US Congressional Committee Recommends China Sanctions Planning Group

On November 15, 2022, the US-China Economic and Security Review Commission (USCC) released its annual report to Congress. Among the report’s concluding recommendations, the committee proposed creating a cross-agency body tasked with drafting sanctions against China in the event of “a Chinese attack, blockade, or other hostile action against Taiwan.”

The report responds to the USCC’s mandate “to monitor, investigate, and report to Congress on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China.” It follows seven public hearings and testimonies from 74 expert witnesses from the government, private sector, think tanks, and other backgrounds. 

In addition to its recommendations, the USCC also analyzed developments in Taiwan and Hong Kong over the last year. 

A Red Line Over Taiwan

On November 14, President Xi Jinping and President Biden met for a three-hour meeting ahead of the G20 summit in Bali, Indonesia. According to a readout from the White House, Biden told Xi the US objects to China’s “coercive and increasingly aggressive actions” toward Taiwan.

According to China’s official Xinhua News Agency, President Xi Jinping responded by saying, “the Taiwan question is at the very core of China’s core interests, the bedrock of the political foundation of China-US relations, and the first red line that must not be crossed in China-US relations.” 

Chinese Defence Minister Wei Fenghe reiterated Xi’s remarks during a meeting with US Defense Secretary Lloyd Austin on November 22. “The resolution of Taiwan is a matter for Chinese people, no external force has the right to interfere,” said Wei. 

Following President Xi’s meeting with President Biden, the USCC recommended that Congress create a permanent interagency committee to develop options and create plans for the imposition of sanctions in the event of a conflict in the Taiwan Strait.

The Commission also noted the following recommendations to be of particular significance to Congress:

• Assess China’s compliance with the terms and conditions of the 1999 Agreement on Market Access
• Create an Economic and Security Preparedness and Resilience Office to oversee and set priorities to ensure resilient US supply chains and robust domestic capabilities
• Identify pharmaceutical products that use active pharmaceutical ingredients sourced from the People’s Republic of China and develop alternative sourcing arrangements
• Negotiate a prohibition on using China’s National Transportation and Logistics Public Information Platform (LOGINK) or similar systems provided by Chinese state-affiliated entities

China’s Anti-Foreign Sanctions Law

In June 2021, China introduced the Anti-Foreign Sanctions Law designed to block international sanctions imposed by the US and the EU. Under the legislation, those deemed directly or indirectly responsible for devising, implementing, or assisting in implementing sanctions imposed by foreign countries, or otherwise interfering in China’s affairs, could face sanctions.

Consisting of possible asset freezes and bans from conducting business with Chinese companies, China views the Anti-Foreign Sanctions Law as a necessary measure against the perceived threat of future sanctions against Chinese companies.

In July 2018, the US imposed tariffs on $34 billion of Chinese products, beginning an escalating trade dispute. During this time, foreign governments also heavily scrutinized two of China’s leading telecom companies. The US banned ZTE, Huawei’s Chief Financial Officer was arrested in Canada, and numerous countries began restricting Huawei products.

China’s sanctions activity reflects Beijing’s desire to respond to Western sanctions. 

Key Takeaways

Given the escalated global compliance risk, international firms must consider China sanctions as part of their AML solution. Firms should seek to integrate sanctions software updated with the latest China data and configurable to their risk tolerance. 

Similarly, a sanctions screening solution should consider non-Western characters and naming conventions to maximize accuracy and reduce false positives.