New Chinese rule to protect its overseas investment

New Chinese rule to protect its overseas investment

Beijing arms itself with a rule to become the third party wherever Chinese entities are debarred from doing business

China's State Council has approved a new rule of the Ministry of Commerce to defend legal trade rights of the Chinese companies and citizens in a foreign land. The new rule will be applicable wherever a Chinese entity is debarred from exercising its trade or commerce activities.

The new rule is bound to create heat in other countries since outbreak of Covid-19 pandemic many countries have either debarred or put stringent restrictions on Chinese companies in doing business in the lands.

The rule gives the Ministry of Commerce a freehand to act as an independent third party to investigate any "unjustified extra-territorial application of foreign legislation".

It aims to create a working mechanism consisting of several government departments to preside over such trade matters.

Article 6 of the rule has mentioned several factors that the working mechanism would look into, including legal factors, to examine if any basic international law or provisions have been dishonoured. It has also been empowered to take into consideration political factors like the potential impact of the Chinese rights, as well as security or development interests.

The new rules follow the US decision of delisting three Chinese telecom companies from the New York Exchange after the outgoing US President Donald Trump issued an executive order banning American investors from financing companies involved with the Chinese military. The Ministry of Commerce has said that such acts violate market logic.

The ministry can now deem such prohibitions as null and void if it establishes that debarring a Chinese company from doing business was unjust.

America is not the exception in banning the Chinese company from doing business over the past nine months from its territory. India has made it mandatory for any business entity to seek prior government approval before accepting foreign direct investment from countries bordering India. Though India did not name China, it impacted the Chinese companies the most.