driving the day
1. MofCom moves to block foreign sanctions
On Saturday, the Ministry of Commerce (MofCom) issued new measures aimed at protecting Chinese companies and citizens from having to comply with “unjustified” foreign sanctions.
Spoiler alert: MofCom didn’t mention the US by name, but there’s no question these rules are aimed at the growing roster of American sanctions.
But there’s a big caveat:
- The policy is aimed only at extra-territorial, or “secondary” sanctions.
- These restrict business between Chinese entities and those of a third country subject to foreign sanctions (MofCom 2).
- Examples include US measures restricting Chinese financial institutions from doing business with Iran or North Korea.
Under the new rules (Bloomberg):
- China can direct businesses or individuals to ignore extra-territorial foreign sanctions.
- If enforcement of foreign secondary sanctions results in losses, companies can sue for compensation in China’s courts.
Similar statutes have already been adopted a number of other countries (Caixin):
- “The fact that China hasn’t had a clear mechanism until now to block the effect of foreign sanctions is itself notable.”
- “[T]he EU blocking statute has been in place since 1996.”
Get smart: These rules have likely been in the works since the 2018 detention of Huawei CFO Meng Wanzhou on charges linked to US sanctions on Iran.
Stay tuned: We’ll learn a lot more about these measures when they are put into action.
2. Top cops focus on economy
On Saturday, top law enforcement officials met to discuss their priorities for the coming year.
Some context: In Party-speak, the law enforcement system is referred to as the “political and legal affairs system.” It includes the judiciary, police, security services, and the People’s Armed Police, a paramilitary force focused on internal security.
The number one priority for 2021: Having the right political orientation.
What that means: Law enforcement officials need to keep in mind that their work is in the service of strengthening the Party’s grip on power.
Priority number two: Economic development.
- Yeah, you heard right. China’s cops need to foster economic growth.
The mission (China Peace):
- “Focusing on creating a market-oriented, rule-of-law based, and international business environment, we should promote the improvement of relevant laws and regulations, severely punish relevant crimes in accordance with the law, and strengthen the enforcement of anti-monopoly…laws.”
Chinese tech companies take notice.
Authorities are also looking to up their long-arm jurisdiction game:
- “We should speed up the formation of a coherent legal system for the extraterritorial application of Chinese laws.”
Get smart: It will be a massive headache for companies – both foreign and Chinese – if authorities start applying Chinese law to activities outside of China.
3. Legally bonded
Yesterday, Xinhua released the Plan to Build the Rule of Law in China (2020-2025).
Some context: Back in November, Xi Jinping held a landmark Party conference on building law-based governance to kickstart this initiative (see November 18 Tip Sheet).
- This first-of-its-kind document emerged from discussions held at that meeting.
The plans covers a lot of ground and includes sections on (Gov.cn):
- Building respect for the constitution
- Developing more legislation governing national security, internet finance, big data, and cloud computing
- Placing checks on the exercise of administrative power
- Promoting the fairer application of judicial power
- Assessing the progress of the rule of law initiative
- Governing the Party by more consistent rules
And this is…um…interesting:
- The plan pledges to explore a detailed strategy for the application of “One Country, Two Systems” in Taiwan, in a bid to push forward the process of unification.
More context: Xi revealed that he wanted a One Country, Two Systems plan for Taiwan last January.
Get smart: This is an indication that Xi Jinping is losing patience with the status quo vis-à-vis Taiwan.
Get smarter: It will be extremely hard, if not impossible, to sell a peaceful reunification plan to Taiwan.
4. Legislative power rising, administrative power declining
Thought we were done talking about the Plan to Build the Rule of Law in China (see previous entry)?
- It’s like you don’t even know us.
China’s legislatures are set to get supercharged in the next five years.
According to the document:
- Civil and military authorities are now subject to constitutional review by central or local legislatures when their rules touch on constitutional issues.
- Local legislatures will be empowered to review local government regulations for legality.
- Legislatures will meet more frequently to review and approve legislation.
The Party also wants to put more checks on the power of administrative organs by:
- Nullifying unfair rules against private businesses
- Correcting abuses of administrative power aimed at suppressing competition
- Imposing harsher penalties for selective or predatory law enforcement
- Consolidating mechanisms for the public, including businesses, to review administrative decisions
Get smart: The rebalancing of power toward legislatures and away from administrative bodies has been ongoing for a few years.
Get smarter: It’s easy to dismiss China’s legislatures as mere rubber stamps, but their influence is growing.
5. Li pushes for energy security during winter
Last Friday, Premier Li Keqiang did his thing – chairing the State Council executive meeting.
Top of the agenda: Ensuring stable energy supply through the winter.
Some context: Many parts of China are having the coldest winter in decades.
- Last Thursday, Beijing recorded its coldest temperature in more than half a century.
More context: The extra cold weather and increasing power demand for heating has led to energy shortages in some provinces.
To ensure ample energy supply, Li urged officials to:
- Mobilize full-capacity production of coal, electricity, and natural gas
- Fully employ gas storage facilities to shore up emergency supplies
- Tap into potential new coal sources and draw on coal reserves
- Coordinate the use of different power types to ensure sufficient energy supply during peak usage hours
- Ensure smooth cross-provincial and cross-regional electricity transmission
Li also had some longer-term asks, including:
- Faster development of natural gas and coal storage facilities
- Establishing a greater role for coal power in meeting peak electricity demand
Get smart: Ensuring adequate energy supply is not just a winter issue, but a long-standing policy priority.
Get smarter: Power shortages during winter tend to scare officials into doubling down on traditional energy at the expense of renewable energy.
6. Sunlight is the best disinfectant
The State Council executive meeting didn’t just focus on securing the winter energy supplies (see previous entry).
Also on the agenda:
- Containing the latest outbreak of COVID-19
ICYMI: Ol’ Rona has been making a comeback in China. Last week, authorities reported:
- 279 domestically transmitted symptomatic cases, four times as many as the previous week
- 278 domestically transmitted asymptomatic cases, eight times as many as the previous week
More context: With Chinese New Year and its attendant travel rush just around the corner, authorities are understandably worried about a major resurgence.
- On Sunday, the State Council inter-agency mechanism for COVID-19 prevention and control assembled a special team for new year travel – led by transportation minister Li Xiaopeng.
Li believes that transparency is the key (Gov.cn):
- “The key point [for epidemic control] is to…publish information in an open and transparent manner, and never allow underreporting.”
- “The State Council’s joint prevention and control mechanism should strengthen the guidance and coordination of local agencies…to stay transparent and curb the spread of outbreaks.”
Get smart: local officials are not psyched about the prospect of reporting an outbreak in their jurisdiction. Beijing will need to work hard to keep them honest.