China targets US defense companies with new sanctions

In the latest escalation of trade tensions between the world’s two largest economies, China on Thursday announced export control measures targeting 28 U.S. companies and added 10 U.S. companies to a list of entities barred from doing business in China.

The larger group of companies is made up primarily of firms active in defense contracting and includes Lockheed Martin and five of its subsidiaries; General Dynamics and three of its subsidiaries; three subsidiaries of Raytheon; one subsidiary of Boeing; and more than a dozen other companies.

Chinese companies are immediately barred from selling “dual-use” items — goods that may have a military purpose in addition to civilian applications — to any of the named companies.

In an announcement, the Chinese Ministry of Commerce said the sanctions were put in place “in order to safeguard national security … interests and fulfill international obligations such as non-proliferation.”

Negligible impact

Experts pointed out that because U.S. defense contractors don’t typically do business with the country’s major adversaries, the new restrictions would likely have little impact on the companies named by China.

“Short answer is, this won’t have much, if any effect, on those companies: They didn’t do business with China anyway,” Raymond Kuo, a director and senior political scientist with the RAND Corporation, told VOA. He said that move would also have no noticeable impact on the broader U.S. economy.

However, he added, the sanctions do illustrate that China is determined to respond when the U.S. applies sanctions in the other direction, as the Biden administration has done several times in recent months.

“It does show that the Chinese are willing to go kind of tit for tat with the United States,” Kuo said. “If we increase our levels of trade sanctions — and [President-elect Donald] Trump has threatened 60% tariffs across the board — that they can hit back in a whole variety of ways.”

‘Unreliable’ entities

In a second announcement, the Ministry of Commerce added 10 of the companies from the first announcement, all subsidiaries of Lockheed Martin, General Dynamics and Raytheon, to its list of “unreliable entities,” a designation that entails a much stricter set of sanctions.

The companies are prohibited from importing or exporting goods to and from China and from making new investments there. In addition, executives of the companies are barred from traveling to China, and any work or residency permits they currently have are revoked.

The Ministry of Commerce said that all of the companies designated as unreliable have sold arms to Taiwan, the democratically self-governing island that China claims as its own territory. It said the new restrictions were meant to “safeguard national sovereignty, security and development interests.”

The additions to the unreliable entities list come just a week after Beijing, on December 27, announced an earlier round of sanctions targeting U.S. firms and their executives for selling arms to Taiwan. The companies named included subsidiaries of Raytheon and Boeing.

In a statement emailed to VOA, Liu Pengyu, the spokesperson for the Chinese Embassy in Washington, said it was determined that the 28 companies facing export controls “endanger China’s national security.”

He also said, “The Chinese government will continue to unswervingly promote high-level opening up, firmly safeguard the legitimate rights and interests of various business entities, and promote the development of compliant trade.”

Follows other sanctions

Thursday’s announcement follows other recent actions by Beijing cracking down on trade with the U.S., often in response to U.S. sanctions on Chinese businesses.

In early December, the Biden administration announced a ban on the sale to Chinese firms of cutting-edge equipment used to make the world’s most advanced semiconductors as well as high-bandwidth memory products needed to maximize those chips’ efficiency. At the same time, the U.S. added 140 Chinese companies to a list of entities that U.S. firms and individuals are restricted from doing business with.

In response, China imposed new restrictions on the sale of “rare earth” minerals to the United States. China dominates the world market for minerals such as gallium, germanium and antimony, which are key components in various high-tech products from smartphones to missile guidance systems.

Little more than a month earlier, the Biden administration had finalized a new set of rules on outbound U.S. investments in China.

The rule codified a set of restrictions barring U.S. individuals and firms from investing in certain kinds of business ventures in China. Among the areas affected are the manufacture of advanced semiconductors and microelectronics, technology used in quantum computing, and artificial intelligence systems.