China approved a law designed to limit foreign sanctions, called the Anti-Foreign Sanctions Law. It is their response to the trade war begun by the United States. China has been the target of restrictions in foreign trade, especially through measures taken by other countries in relation to Chinese exports and imports. The U.S. government has a list of restrictions on Chinese companies in a variety of industries; there is control over technology exports, especially regarding access to microchips, which are vital components in a variety of industries: automobiles, telecommunications, computers, and others.

The goal of the U.S. chip export control policy is to maintain the current status quo of Chinese dependency on these basic inputs. Without chip export control, China would gain substantial market share in several markets, increasing its advantage in international competitiveness.[1] Under Chinese law, if any country violates international law and the basic principles of international law, restrains or suppresses Chinese interests, justifying their actions by a variety of pretexts and their own laws, and adopts discriminatory and restrictive measures against Chinese citizens or organizations or interferes in Chinese internal matters, the Chinese government will have the right to take the corresponding countermeasures. The targets of China’s countermeasures can be people or organizations. Among these measures are: the refusal to grant and/or invalidation of visas in passports, banning entry into China and deportation; sale, seizure or freeze of personal property, real estate and/or other types of property in China, prohibitions or restrictions on organizations or people inside Chinese territory in regard to certain transactions, cooperation, and/or other activities, and other additional measures.

These rules seek to restrict the unjustified application of legislation in an extraterritorial manner (blocking rules). The Chinese Ministry of Trade is authorized by the law to impose orders to not comply with foreign extraterritorial sanctions. Furthermore, the Ministry of Trade will prepare the export control list (Unreliable List).  Based on this Chinese legislation, there are evidently geopolitical and geoeconomic risks for countries that export to China. If a country unilaterally levies any sanction that causes harm to China’s interests, it may face retaliation against its exports. As can be seen, this law is a form of self-defense by China against unilateral sanctions imposed by other governments. It is China flexing its geopolitical and geoeconomic power against hostile actions by other countries.

Therefore, it is important for global companies with activities on different continents to analyze the geopolitical and geoeconomic risk presented by this new Chinese law, including evaluation of the risks brought by new public policies in countries that are hostile to China. As a result, there are practical situations that merit attention. Initially, the Brazilian government gave indications that it was aligned with the position of the United States. The U.S. government even put pressure on the Brazilian government to exclude the Chinese company Huawei’s 5G technology. The 5G bid notice for the commercial network of mobile communications does not seem to contain any restrictions against participation by this Chinese company. However, there is a mention of a possible restriction against participation by the Chinese government in supplying technology for the Brazilian federal government’s own communication network.

Now, it is important that the Brazilian government and companies evaluate the geopolitical and geoeconomic risks in their relations with China, especially in light of the new Chinese Anti-Foreign Sanctions Law. Brazil is one of China’s main commercial partners, with exports of soy, ore, petroleum, and other commodities. Therefore, if there is any type of hostile act against China, there is a risk that sanctions will be levied by the Chinese government, with retaliation against Brazilian exports. Geopolitical and geoeconomic risk analysis needs to be done in order to correctly assess the intentions, interests, actions, and threats by governments, as well as to determine their extent. After all, any and all models of global business are subject to geopolitical and geoeconomic influence, even more so within the context of the dispute for technological leadership between the United States and China.

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Ericson Scorsim. Attorney and Consultor in Regulatory Communications Law. PhD in Law from USP. Author of the Book: Jogo Geopolítico das Comunicações 5G: Estados Unidos, China e o Impacto no Brasil, Amazon, 2020

[1] See: Khan, Saif and Flynn, Carrick. Maintaining China’s dependence on democracies for advanced computer chips. Global China. Assessing China’s Growing Role in the World. Edited by Tarun Chhabra, Rush Doshi, Ryan Hass, Emillei Kimball, Washington, Brooking Institution Press, 2021, p. 193-208.