Signaling through National Security Lawmaking

Abstract

An often-overlooked element of the ongoing TikTok saga is China's export control law, which prohibits the sale of TikTok's core content recommendation algorithm without prior approval from the Chinese government. This law is just one example of the extensive national security lawmaking China has undertaken in recent years. Closely paralleling similar institutions in the U.S., China has established a comprehensive national security legal framework that authorizes the government to restrict exports, sanction foreign entities, screen foreign investments, and block transactions involving cyber infrastructure. 

Why turn towards legality when China has the ability to employ these actions without a formal legal apparatus? Drawing on interviews, this article argues that lawmaking serves a signaling function. By formalizing national security-related actions within a legal framework and borrowing similar legal institutions from the U.S., the Chinese government signals its resolve to take systematic countermeasures against economic restrictions on Chinese entities, while mitigating the associated economic costs, a particularly pressing concern given the current economic challenges China faces. 

Understanding China's use of national security lawmaking as a signaling mechanism carries significant implications. The threat of deploying these legal tools enhances the Chinese government's bargaining leverage in bilateral negotiations, pressures market participants to limit compliance with U.S. economic restrictions, and resonates with domestic nationalist sentiment. However, if the lawmaking fails to achieve its deterrent effect, China is likely to follow through on its threats to maintain credibility, potentially accelerating U.S.-China decoupling, disintegrating global supply chains away from China, and shifting the international economic order toward economic nationalism.

Keywords: TikTok, National Security, Signaling, Diffusion, Geopolitical Rivalry, Export Control, Sanctions