Chinese Company Sanctions Bill Would Cause ‘Enormous’ Issues for US Firms, Former Official Says

A House bill that could apply blocking sanctions on a host of Chinese companies included on various government denied party lists would “create enormous problems” for U.S. companies doing business in China, said William Reinsch, a former Commerce Department official and current Scholl Chair in International Business at the Center for Strategic and International Studies.

The Chinese Military and Surveillance Company Sanctions Act, advanced by the House Financial Services Committee in September (see 2309200052) would require the administration to make annual determinations on whether sanctions should be applied to companies listed on the Defense Department’s list of Chinese military companies, the Commerce Department’s Entity List or Military End-User List, and potentially other lists.

Placing financial sanctions on those companies “would be to impose an economic ‘nuclear option’ on entities the government has not determined deserve it,” Reinsch said in an Oct. 10 commentary for CSIS. He specifically pointed to the three Chinese companies that operate cellular networks in the country -- China Mobile Communications Group Co., Ltd., China United Network Communications Group Co., Ltd. (China Unicom), and China Telecom Corporation Limited -- all of which would be candidates for financial sanctions under the bill.

If they are added to the Treasury Department’s Specially Designated Nationals List, Americans and U.S. businesses in China would be prohibited from contracting with them or their Chinese subsidiaries for telecommunications services in China, Reinsch said, and U.S. manufacturers wouldn’t “be able to get their chip-containing products certified, excluding from the Chinese market not only U.S. phones but products like autos and appliances that contain chips to connect to the internet of things.”

Reinsch noted the bill wouldn’t require the administration to sanction those companies -- it would require the government only to consider sanctioning them. Supporters of the bill argue that Treasury will use this authority “responsibly,” he said, and while that “may be true if we have a responsible administration, like the current one,” that “would be far from certain under a different president.”

“It also begs the question: If you only want the Treasury Department to act responsibly, why encourage it to act irresponsibly?” Reinsch said.

He added the bill is representative of a growing number of anti-China proposals, stoked by "paranoia," arising in Congress and elsewhere. Reinsch pointed to a “wave of bills” proposed in state legislatures that would prevent Chinese parties from buying U.S. farmland, even though the government “already has authority to block any specific investment for national security reasons” through the Committee on Foreign Investment in the U.S.

CFIUS is facing pressure from Congress to more actively intervene in American land purchases by certain foreign buyers, including China. The House and Senate are exploring legislation that would give the committee the power to block all U.S. land purchases by entities from certain “foreign adversary” countries (see 2307180022 and 2306020027).