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China has added 10 U.S. companies to its export control list and banned government purchases from nearly 50 U.S. companies, two weeks before the Pentagon singled out some of the most prominent Chinese companies for cooperating with the Chinese military.
China’s Ministry of Commerce announced the export ban on Monday, banning Chinese companies from sending “dual-use” items that could be used for civilian or military purposes to US companies.
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The list of companies includes rare earth miner MP Materials Corp, rare earth magnet manufacturer USA Rare Earths, and US defense contractors specializing in aerospace, drones, artificial radar, and shipbuilding and maintenance.
Under the law, “foreign organizations and individuals around the world are no longer allowed to transfer or supply Chinese dual-use goods” while export operations must be suspended immediately.
The Ministry of Commerce said the ban on exports was imposed to “protect the security and interests of the country and meet international requirements such as non-proliferation”.
China’s Ministry of Finance on Monday separately banned Chinese government purchases from 46 companies, including subsidiaries of major US companies such as Lockheed Martin, Boeing, General Atomics and General Dynamics. Companies funded in the US, registered there, however, have been granted freedom by the ministry.
Experts described Beijing’s orders as retaliation, albeit symbolic, against the US after the Pentagon at the beginning of June added about 80 Chinese companies and their affiliates to the list of “Organizations Known as Chinese Military Companies Working in the United States”.
The designation means that the Pentagon believes these companies are owned or controlled by the Chinese military or are “military partners”, a term used to describe commercial companies that contribute to China’s military development even if they are civilian.
The revised list also includes Chinese giant Alibaba Holdings, search giant Baidu and electronics maker BYD, some of China’s biggest and most well-known companies.
While the law does not prohibit US companies from doing business with them, it does affect US defense contracts and their supply chains.
“We can interpret this as a tit-for-tat response, and this fits into China’s playbook every time we’ve seen escalation from the US side in terms of trade and trade instruments,” said Nick Marro, a global trade analyst at the Economist Intelligence Unit.
China trade expert Cameron Johnson said the Commerce Department’s plan reflects US semiconductor controls designed to keep high-end chips out of China’s hands.
“They say it doesn’t matter who you are or who you are, you just follow through no matter what the situation is,” said Johnson, who is also a senior partner at Shanghai Tidal Wave Solutions. “Organizations or individuals in any country or region are prohibited from transferring two products that originated in China.”
He added that Beijing’s actions would be difficult to follow and that many of the companies named in the order had already withdrawn their operations from China or had begun to “risk” their operations there.
Johnson said the number of companies included in Washington and Beijing’s directives could be a sign of more to come and could mark the front of the US-China trade war.
“Maybe this is just the beginning of the back and forth,” he said. Last year, after returning to the White House for a second term, the US President, Donald Trump, reignited the US-China trade war, which led Washington and Beijing to impose additional tariffs on each other.
Trump and Chinese President Xi Jinping agreed to a trade deal in October, which was expanded upon during a meeting between the two leaders in Beijing in May.
Although he promised to “promote economic cooperation” at the summit, observers like Singaporean political analyst Steve Okun predicted that the gains could be short-lived.
“The US’s recent closure of chip export channels and China’s continued ban on exports show that the country’s security measures are still working in both arenas regardless of the diplomatic advantages of the recent Trump-Xi summit,” Okun told Al Jazeera.
“There is no ‘deal’ in the US-China trade war. Expect both sides to take action on export controls and trade restrictions,” he said.
