China Adds New Export Restrictions in Latest Trade-Dispute Move
October 19 2020 - 8:50AM
Dow Jones News
By Chao Deng
A new law will allow China to ban exports to protect national
security, adding a versatile weapon to Beijing's arsenal as it
fights a war over trade and technology with the U.S.
The law, approved by China's legislature over the weekend,
authorizes tight restrictions on the sale abroad of dual-use goods
with both civilian and military applications, nuclear materials and
equipment, and other products and services that touch on national
security.
Set to go into effect Dec. 1, the new legislation mirrors
regulations the U.S. and other countries use to limit sensitive
exports. It has been in the works for two years, but the timing of
its passage means the Chinese leadership could use it to target
exports to the U.S. as the two superpowers trade blows over
everything from social media to semiconductors, said China-focused
lawyers.
"With recent events, China feels a greater need to have this
export law in place," said Luo Yan, a regulatory lawyer at
Covington and Burling LLP in Beijing. Chinese authorities feel that
export-control measures have been used against Chinese companies
and they need a way to reciprocate, she said.
The wording of the law, which spells out few specifics, makes it
difficult to say exactly how it might affect U.S. companies.
"The precise point is we don't know how they want to apply
this," said Ms. Luo.
The Trump administration has used the Commerce Department's
"Entity List" to block Chinese technology companies like
telecom-equipment giant Huawei Technologies Co. from accessing
critical U.S. goods and services, threatening their business.
Washington has also moved to protect advanced technologies like
artificial intelligence that it considers critical to national
security, with a governmentwide directive for federal agencies to
give priority to centrally designated technologies.
Ms. Luo pointed to a clause in China's new law that allows for
punishment of organizations and individuals outside the country's
borders, meaning Beijing could use it to try to limit goods it
deems sensitive being sold from anywhere in the world. It
potentially brings China in line with the U.S., which requires
foreign companies selling certain products containing U.S.
components to Chinese firms like Huawei to apply for permission
from U.S. regulators.
Another provision allows China to target data associated with
controlled items getting exported, meaning that both foreign and
domestic companies conducting research and development in China
then exporting goods and services abroad could get targeted.
American tech companies Google parent Alphabet Inc. and Microsoft
Corp. both maintain research labs in mainland China.
Alphabet and Microsoft didn't immediately respond to requests
for comment.
The law also allows China to take reciprocal measures if another
country abuses its export controls to endanger China national
interests. "That's sort of a retaliation clause," said Ms. Luo.
The Chinese government has had discretion to prevent certain
goods from leaving the country, even before export-related
restrictions came into effect. As the Covid-19 pandemic was gaining
momentum in April, Chinese authorities held back U.S.-bound face
masks, coronavirus test kits and other medical equipment, saying
they needed to guarantee the quality of exported medical products
and ensure that needed goods weren't being shipped out of
China.
In August, Beijing announced new restrictions on
artificial-intelligence technology exports, complicating talks
between ByteDance and potential American buyers. The Chinese firm
is facing pressure from the Trump administration to quickly sell
its popular app TikTok's U.S. operations or face an effective ban
on national-security grounds.
Last month, the Beijing leadership debated whether to publish a
blacklist of U.S. companies that it had first announced in 2019 as
an answer to the U.S.'s Entity List. Since October, the U.S.
Commerce Department has imposed strict restrictions on dozens of
Chinese companies and individuals buying American technology, with
the Trump administration citing human-rights abuses in the
far-western Chinese region of Xinjiang and other national-security
concerns.
The new export-control law gives China one more way to counter
countries that may impose trade-related measures against China, as
the U.S. has done, says Benjamin Kostrzewa, a former lawyer at the
U.S. Trade Representative and a lawyer at Hogan Lovells in Hong
Kong.
"China is expanding its legal options to respond," he said.
Write to Chao Deng at Chao.Deng@wsj.com
(END) Dow Jones Newswires
October 19, 2020 08:35 ET (12:35 GMT)
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