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The Chinese Ministry of Commerce (MOFCOM) on Saturday issued rules for a widely anticipated unreliable entity list mechanism that could severely punish foreign entities and individuals who undermine China’s national interests, in a move that is believed to counter the US’ relentless crackdown campaign against Chinese businesses. 

The list would include foreign entities or individuals who undermine China’s sovereignty, security and development interests and those who violate market principles by cutting off normal transactions with Chinese firms, organizations or individuals, according to the rules issued by MOFCOM.

The Ministry did not release specific foreign entities or individuals that will be put on the list.

Foreign entities added to the Unreliable Entity List could be restricted or prohibited from engaging in China-related import or export activities and investing in China, according to the provisions. 

Relevant personnel of the entity may also be restricted or banned from entering China and their work permit and residence status could also be restricted or revoked. Foreign entities could also face a fine and other “necessary measures.”

China will set up an inter-departmental working mechanism to manage the Unreliable Entity List, including investigating foreign entities based on suggestions and reports, determining entities that are to be included on the list and implementing punishment.

The rules mark a major step in China’s efforts to protect its interests as many Chinese businesses face increasingly hostile and risky external environment, particularly in the US, that have paved the way for China to take countermeasures, experts noted.

“This will become the legal foundation for China to take specific actions or measures in the future,” Gao Lingyun, an expert at the Chinese Academy of Social Sciences in Beijing, told the Global Times on Saturday, adding that while the move is not specifically aimed at one country, it’s related to the series of recent actions by the US.  

Chinese officials announced last year that they would set up an unreliable entity list mechanism to protect Chinese interests, as the US government imposed sanctions on many Chinese businesses. The new rules on Saturday came as the US stepped up its crackdowns on Chinese companies.  

Citing national security concerns, the US government has imposed sanctions on more than 300 Chinese companies ranging from tech giants like Huawei to construction firms to Xinjiang textile factories.

The US Commerce Department reiterated on Friday that it would ban Chinese mobile apps WeChat and TikTok from US app stores. The Trump administration has also ordered a prohibition on the sale of microchips to Chinese telecom firm Huawei.

Chinese experts stressed that China’s Unreliable Entity List mechanism was a strictly defensive move that seeks to protect Chinese interests and China’s long-standing opening-up policy and efforts to improve the business climate for foreign companies have not changed.

“Setting up the Unreliable Entity List mechanism is aimed at protecting many companies that strictly abide by market rules and contractual spirit. This mechanism is aimed only at certain foreign entities and does not mean the Chinese government’s stance of welcoming and protecting foreign investment has changed,” Liao Shiping, a professor at Beijing Normal University who has extensively studied the unreliable entity list mechanism, said in a release on the MOFCOM website on Saturday.