China Vows ‘Limited’ Use of Sanctions List for Foreign Firms

Bloomberg News
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(Bloomberg) -- China said it would limit the scope of a blacklist used to sanction foreign companies after deploying the tool for the first time against two US defense firms.

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The use of the measure “is strictly limited and aimed at very few foreign entities breaking the law,” the Ministry of Commerce in Beijing said in a question-and-answer document on Friday, after Lockheed Martin Corp. and a subsidiary of Raytheon Technologies Corp. were added to a list of “unreliable entities” for selling weapons to Taiwan.

“The scope will not be expanded at will, and there is no need for foreign-invested enterprises to worry.”

The pledge appears to be an effort to assure international investors that their interests are unlikely to be harmed by this legal tool that China created in 2019 as it fought the trade war with the US and after the US added Huawei Technologies Co. to a Commerce Department blacklist.

Gabriel Wildau, a managing director at advisory firm Teneo Holdings LLC, said he doubted China would aggressively expand the unreliable entities list because it views the US business community as an ally.

“They want to cultivate the US business community as a political constituency that opposes pro-decoupling policies, so alienating US companies would be a self-inflicted wound,” Wildau said.

“It’s notable that that the action against Raytheon doesn’t appear to include their civil aviation units, which do have significant mainland China operations and which Chinese authorities value as a source of advanced technology,” he added.

Read: China Hits at US With ‘Symbolic’ Sanctions on Lockheed, Raytheon

Last week the US added six Chinese companies to an export blacklist over what it argues are links to a military-backed global balloon espionage program, and China’s Foreign Ministry responded Wednesday by warning of countermeasures. China says the balloon the US shot down Feb. 4 was a civilian airship that was collecting weather data when it was blown off course, adding that the US overreacted by downing it.

China hasn’t said directly whether the sanctions on Lockheed and Raytheon were related to the balloon dispute, but the language in the announcement was similar to that used by Foreign Ministry Spokesman Wang Wenbin on Wednesday.

“This looks very much like a tit-for-tat response to the US measures imposed in the wake of the spy balloon incident,” said Noah Barkin, managing editor of the Rhodium Group’s China practice.

More: Biden Intends to Speak With Xi to Ease Tensions Over Balloon

In his first extended effort to publicly address the episode, President Joe Biden sought to ease concerns about an alleged Chinese spy balloon and the downing of three other objects over the US in recent weeks. He also said he intends to speak with President Xi Jinping to defuse tensions fanned by the uproar.

The world’s two biggest economies could also use a potential meeting between Secretary of State Antony Blinken and Wang Yi, China’s top diplomat, at the Munich Security Conference starting Friday to mend ties. Blinken is said to be weighing a meeting on the sidelines of the event.

--With assistance from Rebecca Choong Wilkins and Zibang Xiao.

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