China: China’s export control white paper and its attitude toward foreign sanctions compliance

The Ministry of Commerce of China (“MOFCOM”) released its first Export Control White Paper (“White Paper”) on December 29, 2021. Simultaneously, it launched a dedicated “China Export Control Information” website, where it publishes export control related FAQs, case studies and training videos.

The White Paper places great emphasis on criticizing the abuse of discriminative, unilateral export controls, and the activity of “building export control small circles in the name of multilateralism”. It also reiterates China’s position to uphold multilateral export control frameworks, suggesting that China’s export control regime is unlikely to become as expansive as the equivalent regime of the United States to include considerable unilateral controls.

Nevertheless, China’s legacy technology import and export control regime, under which China controls import and export of technologies that generally do not fall under any multilateral export control regimes (e.g., artificial intelligence, chip design, biotechnology, etc.), is absent from the White Paper. This legacy regime is widely understood as outside the framework of China’s new Export Control Law and sits alongside it, but may have wider ramifications for multinational corporations, especially technology companies, than the Export Control Law itself.

In addition, despite the criticism about the unilateral export control measures, one interesting observation regarding the new MOFCOM website is that the online resources there have given considerable weight to the importance of compliance with foreign export control and sanctions regimes, in particular, the US and EU regimes, for which there are dedicated training videos in Mandarin.

In one of the case studies that demonstrate export compliance “best practices”, the company (which is seemingly a Chinese company that operates globally) is said to have taken into account the export control and sanctions risks in all applicable jurisdictions, including the United States and European Union, when developing its export compliance policies, and incorporated these considerations into all aspects of its procedures, including items and entities screening, etc. Of course, among all these jurisdictions, China is said to be given the top priority.

The above seems to suggest that, notwithstanding the “blocking provision” in the Anti-foreign Sanctions Law, the Chinese government may take a more pragmatic approach toward individual companies’ compliance with foreign export control and sanctions measures. Compliance in this respect would not be completely prohibited and may even be encouraged to some extent. China’s countermeasures in this area are more likely to target the foreign measures that are considered “discriminatory” against China and “unjustifiably” extraterritorial — e.g., the measures that sanction specific Chinese entities. In contrast, compliance with US or EU sanctions established against a foreign country may be more acceptable to China, if it does not cause harm to Chinese companies.

Baker McKenzie and FenXun Partners, a Chinese law firm that has established a Joint Operation with Baker & McKenzie, have an integrated team of lawyers with strong China and international trade law expertise and bilingual skills in various Asian and North American jurisdictions, and can help multinational corporations navigate the new complexities associated with the rapidly evolving Chinese regimes.

Frank Pan is a senior counsel of FenXun Partners, which is a premier Chinese law firm. FenXun established a Joint Operation Office with Baker McKenzie in China as Baker McKenzie FenXun which was approved by the Shanghai Justice Bureau in 2015.