|FROM ||Ruben Safir
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WSJ News Exclusive | Chinese Leaders Split Over Releasing Blacklist of
Beijing has sped up development of a blacklist that could be used to
punish American technology firms, but officials say leaders are
hesitating to pull the trigger, with some arguing a decision on the list
should wait until after the U.S. election.
The debate highlights Beijing’s continued grappling with how to respond
to the Trump administration without driving the relationship closer to
So far, the Chinese leadership has tried to respond in kind to
Washington’s actions but has tried to avoid measures that go beyond
those of the U.S. A well-timed strike can sometimes work in Beijing’s
and Chinese companies’ favor. After President Trump’s campaign for a
U.S. company to take over video-sharing app TikTok, Chinese regulators
rolled out new export-control rules that have helped TikTok parent
ByteDance Ltd. set terms that could help it avoid losing control of the
platform’s U.S. operations or crucial technology.
The Latest U.S.-China Coverage
China first announced its plan to create a blacklist of U.S. entities in
May 2019, soon after the U.S. restricted telecom giant Huawei
Technologies Co.’s access to U.S. components and technology. But Beijing
refrained from specifying any companies or individuals for the list as
both countries’ trade negotiators were engaged in the talks that
eventually led to the signing of a “phase one” trade agreement in January.
As the Trump administration has intensified its attacks on some of
China’s best-known companies—also including Tencent Holdings Inc., which
runs the WeChat messaging and payments app—the list has gained urgency.
In recent weeks, according to people with knowledge of the matter, an
interagency group led by Vice Premier Hu Chunhua, who oversees foreign
investment and trade, has stepped up finalization of the
“unreliable-entity” list—China’s answer to the U.S.’s list of Chinese
entities it is targeting for sanctions.
China’s Commerce Ministry gave more details Saturday indicating a list
was near completion, saying blacklisted companies and individuals would
be banned from both selling to and buying from China, and from investing
in the country. However, it again refrained from disclosing any names.
The ministry said in its statement that the list is “strictly limited to
a very small number of illegal foreign entities.”
Officials are now debating when or whether to publish the list, with
some arguing it shouldn’t be done before the U.S. election.
Under the leadership of Xi Jinping, the Chinese government is seeking
ways to retaliate against Trump administration actions without
inflicting irreparable harm.
Photo: Li Xueren/Xinhua/Zuma Press
It is one of Beijing’s trickiest balancing acts under President Xi
Jinping as the Chinese leadership weighs how to hit back at Washington
without inflicting irreparable damage, either to the two countries’
relationship or to China’s own economy and industries.
“They’ve been very disciplined not to be baited to do something too
egregious against U.S. companies,” says Paul Triolo, head of global
technology policy at Eurasia Group, a New York-based consulting firm.
When it first started preparing the list, China looked at how much its
own technology companies rely on American suppliers, according to people
familiar with the matter. Relations have deteriorated rapidly since
then. The White House has piled one measure targeting China on top of
another, in areas from human rights and national security to finance and
technology. Beijing has retaliated each time. Chinese officials say Mr.
Xi, powerful as he is, must account for growing anti-American sentiment
A team led by Mr. Hu has in the past few weeks asked a handful of
ministries—including the top economic-planning agency, the Commerce
Ministry, the Cybersecurity Administration and the antitrust
regulator—each to submit names of companies to be included on the list,
the people familiar with the matter said. Those named by each ministry
would make the final list.
One U.S. company that so far has made all the individual lists is Cisco
Systems, the people said. The maker of networking equipment, which
competes with Huawei, already has lost contracts to supply some of its
long-term Chinese customers, such as China’s large state-owned telecom
Cisco said in a statement, “We look forward to many more years of
engagement in China.”
Some senior officials, including Vice Premier Liu He, Beijing’s chief
trade negotiator with Washington, now fear that publishing the list
could provoke the U.S. to take even harsher measures and argue a
decision should wait until after the U.S. election. Recent news reports
that Mr. Trump might sanction more Chinese firms including chip maker
Semiconductor Manufacturing International Corp., e-commerce giant
Alibaba Group Holding Ltd. and state telecom carrier China Mobile have
sent Chinese stocks sharply lower.
The tech battle between the U.S. and China has battered TikTok and
Huawei and startled American companies that produce and sell in China.
WSJ explains how Beijing is pouring money into high-tech chips as it
wants to become self-sufficient. Video/Illustration: George Downs/The
Wall Street Journal
Many in China are hoping to reset relations with the U.S. should
Democratic presidential candidate Joe Biden defeat Mr. Trump. In their
view, the strategic rivalry between the two sides is here to stay, but
there are areas where Beijing could work with a Biden administration.
For example, Mr. Biden has laid out plans to increase engagement with
China over regional issues such as Afghanistan, Iran and North Korea.
Mr. Biden would also likely engage China in dealing with climate change.
“At least it might be possible for everybody to work under the
multilateral institutions with Biden while, currently, things are being
pushed to extremes,” a senior government adviser in Beijing said.
Mr. Xi’s priority for the next two years or so is to prevent any
challenges to his hold on power in the run-up to the next leadership
shuffle slated for late 2022. A mishandling of the U.S.-China
relationship could hurt him politically at home.
Jacob Parker, senior vice president at the U.S.-China Business Council,
a group representing more than 200 American companies, said a Chinese
blacklist “will exacerbate the damage being done to American companies
doing business with China.”
China first announced plans to create a blacklist of U.S. entities in
May 2019, soon after the White House curbed telecom giant Huawei’s
access to U.S. gear.
Photo: michele tantussi/Reuters
Meantime, Chinese authorities already are punishing U.S. companies doing
business in China. Since last year, firms including DuPont have been
dropped from procurement lists by companies such as Huawei. In recent
months, authorities even directed Chinese companies to pay penalties to
break contracts with their U.S. suppliers, according to American executives.
Still, Beijing is wary of scaring off foreign companies at a time of
rising unemployment pressures. China also needs foreign imports,
especially of semiconductors and other high-tech gear.
Last month, Mr. Hu personally invited American and European industry
groups to what some participants described as a “love fest” to assure
them of continued access to Chinese markets.
Write to Lingling Wei at lingling.wei-at-wsj.com
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