China Creating Additional Measures to Protect Tech Firms

China is looking into additional measures to protect its technology firms and strengthen controls on exports through a “national technological security management list system,” according to state news agencies.

The announcement comes about a week after China said it would be creating an “unreliable entity list” in response to the U.S.’s blacklisting of Huawei Technologies (see 1905310060). It also comes days after China opened an investigation into FedEx after saying the shipping company failed to deliver certain packages to Chinese clients (see 1906030036).

While it is unclear what China’s new “list system” will entail or how it will work, it is being organized by China's National Development and Reform Commission to "more effectively forestall and defuse national security risks,” according to a June 8 report from Xinhua, China’s state-run news agency. Detailed measures will be released in the “near future,” the report said.

The move was described as a security “firewall” and an “internationally accepted practice” in “today’s world,” according to an unofficial translation of a June 9 report from Communist Party mouthpiece People's Daily. The report said the system will strengthen innovation in China, increase development of “strategic high-tech” and build a “strong ‘firewall.’” China “will never allow certain countries to use Chinese technology to curb China's development and suppress Chinese enterprises,” the report said, adding the move “demonstrates our firm determination to defend the core interests of the country.”

In a June 9 editorial, state-controlled tabloid Global Times said the move was “clearly related” to China’s unreliable entity list, saying it will “counter U.S. technical restrictions and supply cut-off to some Chinese high tech enterprises.” The move is expected to protect Chinese companies and “provide a legal basis for technology export management,” the report said. “The global supply chain cannot operate without China,” it said. “China is capable of impacting the U.S. supply chain through certain technical controls.”

The editorial points out that “some may think that such regulations create ambiguity and leave space for ‘selective law enforcement.’” But China will not “abuse” its unreliable entity list to “arbitrarily suppress cooperative foreign companies,” Global Times said, and will be “strictly limited to safeguarding” the country's national security.

China announced the move after summoning several global technology companies to Beijing in early June to discuss the U.S. Commerce Department’s addition of Huawei to its Entity List, Reuters reported June 9. While the session was not a “direct warning,” Reuters reported, Beijing “made clear” that complying with U.S.’s ban on Huawei “would likely lead to further complications for all sector participants.” The companies summoned to Beijing included Microsoft, Reuters reported, as well as Dell and Samsung, according to the New York Times.

Tensions between the U.S. and China continued to escalate after a Chinese Foreign Ministry spokesperson was critical of U.S. Secretary of State Mike Pompeo’s recent warning to Switzerland about doing business with China’s technology firms. Pompeo said there is “no privacy” if they “operate” with Chinese technology, according to a June 4 report by Reuters.

In response, China’s Foreign Ministry spokesperson Geng Shuang said Pompeo was “full of lies and fallacies,” Xinhua reported June 10, and that “rumormongering, slandering and stirring up trouble everywhere will only end up damaging his own image.” Geng called U.S. blacklisting of Huawei “unethical and disgraceful,” the report said.