By GT staff reporters Source: Global Times Published: 2020/9/19

China on Saturday issued provisions for its highly anticipated Unreliable Entity List, further laying the legal and regulatory groundwork for future countermeasures against foreign entities and individuals that harm Chinese interests, as the US government continues to step up its aggressive crackdown campaign against hundreds of Chinese businesses.

While the move is not openly aimed at the US and the first batch of entities on the list was not released, the timing of the announcement suggests US and other foreign entities that have sought to block and cut off supplies to Chinese businesses could be targeted and face severe punishment, experts noted.

After announcing to introduce the unreliable entities list mechanism in May 2019, the Ministry of Commerce (MOFCOM) on Saturday issued the most detailed provisions yet for the Unreliable Entity List.

The list is aimed at foreign entities that engage in actions that endanger China's national sovereignty, security or development interests and suspend normal business transactions or take discriminatory measures against a Chinese enterprise, organization or individual, according to the provisions.

China will set up an inter-departmental working mechanism to manage the Unreliable Entity List, including investigating foreign entities based on suggestions and reports, determining entities that are to be included on the list and implementing punishment.

Foreign entities added to the Unreliable Entity List could be restricted or prohibited from engaging in China-related import or export activities and investing in China, according to the provisions.

Relevant personnel of the entity may also be restricted or banned from entering China and their work permit and residence status could also be restricted or revoked. Foreign entities could also face a fine and other "necessary measures."

The provisions mark a major step in China's efforts to protect its interests as many Chinese businesses face increasingly hostile and risky external environment, particularly in the US, that have paved the way for China to take countermeasures, experts noted.

"This will become the legal foundation for China to take specific actions or measures in the future," Gao Lingyun, an expert at the Chinese Academy of Social Sciences in Beijing, told the Global Times on Saturday, adding that while the move is not specifically aimed at one country, it's related to the series of recent actions by the US. 

The release of the provisions comes as the US has become increasingly aggressive in its crackdown campaign on Chinese companies, having imposed sanctions on more than 300 Chinese businesses.

In the latest development, the US government this week took further action to cut off crucial supplies of microchips to Chinese telecom Huawei, essentially seeking to cripple the Chinese company. Then on Friday, the US Department of Commerce announced that it would bar Chinese mobile apps WeChat and TikTok from US app stores. 

"The US is hitting us very hard and [the Unreliable Entity List] adds positive supplements and offers a powerful legal basis for China to intensify certain countermeasures against the US," Huo Jianguo, vice chairman of the China Society for World Trade Organization Studies, told the Global Times on Saturday.

Although MOFCOM did not announce which entities were on the list on Saturday, experts said that the first list may have already been completed and could be released soon, if the US continues to escalate its crackdown campaign. The first list of entities are likely to focus on foreign entities that seek to block and cut off supplies to Chinese businesses.

In May, a source close to the Chinese government told the Global Times that China was ready to put US firms on its Unreliable Entity List, imposing restrictions or probing US firms like Qualcomm, Cisco and Apple and suspending airplane purchases from Boeing, in response to US threats to cut off foreign chip supplies to Huawei.

Other foreign entities - including US courier service FedEx, which was heavily criticized for diverting packages sent to Huawei to the US, the UK bank HSBC, which has been criticized for allegedly aiding in the arrest of Huawei CFO Meng Wanzhou in Canada - have also been subjects of many media reports as possible candidates for the list.

Apart from companies directly involved in actions harming Chinese interests, those that viciously push for foreign governments to crackdown on Chinese firms will also be targeted by the Unreliable Entity List, according to Gao. "Sometimes, if we don't take appropriate countermeasures, then the opposing side will think it can continue to crackdown on Chinese companies," he said.

Chinese experts stressed that the move was a strictly defensive move that seeks to protect Chinese interests and China's long-standing opening-up policy and efforts to improve the business climate for foreign companies have not changed.

"Setting up the Unreliable Entity List mechanism is aimed at protecting many companies that strictly abide by market rules and contractual spirit. This mechanism is aimed only at certain foreign entities and does not mean the Chinese government's stance of welcoming and protecting foreign investment has changed," Liao Shiping, a professor at Beijing Normal University who has extensively studied the unreliable entity list mechanism, said in a release on the MOFCOM website on Saturday.