China moving forward with its own Entity List
September 22, 2020 Category Foreign trade, Weekly
China is moving forward with its own “unreliable Enuity List” of foreign companies which would be prohibited from trading with or investing in China. The blacklist was first announced in May last year, but till now the Chinese authorities refrained from publishing the rules for being included on the list or the names of the companies on it. The U.S. has a similar list, and China was expected to retaliate by publishing its own. The Ministry of Commerce (MOFCOM) has now released more information about the list.
Any organization or person investigated will have an opportunity to defend themselves, and be granted a grace period to correct any unacceptable behavior, MOFCOM announced. Chinese authorities said in May 2019 it would blacklist foreign firms or individuals that violated market rules or contractual obligations, or took measures that hurt the rights of Chinese businesses or threatened China’s national security interests. Now, MOFCOM says that firms and individuals on the blacklist would be restricted or banned entirely from trading – both imports and exports – with China and also from investing in the country.
Foreign business communities have voiced concerns as to how the rules might be implemented in the highly politicized business environment created by the stand-off between Beijing and Washington, the South China Morning Post reports. Joerg Wuttke, President of the European Union Chamber of Commerce in China, said the vagueness of the language used by the Ministry left “plenty of room for discretionary actions”. Lu Xiang, Research Fellow on U.S.-China relations at the Chinese Academy of Social Sciences (CASS), said the release of the rules was in response to Washington’s efforts to contain Chinese technology companies and would allow Beijing to introduce countermeasures in the future. “China needs more legal tools in the face of uncertainties in its relations with the U.S.,” he said, though he added that he expected very few U.S. companies to be blacklisted. MOFCOM said it would “take corresponding actions” against foreign companies, organizations and individuals if their businesses or related actions “harm China’s sovereignty, security and development interests, violate market rules, halt contractual obligations with Chinese companies or individuals, or take discriminatory measures on Chinese companies or individuals to severely hurt their legitimate interest”. An office would be established to investigate and rule on cases of entities or individuals being suspected of breaking the new rules. Firms already added to the list may be removed if they changed their behavior and took timely action to negate the consequences of their actions.
Individuals on the list would be stripped of their work and residence permits, and could be denied access to the country. In some cases, fines would also be payable. There has been speculation that U.S. courier firm FedEx might be one of the first companies to be blacklisted by Beijing after an investigation was started last year into allegations it allowed weapons to be shipped to China and diverted packages intended for Huawei to the U.S. Another possible target is HSBC over its links to the arrest in Canada of Huawei’s Chief Financial Officer Meng Wanzhou.
The South China Morning Post reported earlier that authorities finalised the details of the list late last year but were reluctant to unveil them due to concerns of a possible backlash that could make the country less attractive to foreign companies. Liao Shiping, Law Professor at Beijing Normal University, said the list only targeted illegal activities by individual foreign entities and “does not mean a change of China’s position to welcome and protect foreign investment”. Earlier this month, China’s Vice Premier Hu Chunhua and Vice Minister of Commerce Wang Shouwen met foreign business delegates and said the country would continue to remove barriers to market access.
Meanwhile, Hong Kong has formally demanded that the U.S. Administration drops its “Made-in-China” regulations, which forces Hong Kong manufacturers to label their export products to the U.S. as being “Made in China”. Hong Kong Commerce Secretary Edward Yau said the next step could be taking the case to the WTO settlement mechanism. The WTO considers Hong Kong to be a customs territory separate from mainland China. Enforcement of the U.S. labelling requirement has been postponed from September 25 to November 9 to allow exporters more time to prepare. The U.S. is the second-largest destination for Hong Kong-made shipments, accounting for 7.7% of the city’s total domestic exports in 2019.
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