At a press conference on May 31, 2019, China’s Ministry of Commerce (MOFCOM) announced that China is going to establish an “unreliable entities list,” to which “foreign entities or individuals that do not obey market rules, deviate from the spirit of contracts, blockade or stop supplying Chinese companies for non-commercial reasons, and/or seriously damage the legitimate rights and interests of Chinese companies” will be added.
MOFCOM’s announcement does not explicitly refer to the U.S. Department of Commerce’s recent additions of Chinese entities to its Entity List, but the language it used at its press conference closely echoes the U.S. Department of Commerce’s press statements for some of the Entity List designations. For example, regarding the background for establishing the “unreliable entities list,” MOFCOM has stated that some foreign entities who have stopped supplying Chinese companies have “endangered China’s national security and interests and threated the global industrial chain and supply chain security.”
The MOFCOM announcement is not necessarily a surprising development from a retaliation perspective, but what measures China might take through the “unreliable entities list” remain to be seen. MOFCOM has not released any details in this regard beyond its statement that it will take “necessary measures” against the entities and individuals on the list, and specific measures will be announced in the “near future.” Perhaps the potentially broad scope of the contemplated “necessary measures” and the lack of details at this moment itself is a way to generate pressure; perhaps the “unreliable entities list” is also a way for China to restrict its exports of rare earth minerals. In any event, U.S. companies who have recently stopped supplying or performing contracts with Chinese companies due to their Entity List designations may want to monitor the developments closely; relevant Chinese companies who have been or may be added to the U.S. Entity List or are otherwise subject to U.S. export control/sanctions may also want to watch for potential reaction of the U.S. government.