Decoding China's New Foreign Relations Law

China's new Foreign Relations Law could lead to an escalation in tensions with Washington and the West. What's Beijing's motivation?

China’s recent passage of the new Foreign Relations Law (FRL) has wide-reaching implications for the country's external interactions, at a time when relations with the US are at a multi-decade low. The passage of this law cannot be understood in a vacuum, but in response to its relationship with the US and China’s history.

The FRL is significant because it is the first time since the establishment of communist China in 1949, that the country's core foreign policy principles and positions have been formalized into law.

It is widely understood to be a response to the perception of Western policies that are attempting to hinder China's ascent. It also represents Xi Jinping’s additional consolidation of power over the party and country, as it secures key elements of his foreign policies initiatives. These include the:

1. Global Security Initiative

2. Global Development Initiative

3. Global Civilization Initiative

all of which were formed on the principle of noninterference. What is the motivation and concern behind these policies and the FRL?

In short, China’s painful history

From roughly 1839 to the 1940s, China endured what is called the"Century of Humiliation" at the hands of foreign powers, particularly the West. This deep-rooted socio-cultural trauma has shaped Chinese foreign policy under the Chinese Communist Party (CCP), which emerged as a response to the nation's past humiliations and the Qing Dynasty's failure to protect national sovereignty.

With this historical context, it becomes clear that the new law is also seemingly aimed at appealing to the growing nationalism within the country. The National People's Congress Standing Committee Chairman Zhao Leji emphasized its significance in safeguarding national interests and achieving "national rejuvenation”.

The greatest irony of the CCP leveraging nationalism as a tool of ideological legitimacy and aiming to re-establish China’s former glory vis-a-vis its imperial past is twofold:

1. Nationalism is ideologically antithetical to Marxism

2. The CPP was founded in response and in opposition to the Qing Dynasty

The New Foreign Relations Law

The FRL explicitly establishes that the ruling Communist Party, rather than the Chinese state, holds authority over the country's foreign policy. Decision-making in this regard must be made by the party committee focused on foreign affairs.

A key component of the FRL is Article 33, which outlines China's right to take countermeasures against acts that violate international law and endanger its sovereignty, security, and development interests.

The law provides a legal, legitimizing framework for China's recent crackdown on foreign entities, as highlighted by the Financial Times. These actions include “imposing a record fine on London-based auditor Deloitte, banning US chipmaker Micron's products from critical infrastructure, imposing sanctions on US arms contractors Lockheed Martin and Raytheon, and detaining a Japanese executive”.

The impact of this law will continue to shape China's interactions on the global stage and prompt reactions from the international community. It also points to a deeper, secular trend that I’ve written about previously. Namely, that the unveiling of the foreign policy framework further solidifies worries of a secular shift away from hyper-connected globalization to atomized states prioritizing domestic security. The impact on markets, cross-border data flows, and overseas investments will be felt across asset classes and regions, as this trend reshapes the global paradigm of the 21st century. The FRL is just the latest manifestation of this global shift.