China might impose its own sanctions on U.S. companies or individuals or make it harder for them to operate in China, analysts say. The bill pending in the Senate would not change Beijing’s course in the contested waterway, the South China Sea, they add.
Beijing claims about 90% of the 3.5 million-square-kilometer sea. Brunei, Malaysia, the Philippines, Taiwan and Vietnam contest the Chinese claims, particularly in waters overlapping exclusive economic zones. Since 2010, China has angered the other governments by landfilling small sea islets for military use. Chinese officials cite historical usage records to back their sovereignty claims.
“China would certainly be expected to retaliate. They could impose their own sanctions against U.S. companies and U.S. business as well,” said Jay Batongbacal, international maritime affairs professor at University of the Philippines. “It’s like going back to 19th century diplomacy where reprisals, it was the norm before.”
Scope of sanctions
The draft South China Sea and East China Sea Sanctions Act introduced in the Senate May 23 would sanction Chinese companies or individuals who contribute to projects in contested tracts of the two waterways. Projects would cover land reclamation, “island-making” and lighthouse construction, the draft says.
Sanctions would apply as well to people or companies linked to “actions or policies that threaten the peace, security, or stability” of sea tracts contested by other governments, the draft says. Washington does not claim the sea but says it should remain open to international use.
China disputes some zones of the East China Sea with Japan but has developed the South China Sea more aggressively.
Chinese companies and individuals in the energy, aerospace, telecommunications and dredging sectors would face sanctions, said Sean King, vice president of the Park Strategies political consultancy in New York. The draft bill calls for “specific findings” on 24 Chinese companies, including China Mobile and China Telecom.
Penalties can include revoking any U.S. visas, blocking property transfers in the United States and stopping individuals from entering the country.
Chinese reactions
China might “ease off a little bit” on its maritime expansion because of the sanctions but not reverse course, Batongbacal said. The Chinese government would also try to “rally support” from other Asian countries, especially those with which it has strong economic relations, he said.
Chinese officials already mute anger among the Southeast Asian maritime claimants by using their massive economy to offer them trade and investment benefits. All claimants prize the sea for its fisheries, fuel reserves and marine shipping lanes.
Companies that have helped the government with land reclamation or supplying its fleets will probably not change their activities if sanctioned and might be compensated by China if sanctions hurt business, said Oh Ei Sun, senior fellow with the Singapore Institute of International Affairs. Companies or people hit by sanctions in smaller countries, such as Iran, would have less recourse, he said.
“China is unlike any other country because it has a huge domestic market,” Oh said. “So, if you are talking about sanctions and things like that, China has a huge domestic economy. Those companies and individuals can simply switch to doing domestic business.”
The Communist government has a history of raising the stakes rather than backing down against the United States.
Beijing has resisted U.S. Navy ship movements in the South China Sea since 2017 by stepping up its own. It cut off military exchanges in 2010 after the U.S. government approved an arms package for Taiwan, which China calls its own rather than a sovereign state. Whenever Washington approves tariffs on made-in-China imports, China responds with its own.
Trade dispute tie-in
Congress will probably pass the sanctions bill, King said, but U.S. President Donald Trump may hold off signing it in case China and the United States first settle a trade dispute that broke out last year.
“It’s been introduced by serious senators, from both parties, and there’s no love for Beijing on either side of the aisle, in either chamber, right now,” King said. “But whether Trump would ever sign it is another story, as Trump may prefer to just hold it in reserve as a threat against his supposed good friend, mainland Chinese President Xi Jinping.”
After Trump accused China last year of unfair trade practices, his government approved tariffs on $250 billion in Chinese goods. Next month it will hold a hearing on new tariffs affecting more than $300 billion in additional imports from China. But over much of the year to date the two sides have been angling toward a trade deal.