Notes From The China Desk

On September 11, the U.S. Department of Commerce’s Bureau of Industry and Security published a proposed rule in the Federal Register that would require quarterly reporting by organizations, companies, and corporations organized in the U.S. (including branches outside the U.S.) if they plan to either engage in artificial intelligence model training or acquire, develop, or otherwise possess a high-performance computing cluster for AI training. 

China recently enacted a revision to the PRC Law on Guarding State Secrets, and shortly after Hong Kong followed suit when it passed the Safeguarding National Security Ordinance.

On May 20, 2024, the PRC Ministry of Commerce (MOFCOM) announced the inclusion of three U.S. companies on its unreliable entities list over sales of arms to Taiwan. We discussed the implementation of the Unreliable Entity List here. The move mimics similar designations in February 2023, which we wrote about here, and follows recent actions by the BIS and Treasury to apply new export controls and sanctions on Chinese entities for allegedly doing business with Russia.

Foreign companies should be aware that Chinese companies may attempt, and Chinese courts may accept, these types of cases despite the existence of forum selection and choice-of-law provisions in a contract.

Cadence Design Systems, Inc. v. Syntronic AB et al. is being recognized as one of the first significant decisions regarding discovery disputes involving Chinese companies claiming that Chinese law, specifically the recently enacted Personal Information Protection Law (“PIPL”), would prevent them from complying with discovery obligations in U.S. proceedings. 

With the release of the 2021 Negative List for the Market Entry of Foreign Investment[1] (“2021 Negative List”), which went into effect on January 1, 2022, China’s policy on foreign investment became clear—foreign companies may invest in unrestricted industries or invest passively according to the restrictions in Chinese law. 

On September 17, 2021, the Stock Exchange of Hong Kong published a consultation paper on Special Purpose Acquisition Companies (SPACs).