China’s ambiguous Unreliable Entity List gives Beijing ‘leeway’ to take punitive actions against foreign firms

China’s Ministry of Commerce announced details of its long-awaited blacklist over the weekend, but did not provide a list of names or a timetable for its release

Reports have suggested US firms like Qualcomm, Cisco, Apple and Boeing will be included, along with FedEx and HSBC in response to the treatment of Huawei

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Possible candidates reported to be subject to the list included US courier service FedEx, which was heavily criticised for diverting packages sent to Huawei to the US, and British bank HSBC, which was criticised for allegedly aiding in the arrest of Huawei chief financial officer Meng Wanzhou in Canada. Photo: Bloomberg

Published: 9:00pm, 22 Sep 2020Updated: 11:19am, 23 Sep 2020

The ambiguous language in China‘s new Unreliable Entity List for foreign investment gives it great leeway to take punitive actions against foreign companies, analysts said.

China’s Ministry of Commerce sought to play down the impact of the announcement on Saturday, clarifying that only a very small number of foreign entities that violate Chinese laws and harm China‘s national sovereignty, security and development interests would be punished by the new regulation, while specific entities or countries are not being targeted.

Firms, groups and individuals placed on the blacklist will be restricted or banned from trade with China, as well as investment and entry of people and vehicles into the country, the ministry said at the weekend when finally releasing details of how the list will work some 15 months after it was announced.

But despite the clarification, seen as a countermeasure to similar actions taken by the United States through its entities list, it remains unclear how aggressive Chinese authorities will enforce the new measures.

Companies need to be aware that, if they take steps that China may consider as breaking contracts or rules or ‘hurting Chinese interests’, they could end up on the list and face commercial pain

Louis Kuijs

“Companies need to be aware that, if they take steps that China may consider as breaking contracts or rules or ‘hurting Chinese interests’, they could end up on the list and face commercial pain,” said Louis Kuijs, head of Asia economics at Oxford Economics.

“In principle, it looks like there are clear criteria and a clear process. But the general nature of the language means that the government has quite some leeway to put companies on the list.”

If a foreign entity is blacklisted, a time limit will be given for it to correct its behaviour, during which time no measures would be taken, the ministry said, although it did not specify what they would need to do to be removed from the list.