China accelerating response to US-led Huawei restrictions

Chinese media reports that the country will soon roll out measures in response to the listing of telecoms company Huawei on the United States Department of Commerce Entity List, which will include restrictions on technologies and rare earths necessary for the production of high-tech products.

China’s Ministry of Commerce (‘MOFCOM’) recently published an ‘Unreliable Entity List’ regime, under which foreign entities or individuals that boycott or cut off supplies to Chinese companies for non-commercial purposes and causing serious damages to Chinese companies would be listed as ‘Unreliable Entities’.

Lawyers at international law firm Baker McKenzie noted in a briefing on the development that two senior MOFCOM officials had recently commented: ‘[T]he government would consider the totality of the circumstances in black-listing a foreign business, including (i) the specific “discriminatory measures” taken by the foreign business against Chinese companies, such as boycotting or cutting off supplies to Chinese companies, (ii) whether these measures are taken for non-commercial purposes and against the market rules and contractual obligations, (iii) the material damage caused to the Chinese companies and the related industries, and (iv) the potential threat to China’s national security.’

The lawyers also noted that while the Unreliable Entity List regime seems to only target foreign legal entities and individuals, ‘[O]ne cannot exclude the possibility of enforcement actions taken against the China subsidiaries of the listed foreign corporations for similar reasons.’

But, they said: ‘China is still in the process of formulating its first Export Control Law. Strictly speaking, it thus far does not have an “entity list” regime similar to that under the U.S. export control law, which may restrict exports of Chinese origin products or technologies to specified foreign entities. While the Export Control Law is generally expected to be enacted by the end of this year or early next year, it is unclear whether the Unreliable Entity List regime is intended to impose the same restriction that was originally expected to be included in the new Export Control Law.’