China’s Ministry of Commerce (MOFCOM) announced at a special press conference on May 31 that it will institute an “Unreliable Entity List” system based on China’s Foreign Trade Law, Anti-Monopoly Law, and National Security Law. The planned “Unreliable Entity List” will include foreign companies, organizations, and individuals that do not obey market rules, act contrary to the spirit of contract, engage in boycott or suspension of supply against Chinese enterprises without commercial justifications, or seriously harm the legitimate rights and interests of Chinese enterprises.  MOFCOM will announce the specific measures to be taken against those placed on the “Unreliable Entity List” in the near future.

The MOFCOM spokesman further elaborated at the press conference that the list would target “those foreign entities, organizations and individuals that (1) engage in boycott, suspended supply, or any other discriminatory measures against Chinese entities without commercial justifications, (2) cause substantive damage to Chinese enterprises and the related industries, or otherwise (3) constitute threats or potential threats to Chinese national security interests.” On June 1, the Director-General of the Department of Treaty and Law of MOFCOM further indicated that the entities included on the list may be found to have abused their dominant market positions violating antitrust laws.

Many perceive the introduction of “Unreliable Entity List” as a direct response to the inclusion of Chinese enterprises ZTE and Huawei on the U.S. Department of Commerce’s “Entity List.” When asked about the main policy motivation for implementing the “Unreliable Entity List,” the MOFCOM spokesman commented that: “There is a surge of unilateralism and trade protectionism in recent years. Some countries routinely abuse the concept of national security, export control mechanisms, and long-arm jurisdiction.  Such abuses have caused serious harms to global trade and economic growth, the global supply chain and value chain division of labor, and global technological innovation and industrial development.  They have undermined the global economic order and multilateral trade rules, harming the global economy and the interests of many countries, including China.”  On June 1, MOFCOM further confirmed that the establishment of the “Unreliable Entity List” is an action in response to the targeted measures taken by some countries and some companies, out of line with international rules and common legal principles, restricting trades with certain other countries and companies.

MOFCOM is currently going through the relevant procedures to prepare for the publication of the relevant policy documents and the initial “Unreliable Entity List” system.