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the idea of having to choose between the US market and the Chinese market sounds like an industry nightmare. The largest and second-largest economies, together with the EU home market, are the main pillars of export success. However, now German firms may find themselves in precisely this predicament, writes Marcel Grzanna. If China really does apply its new anti-sanctions law, they will have to do without one of the major foreign markets. The BDI also believes that this means that “a sword of Damocles” hangs over the German economy. China is sealing itself off further as a result.
Meanwhile, the government is plugging the last loopholes for capital transfers abroad: even an internet search for keywords related to Bitcoin now leads nowhere. The government is now also pulling the plug on the so-called miners. This is because the production of Bitcoin consumes crazy amounts of electricity, which the country needs for more productive applications. In general crypto enthusiasts are having a hard time in China right now. The communist state does not allow itself to be wrested from control of the financial system so easily.
Xi Jinping has further consolidated his control over the party and the state in recent years. Yesterday, the general secretary and president turned 68. That’s still young for a communist leader, and Xi is known to make no plans to ever leave office. The new German government can confidently expect to have to deal with him for quite a while yet.
Anti-Sanctions Law: for us or against us
For months, the US and China have been worsening the economic framework of global trade with mutual punitive measures. The anti-sanctions law from Beijing, which was passed last week (China.Table reported), leads to scenarios in which European and other companies find themselves in a quandary. In the worst case scenario, companies are forced to change course in their business strategy through no fault of their own. Namely, which market they will choose: China or the US and its allies in Europe.
The logic behind this stems from new legislation waved through by the Standing Committee of the National People’s Congress in Beijing. “At its core, the People’s Republic reserves the right to give companies the choice of whether or not to comply with possible sanctions against the country,” says China analyst Bernhard Bartsch of Berlin-based research institute Merics, which itself has been hit with Chinese sanctions, in an interview with China.Table. “The Anti-Sanctions Law thus provides the government with a tool to dodge sanctions and leverage to pressure foreign companies to violate.”
BDI: Law becomes “sword of Damocles” for Companies
The consequences for companies would be far-reaching. If they comply with the sanctions, they must expect to encounter significant problems in China. “The new law now gives Beijing the means to issue painful penalties. Affected companies could lose their access to the entire Chinese market,” Angela Zhang, an expert in Chinese law at Hong Kong University, told China.Table. If they did not comply with the sanctions, as Chinese law now requires, consequences in the US market and possibly in Europe would be hard to avoid.