China’s New Foreign Relations Law: Clarifications & Analysis
By Chris Devonshire-Ellis
China has passed a new foreign relations law that strengthens the government’s legal basis for “countermeasures” against potential threats to its economic security, designed to deal with issues seen against Russia in terms of Western sanctions. The National People’s Congress approved the law on Wednesday (June 28).
There has been some Western media confusion about what this law means. In this article, we provide an English translation, provide links to the Chinese original, and discuss the salient points of the six chapters contained within this new law. It is due to take effect from July 1st, 2023.
Political Structures & Adherence To The UN Charter
The introductory chapter outlines the basic, mainly Marxist-Leninist-Chinese political structures on which the new law is based; but does contain references to “an opposition to hegemony and power politics”. This potentially builds in the potential for disputes with the United States in particular. As this ‘opposition’ is about to become legally enshrined, one can expect upcoming turbulence concerning the unipolar vs. multipolar global concepts.
However, it also confirms China’s adherence to the “Purposes and principles of the United Nations Charter” which effectively places China’s recognition of the UN as the principal global authority and not as emanating from Washington. Upcoming political US-China spats at the UN can therefore be expected.
Domestic Decision Making
This confirms the Standing Committee (SC) of the CCP as the premium authority concerning China’s foreign relations. This is currently a seven-man body, elected by the Central Committee. The General Secretary (Xi Jinping) is the chair, however, it should be noted that despite recent rhetoric from US President Joe Biden referring to China as a ‘dictatorship’, the SC makes its decisions on a collective, democratic basis. The new law states that the overall responsibility for China’s foreign relations lies with the State Council, and is responsible for the signing of treaties, while the Ministry of Foreign Affairs handles Chinese diplomacy.
It also passes some authority for foreign relations “within a specific scope“ and “according to their powers and functions” to China’s various Provincial governments, an issue of note especially to countries bordering China – which include Afghanistan, Bhutan, India, Kazakhstan, Kyrgyzstan, Laos, Mongolia, Myanmar, Nepal, North Korea, Pakistan, Russia, Tajikistan, and Vietnam. Our view is these powers will extend to trade and commercial ties but not beyond this remit.
Developing Foreign Relations
This confirms China’s intent to develop “global development initiatives, global security initiatives, and global civilization initiatives, and promotes an all-round, multi-level, wide-ranging, and three-dimensional external work layout.” These can broadly be taken as referring, but not exclusively so, to the Belt & Road Initiative, the UN Security Council, and the Global Civilisation Initiative.
This chapter refers again to the unipolar vs. multipolar systems, in that China has chosen the latter as a foreign relations principle, stating it intends to “Maintain and practice multilateralism; and participate in the reform and construction of the global governance system.” This very much implies that China’s new foreign relations policy will follow the path of global, rather than G7-style governance, and all that this implies. It directly contradicts, in fact, the US’s position of wishing to maintain global dominance. Again, this has the potential to create further economic clashes between the two.
The new foreign relations law states how it will accomplish the stated multilateralism push, by “Adhering to the global governance concept of extensive consultation, joint contribution and shared benefits, participating in the formulation of international rules, promoting the democratization of international relations, and promoting the development of economic globalization in an open, inclusive, universally beneficial, balanced, and win-win direction.” Note the reference to ‘democracy’ in international relations.
The chapter also strongly confirms China’s commitment to the UN Security Council. Of note in Human Rights, China states that it “Adheres to the principle of universality of human rights in combination with its own reality” and then goes on to state that it will “Promote the comprehensive and coordinated development of human rights, conduct international exchanges and cooperation in the field of human rights on the basis of equality and mutual respect, and promote the healthy development of the human rights cause.” In other words, China’s foreign relations law draws a direct line between human rights and economic progress.
It also confirms China’s commitments to “Actively participating in global environmental and climate governance, strengthening green and low-carbon international cooperation, building a global ecological civilization, and promoting the establishment of a fair, reasonable, cooperative, global environmental and climate governance system.” It should be noted that China is on course to meet its commitments to solar and wind power renewables five years ahead of schedule.
The chapter also contains references to handling foreign aid and grants, while stating that its foreign aid (which includes BRI loans and grants) will be based on “respecting the sovereignty of other countries, not interfering in the internal affairs of other countries, and not attaching any political conditions.” The reference to ‘respecting sovereignty’ has been picked up before in reference to the Russia-Ukraine conflict, however Russia is not a recipient of Chinese loans. There is also the caveat in that particular conflict, where Eastern Ukraine is ethnically Russian, somewhat blurring the lines of what sovereignty actually means. However, in this case, the ‘respecting sovereignty’ note can also be taken to mean not providing loans to effectively mortgage recipient nations’ ability to govern themselves and to choose their own political structures, a finger being pointed at the US position which generally invokes a commitment to democracy in return for aid.
