China threatens to blacklist foreign companies after Huawei ban

Trade tensions with US continue to escalate

By Julia Horowitz and Steven Jiang, CNN Business
Rishi Iyengar/CNN

(CNN) - Beijing is preparing a blacklist for foreign companies as trade tensions with the United States continue to escalate.

The Chinese government is working to establish an "unreliable entity list" which would include foreign companies, individuals and organizations, according to a statement Friday from China's Commerce Ministry.

Companies that violate market rules will be added to the list, according to the statement. Other targets include firms that block supplies to Chinese companies for "non-commercial reasons" or otherwise damage their interests.

The exact details of the plan will be announced soon, the statement added.

The move to establish a blacklist comes after the United States hit Huawei with an export ban, effectively barring US companies from doing business with the smartphone and telecom equipment maker.

The Trump administration claims that Huawei equipment can be used by China for spying. Huawei has repeatedly denied that it poses a risk, saying the restrictions are an attempt to put it out of business.

Jude Blanchette, a senior adviser at the risk consultancy Crumpton Group, said that American companies are responding to the blacklist threat by going into "triage" mode.

"Your reaction is not going to be, 'This is no big deal,'" said Blanchette, who added that US businesses are already assessing the probability that they'll be targeted by Beijing.

Huawei fight

The US campaign against Huawei, one of China's most powerful tech companies, reached new heights earlier this month when the Trump administration added it to a list of companies said to undermine American interests.

That forced crucial suppliers like Google and ARM Holdings to cut ties with the Chinese company, while top carriers in the United Kingdom and Japan delayed the launch of Huawei smartphones.

Now China's blacklist could target those same companies, penalizing them for complying with the US ban.

"They have not identified which companies this means but I'm sure, knowing the Chinese as I do, that they will do counterpart targeting matching the US," said Harry Broadman, a former US trade negotiator. He added: "Clearly their buttons have been pressed, with the way we're dealing with Huawei."

For Huawei, which had aimed to become the top smartphone brand globally by the end of 2020, the ban could pose an existential threat.

Huawei bought $70 billion worth of components and parts last year from 13,000 suppliers. Of that, about $11 billion was spent on products from US businesses including Qualcomm, Broadcom and Microsoft.

Analysts had predicted that China could target US businesses as a result of the Huawei ban. Trust between the United States and China is running low as new rounds of tit-for-tat tariffs go into effect.

China has always had a range of powerful tools that it could use to target foreign firms, said Nicholas Consonery, director at consultancy Rhodium Group.

"The point is we are now in an environment where retaliatory steps against US entities operating in China is becoming more probable," he said.

Brian Fung contributed reporting.

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