Explanation
China’s leader Xi Jinping has changed domestic laws and strengthened state control to combat the US-China trade war. This is a strategy that risks further mitigating China’s already economic recovery by warding off foreign investment.
Beijing announced on March 24 that Prime Minister Li Qiang had signed an order to strengthen China’s measures against foreign sanctions and enacted new regulations under the Anti-Foreign Sanctions Act. These rules will take effect immediately, listing “discriminatory behaviour” entities in Beijing, penalties and using weapons like freezing assets, seizing intellectual property (IP), refusing to enter, and trade bans across sectors such as education, science and legal services.
These measures, coupled with revised state secret laws that came into effect on May 1, 2024 and encompass now vague “work secrets,” strengthen the legal arsenal of the Chinese Communist Party (CCP) amid the US trade war and are governed by the threat of 20% of US President Donald Trump’s Tarif.
This legitimate pivot marks the shift from openness to security driven by XI’s “double circulation” strategy launched in 2020. This approach emphasizes domestic independence while selectively engaging in global trade. It is also part of a broader agenda to revive China’s slowdown in economy while tightening CCP’s control over the country.
The Anti-Foreign Sanctions Act, first passed in 2021, targets foreign sanctions such as new jiang cotton and US restrictions on technology exports by allowing China to seize IP and other assets from entities complying with such measures. This is a retaliation device to protect the interests of CCPs and punish foreign companies. In particular, the US technology ban, including semiconductor restrictions, escalates under export control during the Biden era.
Regulations in 2025 expanded the toolkit to allow sector-specific trade bans that could be heavily attacked by multinationals. Meanwhile, the expanded State Secret Act classifies uncategorized “work secrets” and national security-related data as highly confidential and imposes severe penalties for disclosures that are deemed harmful to the interests of the state. This limits transparency and reflects tensions from the 2023 Anti-spioneage Act, blocking foreign access to critical technology and economic data such as supply chains and finances.
Economically, Beijing constitutes these laws as a safeguard for innovation and capital stability. The IP attack powers of the Anti-Foreign Sanctions Act prevent foreign companies from using sanctions to undermine China’s progress, such as chip design and artificial intelligence algorithms, and ensure that they remain domestic assets.
Similarly, the state is keeping the legislation within China, keeping innovations like semiconductors secret and strengthening XI’s self-sufficiency goals. These measures also curb capital flight. The threat of asset freezes discourages Chinese entities from changing money and technology overseas to avoid sanctions, but data restrictions limit foreign extraction of sensitive information.
On March 8, the CCP’s highest people’s official prosecutor submitted his 2025 work report at the 14th National People’s Assembly, China’s Rubber Stamp parliament, highlighting Beijing’s emphasis on intellectual property enforcement. The report revealed that in 2024 alone, 21,000 individuals were charged with IP-related crimes.
While framed as an effort to protect intellectual property, China’s enforcement strategy will increasingly help protect CCP management over the delicate sector. Domestic crackdowns are surrounded by vast laws such as the Anti-Foreign Sanctions Act, but create a securitized legal environment that separates the administration from external scrutiny.
This shift raises the risks of foreign companies operating in China, exposing them to enforce uncertain legal standards and politically motivated. For example, tech companies could lose their patent rights to comply with US sanctions, but manufacturers could face a “secret” audit that gets in the way. The new IP dispute regulations flagged by national law reviews further amplify the burden of compliance and increase the likelihood of IP forfeiture.
These conditions directly undermine recent attempts to bring foreign investments to justice. At the China Development Forum, Prime Minister Li overtures the global CEO to promote China’s essentiality, but the reality on earth tells a different story. Foreign direct investment has plummeted 99% over the past three years, and rebounds are unlikely as authoritarian control deepens.
This isolationist trajectory not only thwarts innovation and global integration, but also threatens to derail XI’s $41 billion domestic consumption push. As the economy is already weakened by property market instability, additional losses in foreign capital and reduced job creation could endanger billions in US exports and further slow China’s long-term economic recovery.
The CCP is increasingly arming weapons and secret laws as a tool for retaliation for Trump-era tariffs and G7 sanctions, and as a tool for retaliation for merging the economy and security into a fortress-like attitude. The 2021 Anti-Foreign Sanctions Act rebuts the US tech ban by approving IP attacks from entities following Western sanctions, but the expansion of the state’s secret law in 2024 protects Beijing from containment, broadly defines “work secrets,” and punishes all businesses to Chinese, domestic and foreign companies.
CCP messages are dull. Comply with sanctions, lose your IP, share sensitive information, and scrutinize your face. But this legal counterattack drips with irony. Xi Citizen repeatedly denounced Trump for tariffs and trade restrictions, declaring that “unlimited solitaryism and protectionism and an increasingly fragmented global economy could reverse the trend towards economic globalization.”
The CCP may believe that stricter restrictions could encourage the US to negotiate and ensure China has better access to the US market. However, these laws are likely to repel foreign investment, further harm China’s exports, deepen segregation and further slow the Chinese economy.
The views expressed in this article are the views of the authors and do not necessarily reflect those of the epoch era.
