1. Overview of the Provision on the Unreliable Entities List
On September 29th, the PRC Ministry of Commerce has promulgated the Provisions on the List of Unreliable Entities, with immediate effect.
The purpose is establishing a list of foreign entities, i.e. foreign companies, other organizations or individuals, who are deemed to “have endangered China’s sovereignty, security and development interest” to a certain degree and who “violated the principles of market operations, interfering with regular transactions with Chinese enterprises” or have adopted discriminatory measures towards Chinese enterprises, organizations or individuals.
An investigation procedure shall still be devised, but the Provisions already stipulate that any target company or individual shall in any case be informed of commencement of such investigation and shall be granted the right of defense. The announcement to include a foreign entity in the List of Unreliable Entities shall be made public.
Other than publicly identifying unreliable entities as entities with which the risk of carry out transactions is high, the competent authorities may prevent or restrict them from engaging in import/export with China, from investing in China, imposing the obligation to require a specific government approval to any Chinese entity who intend to conduct any transaction with such companies; other measures may consist of restricting travelling and staying in China by personnel of such companies or even imposing fines.
2. The purpose
The Provisions are sending a loud message, bouncing from Beijing to Washington.
The background of the Provisions lies in art. 3, which stresses that the Chinese government adheres to the basic principles of international relations which are mutual respect of sovereignty, non-interference into each other’s internal affairs, as well as equality and mutual benefit, the Chinese government opposes unilateralism and resolutely safeguards China’s core interests and promotes the establishment of an open world economy.
Since May the Central Government has anticipated the establishment of such a list, indicating that such initiative is the reaction of the PRC to those government who are taking decisions in the business field, which affect Chinese companies and Chinese citizens’ interests, where such decisions are driven merely by political reasons.
Beijing is thus firing back in a formal manner, before taking actual and concrete actions mirroring US initiatives against Huawei. A prudent approach, which actually shows to be quite different from that of the US President. We shall now monitor how the situation develops, to understand which entities will eventually be included in the Unreliable Entities List.
