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Sanctions and Anti-Sanctions

Chinese President Xi Jinping and United States President Joe Biden. NICOLAS ASFOURI, Nicholas Kamm / AFP

For those tracking the development (and high-level normalization) of ‘the new cold war,’ this week has been a doozy.
 
U.S. President Joe Biden departed for the G7 summit in Cornwall with a rare bipartisan win in his pocket. His U.S. Innovation and Competition Act, a $250 billion bill aimed at countering Chinese competition in a number of hi-tech areas like semiconductors and robotics, passed with a 68-32 majority. Some predict that it could be the last bipartisan bill of the year, providing support to the assumption that evoking the threat of China might be the only way to bridge the current split between Democrats and Republicans.
 
It also seems key to Biden’s plans to bridge the divides between the U.S. and Europe in Cornwall, where shoring up support against China seems to top the agenda.
 
China responded by saying that the bill reflects zero-sum Cold War thinking, and treats China as an ‘imaginary enemy.’ It then ramped up the tensions by rushing through a law that apparently provides tools to crack down on foreign companies complying with Western anti-China sanctions by hitting their Chinese business. The full details of the bill still have to be released, but it was notable that it was approved after only two rounds of review, much faster than China’s usual triple review process.
 
Right in time for in Cornwall, the main reaction quoted in the English-language press was from the EU Chamber of Commerce in China, who complained that EU firms could be treated like ‘sacrificial pawns,’ finding themselves in an impossible situation between Western sanctions and Chinese anti-sanctions. These concerns aren’t only true for Western firms. African entities like Naspers (who famously made a mint through a well-timed investment in Tencent) must be on high alert.
 
This pressure might not only hit companies’ Chinese business. There are ample opportunities for spillover into African firms’ business in other regions. It’s an imperfect analogy, but the South African telecom company MTN recently announced that they’re ending 15 years of business in Western Asia, in part after years of trouble due to U.S. sanctions against Iran, and the ups and downs of the Iran nuclear deal. Similar blanket sanctions against Chinese companies like Huawei (a frequent business partner of MTN) could hamstring the work of African companies on the continent and beyond. As we speak, MTN is planning a second-round bid for a telecom license in Ethiopia with China’s Silk Road Fund.
 
However, the much bigger impact of G7 pressure and the inevitable counterattack from Beijing could land on African governments. Any pressure from rich democracies on African governments who are working with targeted Chinese companies will put them in a difficult position. If this pressure is echoed from the Chinese side, the situation could quickly become intolerable.
 
While individual governments might be able to play the two sides against each other, I fear that the combined centrality of Chinese companies in African sectors like ICT and the overlap between Western geopolitical anxieties and its historical indifference to African development goals like ICT development could put African development itself on the New Cold War altar.

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