China to create its own blacklist of ‘unreliable entities’ as trade war with US escalates

BEIJING: China on Friday said it would release a blacklist of "unreliable" foreign companies and individuals, hitting back after the United States targeted telecom giant Huawei in their escalating trade war.

The announcement was made a day before Beijing is due to increase tariffs on $60 billion in US goods, capping a week marked by rising Chinese threats of retaliation after President Donald Trump blacklisted Huawei.

The US Commerce Department placed Huawei on an "entity list" on grounds of national security on May 16, a move that curbs its access to US-made components it needs for its equipment. A 90-day reprieve was later issued.

China's commerce ministry announced on Friday that it will release its own list of "unreliable entities".

Ministry spokesman Gao Feng said the list will include "foreign enterprises, organisations or individuals that do not comply with market rules, deviate from a contract's spirit or impose blockades or stop supplies to Chinese enterprises for non-commercial purposes, and seriously damage the legitimate rights and interests of Chinese enterprises."

The detailed measures against firms on the list will be released shortly, Gao said.

Impact of 'unreliable entity' list

The Chinese move to create its own "entity list" appears aimed at pressuring foreign companies to maintain commercial relations with Huawei - Washington is reportedly also considering adding Chinese surveillance firms to its list for alleged human rights violations.

Google, whose Android operating system is vital to Huawei phones, is among the companies that have announced that they will abide by the US order.

"Some foreign entities have violated normal market rules and the spirit of their contracts" to cut off supplies and "take other discriminatory actions against Chinese companies damaging their legitimate rights and interests, and endangering China's national security and national interests," Gao said, according to state-owned Global Times.

Huawei has been thrust to the centre of the trade spat, with Trump suggesting last week that the company could be included in a deal.

The United States claims the company has deep links to China's Communist-led government and warns that its equipment could serve as Trojan horse for Chinese intelligence services.

Huawei - the world's second smartphone maker and a leader in developing next-generation 5G networks - vehemently denies the charges.

Trump 'lies' and 'naked economic terrorism'

China's announcement follows a growing war of words, with Chinese officials accusing the United States of "naked economic terrorism" and of lying about the impact of tariffs on its economy.

Washington and Beijing resumed their tariffs battle earlier this month after trade talks in Washington ended without a deal, with the US side accusing Chinese negotiators of reneging on previous commitments.

The countries have exchanged tariffs on $360 billion in two-way trade so far.

Trump said Thursday the US tariffs have had a "devastating effect" on the Chinese economy.

"The US side has said such lies not just once or twice. Every time China exposes them in time, but the US seems to be very persistent, even obsessed, and keeps repeating these lies," Chinese foreign ministry spokesman Geng Shuang said at a regular press briefing.

Trump more than doubled punitive tariffs on $200 billion in Chinese goods to 25 percent this month, and launched the process to hit nearly all remaining imports from the Asian country.

China responded by announcing that it would increase tariffs on $60 billion in American products on June 1.

The US tariffs appear to have already had an impact on Chinese manufacturing activity, which contracted more than expected this month, official data showed on Friday. Experts note that US consumers and importers bear the brunt of tariffs on products coming into the United States.

Tariffs on condoms

Now China is hitting back Saturday with tariffs ranging from five percent to 25 percent on 5,410 products.

Those facing the 25 percent hike include beauty products, sports equipment, musical instruments, wine, condoms, diamonds, wood, fabric and toys.

Chinese state media suggested this week that Beijing could also hit back by stopping exports of rare earths to the United States, cutting off key materials used to make everything from smartphones to televisions and military equipment.

Chinese mines accounted for 71 percent of the world's rare earths production in 2018, according to the US Geological Survey, down from 80 percent in 2017 and 95 percent a decade ago.

Cutting off exports to the US could give Beijing leverage in trade talks as China supplies 80 percent of the rare earths imported by the United States.

But analysts say China may be reluctant to target the materials because it could hasten a global search for alternative supplies of rare earths.