MNI EXCLUSIVE: China To Be Cautious Before Blacklisting Firms

China's planned "unreliable entities" list to target companies it considers to be damaging its interests is likely to be used only with caution, both to give Beijing leeway in its relations with the U.S. and to ensure that its actions do not backfire and damage its own economy, policy advisors told MNI.

While China's Ministry of Commerce announced details of the blacklist over the weekend, it provided no details of when it would be enacted or which companies it would contain. Nor is it likely to do so soon as the market has speculated, despite U.S. pressure on Chinese companies, said Shi Yinhong, a U.S. expert at Renmin University and a policy advisor to the State Council.

"I think you can interpret the Chinese government move as prudential or even that it remains undecided," said Shi, adding that making sure that targeting a specific company does not harm Chinese firms or foreign companies operating in China is also a major concern for the government.

HSBC, a British bank listed in Hong Kong, saw its shares to a record-low in 25 years on Monday after the Communist Party tabloid Global Times hinted that the bank may be the first to be sanctioned by China.

"If the list has been made, the flexibility of China's policy has been narrowed. It's part of the reason why the government is not in rush to make the list," said Shi.

The identity of companies to be included on the list is hard to predict, said three policy advisors including Shi. One added that this will depend on U.S.-China relations.

US ELECTIONS

"Launching the list before the [US] election or after the election doesn't matter, to be honest. No matter whether the Democrats or Republicans are in the office, the general situation will not change," said a policy advisor familiar with official thinking on the matter.

China's announcement of the long-expected law for the unreliable entity list came in response to U.S. moves against TikTok and to limit access to WeChat, said Lv Xiang, a U.S. expert with the Chinese Academy of Social Sciences.

"I don't think the government will sanction many companies. If this tool were to be used, the target company would feel actual pain. But they are not going to use it against many, as China is still pursuing a policy of welcoming foreign companies which want to come and operate in the country," Lv said.

Plans for an unreliable entity list were first announced in 2019 when tech giant Huawei was sanctioned by the U.S., but China has kept the tool on ice to facilitate trade negotiations between the two countries, policy advisors said.