China’s Ministry of Commerce (MOFCOM) has placed seven entities from the European Union on its export control list, banning them from receiving “dual-use” items – products with potential military applications – originating in China. The entities include Belgium-based firearms manufacturers FN Herstal and its parent FN Browning Group. Others were major European defense contractors, aerospace research institutes and satellite intelligence firms the Ministry said were involved in arms sales to Taiwan. The move came as the EU imposed sanctions or export controls on 27 mainland Chinese and Hong Kong entities, accusing them of either helping Russia and Belarus circumvent Western sanctions or directly providing items such as drones or components for use on the battlefield in Ukraine.
The Ministry said the measure was to “safeguard China’s national security and interests” and “fulfill international obligations such as non-proliferation”, and was in accordance with the country’s laws and regulations on export control. “It must be emphasized that China’s legal listing of these entities targets only a small number of EU military-related entities that have taken part in arms sales to Taiwan or engaged in collusion with Taiwan,” the Ministry said in a statement. “These measures apply strictly to dual-use items and do not affect normal economic and trade exchanges between China and the EU. Law-abiding EU entities with high integrity have absolutely no cause for concern.”
Alicia Garcia-Herrero, Chief Economist for Asia-Pacific at French investment bank Natixis, said Beijing’s move could be a tit-for-tat retaliation for the EU measures revealed a day earlier. “Notably, it also follows China’s supply chain law approved on April 7,” she said. “The rules impose significant penalties on foreign entities that attempt to interfere with, audit, or otherwise disrupt Chinese supply chain arrangements.” The new 18-point regulation on supply chain security elevates safeguarding China’s industrial and supply chains to a national security issue. It also grants officials the power to punish any entities deemed to threaten the country’s access to vital resources and the free flow of goods.
Xu Tianchen, Senior Economist at the Economist Intelligence Unit (EIU), said China has seemed less tolerant of the EU’s sanctions involving Chinese firms. “The animosity between the two powers shows no signs of subsiding.” China lifted retaliatory sanctions against two Lithuanian banks following “the EU’s removal of its sanctions against two Chinese financial institutions”. UAB Urbo Bankas and AB Mano Bankas were sanctioned last August as China’s retaliation for the EU’s 18th round of sanctions against Russia which included two Chinese financial institutions: Heihe Rural Commercial Bank and Heilongjiang Suifenhe Rural Commercial Bank.
China-EU relations have been under increasing strain this year. On top of long-standing friction over alleged support for Russia in the Ukraine war, Brussels has enacted or proposed new trade and industrial regulations seen as restricting Chinese investment and companies, including the EU Cybersecurity Act 2 and the Industrial Accelerator Act. Both policies are likely to restrict market access for Chinese firms, either a total freeze on national security grounds or limitations in favor of made-in-Europe products.
Chinese Commerce Minister Wang Wentao called on European multinationals to play a “proactive role” in tempering the EU’s increasingly protectionist stance during meetings with Airbus CEO Guillaume Faury and Ola Kaellenius, Chairman of Mercedes-Benz and President of the European Automobile Manufacturers Association. Wang urged the executives and the business community to push for dialogue between China and the EU to resolve economic rifts, the South China Morning Post reports.
The Global Times adds that according to MOFCOM’s decision, exporters are prohibited from exporting dual-use items to the seven entities, and foreign organizations and individuals are prohibited from transferring or providing dual-use items originating from China to these entities; and all ongoing related activities must also be halted immediately. In special circumstances where an export is truly necessary, exporters must submit an application to MOFCOM for permission. Zhang Junshe, a Chinese military affairs expert, told the Global Times that the companies placed on the export control list have either engaged in arms sales to Taiwan or have colluded with Taiwan authorities, driven by self-interest and supported by certain political forces in their countries. This is undoubtedly a serious provocation against China's sovereignty and will inevitably be met with countermeasures from China that are reasonable, legal, and forceful, Zhang said.
The MOFCOM website lists the seven entities as FN Herstal; OMNIPOL; Hensoldt; Excalibur Army; Spaceknow; VZLU Aerospace; and FN Browning.
Meanwhile, U.S. lawmakers have advanced 20 new export control measures – including the controversial Match Act – to further restrict Chinese access to U.S. technology and bar Chinese chipmakers from gaining access to advanced semiconductor manufacturing equipment. The House of Representatives described the action as the “largest significant export control mark-up in the history of Congress”.
