US Adds 58 Chinese Military-Linked Entities to New Trade Blacklist

December 22, 2020 Updated: December 22, 2020

The United States has named 103 Chinese and Russian companies and entities to a new trade blacklist, banning them from acquiring U.S. technology.

The Commerce Department released the new “Military End User” (MEU) list on Dec. 21, alleging that 58 Chinese and 45 Russian entities had ties to the two countries’ military forces. U.S. companies will now need to obtain a government license before they can “export, re-export, or transfer” goods to these blacklisted entities.

“The Department recognizes the importance of leveraging its partnerships with U.S. and global companies to combat efforts by China and Russia to divert U.S. technology for their destabilizing military programs, including by highlighting red flag indicators such as those related to communist Chinese military companies identified by the Department of Defense,” Commerce Secretary Wilbur Ross said in a statement on Dec. 21.

Many of the blacklisted Chinese companies are in the aviation and aerospace sector, such as Henan Aerospace Precision Machining Co.

Seven subordinate institutes of China’s state-owned defense company Aviation Industry Corp. of China (AVIC) and eight subordinate institutes of state-owned aerospace manufacturer Aero-Engine Co. of China (AECC) were also blacklisted.

AVIC was one of 35 Chinese companies identified by the Pentagon this year to have links to the Chinese military, formally known as the People’s Liberation Army. The designations were made under a requirement under section 1237(b) of the National Defense Authorization Act (NDAA), the annual defense spending bill. Other companies identified by the Pentagon included Chinese tech giant Huawei, railcar-maker CRRC, and semiconductor chipmaker SMIC.

The MEU list is a part of a growing effort by the Trump administration to address threats posed by the Chinese Communist Party (CCP) through its state policy of “military-civil fusion.” A Chinese government agency, named the Central Commission for the Development of Military-Civil Fusion, was established in 2017 to oversee collaborations between the military and private sector to advance technology innovations.

The State Department has warned on its website that the CCP strategy involves intellectual property theft in order to “achieve military dominance.”

SMIC was singled out for participating in military-civil fusion, when it and ten of its related entities were among 59 Chinese companies placed on the so-called entity list by the Commerce Department last week.

The Commerce Department stated that more firms could be added to the MEU list in the future, and restrictions against the 103 entities will take effect on Dec. 22 after the list is published in the U.S. Federal Register.

Additionally, the Commerce Department warned that U.S. companies should conduct “additional due diligence”; just because a company is not currently on the list, “does not imply that…[they] are exempt from regulatory prohibitions.”

For example, Chinese military-linked companies named by the Pentagon but not on the MEU list could be subject to restrictions, the department said.

On Tuesday, China’s foreign ministry spokesperson Wang Wenbin, responded to the MEU list during a daily briefing, stating that the United States should “immediately stop making mistakes.” Wang also said that China will react by taking “necessary measures.”

Hawkish state-run media Global Times stated that the MEU list was “meaningless” in an article published on Tuesday, while quoting a chief editor of a Chinese aerospace magazine.

Chinese and Hong Kong government entities were also named on the MEU list, including the Second Institute of Oceanography (SIO), a unit under China’s Ministry of Natural Sources. The SIO wrote on its website that one of the institute’s main responsibilities was to launch scientific research for Beijing’s military-civil fusion.

The Government Flying Service (GFS), a Hong Kong government department in charge of civil aviation, was also on the list. According to the GFS’s website, the department employs about 300 civil servants.

The GFS is currently facing allegations that it worked with mainland Chinese authorities to aid in their arrest of 12 Hongkongers by Chinese coast guards in August, according to Hong Kong media. The 12 were arrested on a boat, allegedly trying to escape to Taiwan and claim political asylum.

The 12, aged between 16 to 33, are being detained in the mainland Chinese city of Shenzhen and were formally charged by a Chinese court earlier this month.

On Dec. 21, family members of the 12 Hongkongers released an open letter to both Hong Kong and Chinese authorities. They demanded that Chinese authorities open their upcoming trial to the public and webcast the trial, and allow family-appointed lawyers to defend them.

Secretary of State Mike Pompeo wrote in a tweet last week that the 12 Hongkongers should be released immediately, since their so-called crime was “to flee tyranny.”

Pompeo added: “Communist China today is turning Hong Kong into the East Berlin of yesteryear, actively preventing its own people from seeking freedom elsewhere.”

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