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The US & China Shuts Down Each Other

What is it about?

The US ordered to close down the Chinese consulate in Houston, Texas last Tuesday, alleging that China was stealing intellectual property. China responded by closing down the US consulate in Chengdu on Friday, alleging that people at the US consulate were interfering with China’s internal affairs and threatened China’s security. The US-China tension started back in the summer of 2018 and has been escalating since despite attempts to reconcile, especially early this year when the two countries signed a trade deal.

The current rise in conflict partially roots back to China’s implementation of the new national security law in Hong Kong. The US condemned it as a threat to the freedoms Hong Kong has enjoyed for 50 years and President Trump signed an order to end preferential treatment for Hong Kong including special economic treatment and export of sensitive technologies. The US also passed the Hong Kong Autonomy Act which imposes sanctions on foreign individuals and entities that contribute to China’s interference of Hong Kong’s autonomy. This includes banks that do business with Chinese officials engaged in the crackdown of the protesters in Hong Kong.

Thinking beyond

Tensions surrounding the US and China have wider implications. They affect not just the economic and political relationship of the two countries, but also other countries and even the global economy. For example, the UK recently announced to ban Huawei from its 5G network and France, while it did not ban Huawei, announced to put restrictions on the renewal of licences once they expire. The US is putting pressure on other countries to ditch China. There could be disruptions in the technology sector and international trade as countries try to move away from reliance on China and as China imposes restrictions on trade as a retaliation. Also, as the US-China relationship deteriorates, the US could impose further restrictions on China on issues of trade, intellectual property and data protection.

Therefore, there are huge uncertainties surrounding international trade. It is unclear what actions each country will take and how serious the implication will be in the global economy. Law firms must play an important role in quickly identifying new legal restrictions being imposed by countries in response to the political tensions of the US and China and ensure the clients’ compliance with them. For example, recently, Ashurst hired Ross Denton from Baker & McKenzie to strengthen its international trade practice. He will assist the firm in advising international trade regulations and export and import sanctions.

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