PSSI’s newest Perspective examines two recent legal developments in China with alarming consequences, highlighting how these represent a strategic shift and a sharp increase in the risks of doing business in China. These two legal actions create an impossible situation for foreign companies in China, where compliance with U.S. or EU laws now constitutes a potential offense under Chinese law. 

By raising the costs and risks of following Western legal norms, such as conducting basic supply chain due diligence to screen for forced labor risks, China is effectively creating a parallel legal order in which Western sanctions are undermined and foreign companies are trapped in the middle. 

In response, Western governments must respond. As governments expect local companies to follow their laws, they must be protected from Chinese repercussions for doing so, potentially even enacting reciprocal measures. Ideally, such protective measures should be coordinated between the U.S., the EU, and other allies, allowing a combined legal and diplomatic response to be mounted.