The Chinese government is stepping up pressure on foreign businesses not to run afoul of Beijing, as the White House continues to target some of the Asian giant’s largest technology companies.
China’s Ministry of Commerce released long-awaited provisions on its so-called “unreliable entity list” over the weekend. The vaguely worded document mirrors the U.S. Commerce Department’s entity list that restricts named companies from accessing items originating in the U.S.
”Beijing will likely name at least one US company to the (unreliable entity list) between now and year-end – possibly even in coming days – but will use this tool in a targeted fashion, particularly in its early stages,” Michael Hirson, practice head, China and Northeast Asia, at consulting firm Eurasia Group, said in a note released Monday.
”The coming debut of the (unreliable entity list) underscores the dilemma facing (multi-national corporations) in China, who are squeezed between the legal and political dictates of the US and its Western allies on the one hand and Beijing on the other,” he said.
The Commerce Ministry first announced it was establishing the unreliable entity list in May 2019. The move came shortly after U.S. President Donald Trump’s administration said it was adding Chinese telecommunications giant Huawei to a blacklist, which prohibits the company from working with its U.S. suppliers. Huawei’s revenue last year missed internal forecasts by $12 billion, while profit growth slowed from the prior two years.
Provisions from the unreliable entity list released Saturday laid out consequences for a foreign entity — a company, organization or individual from another country — that is deemed to be a danger to “national sovereignty, security or development interests of China,” according to an English-language version of the policy on the Commerce Ministry website.
Authorities can also add a foreign entity to the list if it suspends “normal transactions” or takes “discriminatory measures” against a Chinese entity “which violates normal market transaction principles and causes serious damage to the legitimate rights and interests of the enterprise, other organization, or individual of China,” the document said.
The consequences for an entity added to the list could include: restrictions or prohibitions on China-related trade, investment in China and travel or work permits.