The China Question

www.worldecr.com 5 ThE ChInAquESTIOn CHINA 1 Figure 1: Current U.S. National Security Toolkit Export Controls Other Measures Emerging and Foundational Technologies CFIUS / FIRMMA Xinjiang Customs Orders Supply Chain Executive Orders National Security Tariffs De Minimis Rule Foreign-Produced Direct Product Rule License Exceptions (CIV, APR) Military End Use/User & Military Intelligence End Use/User Rule Hong Kong Decertification Entity List Deemed Exports Enforcement Priority Other Export Control Regimes ( e.g., DOE) Immigration Hong Kong Sanctions SDN Designations (e.g., human rights) Sanctions IP Theft Prosecutions ICT and Connected Software Executive Orders EO on Investment in Chinese Military Industrial Complex H DoD Lists Under NDAA FY99 2 H on China April – May 2020 • TrumpEOonbulkpower system • BISmilitaryenduse/user(MEU) rule • BIS eliminatesCIV • Foreign-ProducedDirectProduct (FPDP)ruleexpanded forHuawei • EntityListadditions (30+) June-July 2020 • TrumpEOonHongKong • BIS suspendscertain licenseexceptions forHK • BISFAQs forMEU rule • EntityList additions (11 including XPCC) • OFAC sanctionsXPCC • DOD issues listofChineseCommunist MilitaryCompanies (“CCMCs”) Aug-Sept 2020 • TrumpEOsonTikTok/WeChat • BIS tightensHuaweiFPDP rule • EntityListadditions (24) • OFACHongKongdesignations • DODexpandsCCMC list Nov-Dec 2020 • TrumpEOon investment inChinese CommunistMilitaryCompanies • BIS issues listofcompanies forMEU Rule • EntityListadditions (75+ including SMIC) • BIS removesHK fromCommerce CountryChart • OFACHongKongdesignations • DODexpandsCCMC list Jan 2021 • TrumpEOoncertainChinesepayment andotherapps • Commerce issues InterimFinalRules related to ICTSEO • BIS issues InterimFinalRules related toMilitary IntelligenceEndUsers • OFACFAQsandGLs forEOon investment inCCMCs • DODexpandsCCMC list February – June 2021 • BidenEOon securingsupplychains • BidenEOon connectedsoftware • BidenEOonChineseMilitary IndustrialComplex • Bidenallows InterimFinalRules related to ICTSEO tocome intoeffect • EntityListadditions (7+ including XPCC) • OFACupdatesFAQs forEOonChinese Military IndustrialComplex • Presidential action • Commerce/BIS action • Treasury/OFAC action • Defense Department action Source:Hogan Lovells Figure 2. Continued escalating trade controls restrictions on China Figure 1. Current US national security toolkit Biden administration continues Trump’s legacy of trade control restrictions on China Since taking office in January 2021, the Biden administration has continued the Trump administration’s legacy of expansive US national security restrictions on China, writes Ajay Kuntamukkala, a partner in the DC office of law firm Hogan Lovells . While the Biden administration has adopted a more measured tone and has sought the cooperation of traditional US allies, it has signaled that it intends to continue a robust approach to countering perceived national security threats from China. Rather than reversing course, the Biden administration has doubled down on the Trump aministration’s aggressive national security policies related to China, which included executive orders, regulations, and other measures imposing restrictions on the transfer of technology and items to China and Hong Kong; prohibiting investments and other activities involving Chinese parties associated with the Chinese military and intelligence establishment; prohibiting transactions involving China that pose a threat to US supply chains and information and communications technology infrastructure (including certain Chinese apps); and sanctioning specific parties involved in human right abuses, undermining democracy in Hong Kong, and the ongoing fusion between the civil and military sectors in China, among others. As shown in Figure 1, the Trump administration and now the Biden administration have taken a broad and robust approach to countering national security threats from China by leveraging a large number of policy tools and agencies. Known as the ‘whole of government’ approach, the US government has imposed restrictions covering export controls, economic sanctions, customs, investment and securities restrictions, immigration, national security tariffs, IP theft prosecutions, and other measures. A number of agencies have been involved, including the US Trade Representative and departments of Commerce, State, Treasury, Defense, Homeland Security, and Justice/FBI. Figure 2 depicts the escalating pressure on China through key national security measures imposed on China using presidential executive orders and actions by the White House and specific agencies, including the Departments of Commerce, Treasury and Defense. These efforts began to take shape in parallel with the US-China trade talks and broader tensions resulting from Covid-19, China’s National Security Law, and Xinjiang province. Taken as a whole, the Biden administration’s national security approach to China represents a continuation of President Trump’s policy shift from accommodating China to confronting China directly in an attempt to impose costs on Chinese behaviour that threatens US interests. A major component of this strategy has been to expand national security restrictions on activities involving China, including export controls, sanctions and other measures.