China’s External Relations
It is this chapter that has caused the most comment from Western analysts. In it, the new Foreign Relations law points to the legal system in upholding its concept. It states China will “Advance domestic and foreign-related rule of law, strengthen legislation in foreign-related fields, and strengthen the construction of a foreign-related rule of law system.” This implies changes to China’s Foreign Investment Laws, described in some Western media as a ‘tightening’ of regulations without being privy to what such changes might be.
The new law then clarifies this in two parts.
Firstly, Article 32 states that “On the basis of abiding by the basic principles of international law and the basic norms of international relations, China will strengthen the implementation and application of laws and regulations in foreign-related fields; and take law enforcement and judicial measures in accordance with the law to safeguard national sovereignty, security, and development interests, and protect China’s Legal rights and interests of citizens and organizations.”
This has put the willies up the China negative brigade, who have jumped to the conclusion that any strengthening of Chinese laws is a negative. They misuse the word ‘strengthen’. In China, this can also be taken to mean ‘evolve’, or ‘improve’, where in the West, the word is often used in a negative concept, such as ‘strengthen defences’. It is prudent to give China some leeway here: its foreign investment laws have consistently been ‘strengthened’ over the past thirty years, with the country the second largest global recipient of foreign direct investment in 2022, attracting some US$189.13 billion, a rise of 8 percent over 2021.
In Article 33, the China naysayers really get a fright. It states that “China has the right to take corresponding countermeasures and restrictive measures against acts that violate international law and basic norms of international relations and endanger the sovereignty, security, and development interests of the People’s Republic of China. The State Council and its departments formulate necessary administrative regulations and departmental rules, establish corresponding work systems and mechanisms, strengthen departmental coordination, and determine and implement relevant countermeasures and restrictive measures.”
It doesn’t elaborate on what these measures might be, rendering fears somewhat subjective. However, the related, China Foreign Investment Law of 2019 provides a clue. It states that “The Foreign Investment Law establishes a general principle that China will not expropriate foreign investment. However, in cases where expropriation of foreign investments happens in exceptional circumstances for the public interest, fair and reasonable compensation will be payable to foreign investors.”
So, what does this mean? Firstly, it is quite clear that should China be subjected to arbitrary sanctions, or even tariff measures (such as those imposed by countries and areas such as the United States or European Union, and as were imposed upon Russia and Iran among others) without going through ‘international laws’ (such as WTO dispute mechanisms) then China will instigate corresponding measures. It doesn’t state what these would be as these would presumably be dependent upon the sanctions measured imposed upon it.
However, Beijing is very serious about taking such countermeasures should anyone place sanctions upon China. It further states that it “Has the right to take necessary diplomatic actions such as altering or terminating diplomatic and consular relations in accordance with the treaties and agreements concluded or acceded to, the basic principles of international law and the basic norms of international relations. We will take measures to implement binding sanctions resolutions and related measures made by the United Nations Security Council in accordance with Chapter VII of the United Nations Charter.” This is strong language.
But – what is somewhat reassuring here is that the law refers to ‘countermeasures’ as opposed to ‘measures’, meaning that someone has to impose sanctions on China first. China does not state it will take the initial move in placing sanctions, and implies it would instead work through the existing, established global dispute resolution mechanisms. The ‘China Risk’ here therefore does not emanate from China – the ‘China Risk’ is dependent upon what lawmakers in the United States and Europe might do. The fingers of China’s responsibility as concerns sanctions therefore point directly back to Washington, Brussels, London and others and are not of Beijing’s making. In this sense, the China risk depends upon how foreign investors perceive their own governments’ strategies towards China, and not upon China per se.
Elsewhere, this Chapter refers to the usual ‘One-China Principle’ concerning Taiwan, as well as the ‘Five Principles For Peaceful Co-Existence’ which were originally formulated in 1953 by then Premier Zhou Enlai with assistance from Indian philosophers. They are: “Mutual respect for sovereignty and territorial integrity, mutual non-aggression, non-interference in each other’s internal affairs, equality and mutual benefit, and peaceful coexistence.”
