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Russia and Global Security Risks
Chinese Sanctions: Now Official?

China’s role as the initiator of restrictive measures is becoming increasingly visible. China generally prefers to impose sanctions informally, thus avoiding open confrontation, writes Valdai Club expert Anastasia Pyatachkova. However, the political component of the sanctions in China is almost not being retouched, and the measures themselves, from unofficial and time-limited, are gradually becoming systemic and open.

There have been two important changes in China’s sanctions policy in recent months. Amid of the prevalence of informal sanctions, more and more formal ones have appeared, and the conflict with the United States provokes the introduction of systemic, long-term sanctions instead of targeted and temporary ones. In the event of an increase in international pressure on the PRC and a further deterioration in Sino-American relations, these trends are likely to intensify.

Fake it ‘till you make it

For a long time, China was considered primarily as a target of sanctions. From this point of view, the position of the PRC has noticeably deteriorated lately. The United States took action against a number of Chinese companies and organisations (including universities), students and officials, and closed the Chinese consulate in Houston. In addition to the statements about the deprivation of Hong Kong’s Special Trading Status and the signing of a law on sanctions against China due to the alleged oppression of the Uyghurs, at the level of rhetoric and possible further sanctions steps, other sensitive topics for the PRC are also under discussion – Tibet, the South China Sea, Taiwan.

New restrictions haven’t just been initiated by the United States; other countries have introduced them as well. Against the background of the border conflict with India that has unfolded this summer, a ban was introduced on the use of 59 Chinese applications (including TikTok and WeChat). At the end of July, information appeared about the addition of 47 applications to the list, and in the near future more than 250 more applications will be checked (according to some estimates, there are more than 275). Several mobile operators have announced that they would not use Chinese equipment: NTT in Japan, Jio in India, SK and KT in South Korea, and a few others. The list of countries that have banned the use of Huawei products in the creation of 5G networks has expanded (notably, the UK has introduced such a ban).

At the same time, China’s role as the initiator of restrictive measures is becoming increasingly visible. China generally prefers to impose sanctions informally, thus avoiding open confrontation. Measures, as a rule, are limited in time and are specifically targeted at certain groups of goods or areas of activity.

The first signs of the use of instruments of economic coercion in modern China date back to the mid-1990s; such measures started to be used relatively regularly by the mid-2000s, and by the 2010s, the number of cases, motives and the set of tools had begun to gradually expand. China has repeatedly imposed restrictions on Vietnam and the Philippines in the context of the escalating conflict in the South China Sea. Also, sanctions were applied against Mongolia in connection with the visit of the Dalai Lama in 2016, South Korea (in 2016-2017 after the installation of the THAAD system) and Japan (against the background of the territorial conflict in 2009-2012). A special situation has developed in North Korea, where China took part in the UN multilateral sanctions.

One might get the impression that the PRC only used sanctions against weaker countries or neighbours that are closely connected with it geographically and economically. This conclusion is not entirely correct: one example is the imposition of restrictions on the import of Norwegian salmon after the Nobel Peace Prize was awarded to the famous Chinese dissident Liu Xiaobo in 2010.

Speaking about recent examples of Chinese sanctions, two new trends can be noted: 1) formal ones appear amid the prevalence of informal sanctions; 2) the conflict with the United States has provoked the introduction of systemic long-term sanctions.

In general, the mutual restrictive measures of the PRC and the United States have been developing for a long time in the spirit of a “game of confrontation” – as if no one wanted the deterioration of relations, but it happened systematically. The peculiarity is that only one side – the United States – is more interested in a radical revision of interaction.

Of course, China has also contributed to the decoupling, and it would be wrong to portray it solely as a victim. Nevertheless, there was a noticeable desire in the PRC’s policy to minimise tensions. At the beginning of interaction with the Trump administration, China made unprecedented concessions during the negotiations on North Korea. At the time of the signing of the January trade deal, steps towards the US were also visible. When pressure on China was increasing during the pandemic, the PRC for a long time did not respond symmetrically, obviously writing off American actions as pre-election posturing. Even a few months ago, there was no certainty in the expert community as to whether China would limit itself to rhetoric or take more decisive measures.

In practice, in conditions where one side is de facto choosing to pursue conflict (in this case, decoupling), the other alone is not able to maintain cooperation in the same form. The fragile and temporary maintenance of equilibrium is possible only through increasingly unacceptable concessions, but against the backdrop of unceasing pressure or unfriendly steps, one still has to respond in the end. So, on the Chinese side, at first, there was a tightening of rhetoric (including in the media in the form of cartoons), then more specific retaliatory actions began to be taken, including, in particular, sanctions against American officials, the military-industrial corporation Lockheed Martin, the retaliatory closure of the consulate in Chengdu (excluding the previously stopped work of the consulate in Wuhan in connection with the pandemic, at the initiative of the US).

The damage from sanctions at the moment is mainly defined by experts as not very significant and temporary. This is mainly due to the interdependence of the parties. There are objective limitations on the possibilities for using the sanctions; moreover, sometimes there are ways to bypass the sanctions. The voiced steps remain at the level of political rhetoric: for example, the PRC announced the preparation of a “black list” of American companies, but measures against them have not yet been introduced. However, at least a short-term drop in the value of the companies that were hit by sanctions is inevitably recorded, and ways are being sought to replace American components in Chinese goods (for example, microchips), and companies and industries are being withdrawn from the PRC. This will have a long-term structural effect on Sino-US engagement.

Of course, bilateral relations have a large margin of safety. In particular, Chinese Foreign Minister Wang Yi noted that despite the consequences of the pandemic, 74% of American companies plan to expand investments in the PRC. Sometimes they try to find positive moments in decoupling: Donald Trump, in turn, said that a break with the Chinese economy would allow the United States to save $500 billion.

Nevertheless, the official announcement of sanctions, along with changes in strategically important documents, symbolises the clear presence of confrontational motives. If the task is to carry out decoupling, then sanctions are one of the most suitable tools for this.

At the moment, the PRC mainly uses “mirroring”: it acts reactively, albeit more rigidly. There is a noticeable expansion of the scope and instruments of sanctions in comparison with the previous period: in addition to economic and technological sanctions, political, ideological and socio-humanitarian sanctions are involved to a greater extent than before.

Signals from China may not come directly, but indirectly, through American allies. Here, the PRC feels more confident in terms of initiating sanctions. So, in response to Australia’s comment on the need to investigate the causes of the spread of coronavirus, China introduced an 80% duty on barley, and also limited beef imports. Chinese students and tourists have been advised not to visit Australia. An Australian citizen was executed in the PRC for drug trafficking. With regards to India, China is still trying to avoid a systemic confrontation. However, in the event of further steps from the Indian side, China will be faced with the need to respond.

Thus, the main danger of the current situation is not so much in the current damage, but in the institutionalisation of hostile intentions. The political component of the sanctions in China is almost not being retouched, and the measures themselves, from unofficial and time-limited, are gradually becoming systemic and open. If international pressure on China continues to increase, it will be forced to increasingly master the entire range of sanctions instruments available.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.