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China on Sunday sought to soothe concerns over its newly released provisions for the Unreliable Entity List that aims to sanction foreign entities harming Chinese interests, as an official offered reassurance that the mechanism will not affect China's opening-up policies and law-abiding firms, one day after procedural rules and penalties were revealed for entities put on the list.  

The clarification from an official at the Ministry of Commerce (MOFCOM) shows that China is sending a stern warning to foreign entities that violate laws and rules, while seeking to minimize the impact on the country's long-standing opening-up policies and law-abiding foreign and domestic businesses, experts noted.

In a question and answer session with media on Sunday, an official with MOFCOM's Department of Treaty and Law stressed that while China is firmly committed to strengthening the protection of Chinese interests, it would continue to welcome foreign companies that abide by laws and rules.

"The provisions are only aimed at a very few foreign entities that violate market transaction rules and Chinese laws. There is no need whatsoever for credible and law-abiding foreign entities to worry," the official said, adding that the scope of the provisions would not be expanded "at will."

Asked whether the release of the rules for the Unreliable Entity List is aimed at the US crackdown on Huawei, WeChat and TikTok, the official said that the provisions have been in the workings for more than a year and are not aimed at any particular country or entity. Furthermore, there was no timetable or specific companies earmarked for the list, the official said.

"If some in the US think this is only about them, then they are overtly self-centered and grossly understating the significance of the mechanism. This goes way beyond retaliating against the US over a specific move in the short term, it's about how China wants to protect its interests in the long run," Mei Xinyu, a research fellow at the Ministry of Commerce's Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Sunday. "Unlike the US administration, China does things with principles and rules."

The provisions came as the US government has imposed various sanctions on more than 300 Chinese companies, including a ban on all chip supplies to Huawei and blocking downloads of Chinese mobile apps WeChat and TikTok. Chinese officials have harshly criticized the US for abusing its state power and national security laws to crack down on Chinese tech firms to contain China's rise.

The clarification from the MOFCOM official on Sunday was aimed at deterring certain foreign entities, organizations and individuals from hurting Chinese interests, while reassuring those that abide by the law that their operations in China will not be impacted.

It sends a signal that "China will definitely not act like the US to abuse its national security and other laws and that it will be very prudent [in using the list]," Huo Jianguo, vice chairman of the China Society for World Trade Organization Studies, told the Global Times. But the move also sends a stern warning to foreign entities that are seeking to hurt Chinese interests, as it gives officials more legal tools to punish them, Huo said. 

According to the provisions, 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. Some personnel of the entity may also be restricted or banned from entering China and their work permit and residence status could be restricted or revoked. A fine could also be imposed.

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.

Liao Shiping, a professor at Beijing Normal University who has extensively studied the unreliable entity list mechanism, implied in a note released on the MOFCOM website on Saturday that foreign entities that illegally block or cut off supplies to Chinese businesses or adopt other discriminatory measures against them may be targeted.  

Since China first announced to introduce the list mechanism in May 2019, many US companies including Qualcomm, Cisco, Apple and FedEx have been widely reported as potential targets for the list. 

In May, a source close to the Chinese government told the Global Times that China was ready to put US firms on its Unreliable Entity List, imposing restrictions or probing US firms like Qualcomm, Cisco and Apple and suspending airplane purchases from Boeing, in response to US threats to cut off foreign chip supplies to Huawei.

The MOFCOM official said that Chinese officials will implement the Unreliable Entity List mechanism in strict accordance with the law and in a transparent manner. Foreign entities will also be given a period of time for rectification, during which measures will not be taken against the entities, unless they have failed to rectify within a given deadline, the official said.

"The goal of this mechanism is to protect Chinese interests, so China will adopt this in a manner that will retaliate against the US most effectively, while avoiding damage to Chinese companies," Mei said.