kong and Taiwan.

For instance, on June 27, while speaking at the World Economic Forum’s Annual Meeting of the New Champions in Tianjin — also referred to as the Summer Davos — China’s Premier Li Qiang warned the western powers that attempts to “de-risk” from China could lead to fragmentation of global supply chains. He said that governments should not “overreach themselves” to influence companies to move out of China.

“We should oppose the politicisation of economic issues and work together to keep global industrial and supply chains stable, smooth and secure in order to deliver the fruits of globalisation to different countries and groups of people in a more equitable way,” he said.

The new law

According to the People’s Daily, the flagship newspaper of the Chinese Communist Party, the new law implies that “China has the right to take necessary countermeasures in accordance with the law against acts that violate international law and the basic norms governing international relations and endanger China’s sovereignty, security and development interests. The country shall formulate necessary laws, administrative regulations and departmental rules, establish corresponding working systems and mechanisms, strengthen coordination among departments, and establish and implement relevant countermeasures and restrictive measures.”

Speaking to Global Times, Huang Huikang, a professor of the Institute of International Law of Wuhan University said: “For the first time, the law states the purpose, conditions and policy orientation of the application of Chinese law in foreign relations, and stipulates principles for the measures to counter and restrictive measures against foreign countries, individuals or organizations.”

Upshot?

China hopes to beat the US as the world’s biggest economy. Becoming a technological superpower is almost a necessity for it to sustain its dominance. At the same time, it cannot let go of its existing control of being the nerve centre of global production. The actions of the US — from trade restrictions to closer ties with countries such as India — can threaten China’s rise.

China’s economy has lost its growth momentum, and the first time in several decades, grew below the global average in 2022.

It has been taking actions such as prohibiting Chinese domestic companies from buying Micron Technology Inc.’s products. Micron, a US chip maker, has just signed an MoU with the Gujarat government to set up a semiconductor manufacturing facility at Sanand worth $2.75 billion.

The new law allows China to respond to US actions even more aggressively.

Expect more fireworks from Beijing in the coming months as the economic war between the two biggest economies intensifies.

Until next time,

Udit