In terms of Consular and Diplomatic Foreign Officials and Properties, the law has this to say “China grants corresponding privileges and immunities to foreign diplomatic missions, officials of foreign countries, international organizations and their officials in accordance with relevant laws and treaties and agreements concluded or acceded to. We grant immunity to foreign countries and their properties in accordance with relevant laws and treaties and agreements concluded or acceded to.”
This means that any Boxer Rebellion-style aggression towards foreign powers is completely out of the question.
The Foreign Relations Law also states China’s position as concerns foreign nationals saying that: “China protects the lawful rights and interests of foreigners and foreign organizations in China in accordance with the law. The state has the right to allow or refuse entry, stay and residence of foreigners, and manage the activities of foreign organizations within the territory according to law. Foreigners and foreign organizations in China shall abide by Chinese laws and shall not endanger China’s national security, harm public interests, or disrupt public order.”
As I was once advised, long ago “Remember Chris, you are a guest in our country. Please respect that as you would a guest in your home.” It was great advice, and my business has been operating in China for over 30 years based on that simple coda. China’s Foreign Relations Law merely states the same.
The Chapter finishes with a flourish of international legal and security cooperation issues, in which Beijing actually reaches out, stating that “China strengthens multilateral and bilateral dialogue on the rule of law, and promotes exchanges and cooperation on the rule of law with foreign countries. We conduct international cooperation with foreign countries and international organizations in the fields of law enforcement and justice in accordance with the treaties and agreements China has concluded or acceded to, or in accordance with the principle of equality and mutual benefit.
China will deepen and expand the working mechanism of foreign law enforcement cooperation, improves the judicial assistance system and mechanism, and promotes international cooperation in law enforcement and judicial fields, and will strengthen international cooperation in combating transnational crimes and anti-corruption.”
All of which seems fair enough.
Foreign Relations Guarantees
This basically confirms China’s financial commitment to its foreign relations, including a comprehensive guarantee system for foreign affairs, and strengthening the ability to develop foreign relations while safeguarding national interests. The ‘fund guarantee mechanism’ “is to be compatible with the needs of developing foreign relations and the level of national economic development” and appears to refer again to foreign aid policies.
Elsewhere the law proposes the “building of talent teams for foreign affairs” – meaning China will recruit personnel to its various Foreign Affairs institutions, while on a cultural level “take measures to promote the cultivation, use, management, service, and guarantee of talents, promote to the world a better understanding of China, and to promote exchanges and mutual learning among human civilizations.”
The final, sixth chapter merely refers to the law’s effective implementation: July 1st (this Saturday).
Apart from Articles 32 and 33, the new China Foreign Relations Law doesn’t really contain anything new, it merely spells out China’s terms of engagement, most of which are clarifications of already understood protocols. It doesn’t contain any aspects which are detrimental to foreign investment in China, nor the existing rights of foreigners in the country.
However, what Articles 32 and 33 do spell out is that should other nations or trade blocs – and this can be expressly read to mean the United States, European Union, and the United Kingdom among others – impose arbitrary tariffs and especially sanctions upon China ‘without reference to international laws’ then China will seek to impose countermeasures. That is not an offensive foreign relations policy, it is a defensive one.
In terms of what it means for foreign investors, of those looking at China, it means that in the Western, largely G7 group of countries, businesses investing from these need to assess the China Risk not in China terms, but in the political risk inherent within their own governments’ attitudes towards China – and how this is expected to develop. That is an issue to be discussed and analysed in boardrooms throughout the West – and should contain China analysis as well (my firm, Dezan Shira & Associates, can provide such intelligence).
However, like all political shenanigans, there is always a get-out clause as well. Countries such as Singapore are highly unlikely to impose sanctions upon China, no matter what the West does. Singapore (as do all other ASEAN countries) has a Free Trade Agreement with China, while Dubai, as part of the GCC, is negotiating one. Although locational choices should be considered, just because the West imposes sanctions or tariffs doesn’t mean everyone else will follow suit. This means, that as an Anti-Western China sanctions hedge, establishing or using an alternative conduit to access the China market could be the way ahead should diplomatic tensions rise.
Chris Devonshire-Ellis is the Chairman of Dezan Shira & Associates and has a 30-plus-year career advising foreign investors in China and Asia. Please email him at email@example.com or visit the firm’s website at www.dezshira.com
An English-language pdf version of China’s Foreign Relations Law in full can be downloaded here.
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China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at firstname.lastname@example.org.
Dezan Shira & Associates has offices in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, Dubai (UAE), and Russia, in addition to our trade research facilities along the Belt & Road Initiative. We also have partner firms assisting foreign investors in The Philippines, Malaysia, Thailand, Bangladesh.
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