“It's time for a Trade War” said President Dumb aka Cadet Bone Spurs

from The New York Times…

China Steps Up Trade War and Plans Blacklist of U.S. Firms

Without disclosing details, officials say they plan to retaliate against those who
blockade Chinese companies, in an apparent response to Huawei's problems.

By ALEXANDRA STEVENSON and PAUL MOZUR | Friday, May 31, 2019

A Huawei advertisement in Shanghai. The company was placed on an American blacklist two weeks ago. — Photograph: Lam Yik Fei/for The New York Times.

BEIJING — The Chinese government said on Friday that it was putting together an “unreliable entities list” of foreign companies and people, an apparent first step toward retaliating against the United States for denying vital American technology to Chinese companies.

China's Ministry of Commerce said the list would contain foreign companies, individuals and organizations that “do not follow market rules, violate the spirit of contracts, blockade and stop supplying Chinese companies for non-commercial reasons, and seriously damage the legitimate rights and interests of Chinese companies.”

It did not give any details of which companies or entities it would include on the list, or what would happen to them. The ministry said that specific measures would be announced in the “near future.”

Still, the language echoes that of the United States government, which in recent months has placed Chinese companies on what it calls an “entity list” of firms that need special permission to buy American components and technology. Two weeks ago, the Trump administration placed Huawei, the Chinese maker of telecommunications gear, on the entity list, which could deny it access to microchips, software and other American-provided technology it needs to make and sell its products.

Shortly afterward, some American technology companies, including Google, said they would stop supplying Huawei. The American government has since granted Huawei a 90-day waiver, giving Chinese and American officials time to reach an agreement. The Trump administration is also said to be considering putting Hikvision, a Chinese video surveillance company, on the list.

If Friday's move is calculated to be a tit-for-tat strike back at American technology companies, Beijing will have ample targets.

Although major websites like Facebook, Twitter, and Google are already blocked in China, and rules strictly control other businesses like online payments and cloud services, most American technology firms have a big presence in China.

Both Google and Microsoft run sizable research and development operations in the country, and their Android and Windows operating systems are ubiquitous on Chinese smartphones and computers. Google and Facebook probably pull in billions of dollars in advertising revenue from Chinese companies.

The vague announcement also opens the door to retaliation of other kinds, perhaps against individuals or companies that depend heavily on the Chinese market for selling their products. If China decided to target individuals specifically, it could raise questions for foreigners doing business in China.

It could also give Beijing a way to punish American firms without forcing them to shut down operations in a way that would hurt China's economy or its long-term growth prospects.

Microsoft's research lab in Beijing is its largest outside the United States. — Photograph: Thomas Peter/Reuters.

Gao Feng, the Commerce Ministry's spokesman, said in the statement that the list would be aimed at those who block supplies and “take other discriminatory measures.”

An entity would be added to the list, he added, when its activity “not only damages the legitimate rights and interests of Chinese enterprises, and endangers China's national security and interests, but also threatens the global industrial chain and supply chain security.”

But China must be careful in how it retaliates, since many American companies are already reconsidering their dependence on the Chinese market and Chinese suppliers. If neither side backs off, the brinkmanship could permanently pull apart the supply chains that entwine the countries' economies.

Still, any move to shut down American technology companies' operations in China could hurt Chinese companies and the country's longer-term tech development. A shutdown of Microsoft's and Google's offices would mean that Chinese workers lose access to valuable training. Many of China's leading artificial intelligence entrepreneurs got their beginnings at Microsoft's A.I. lab.

Forcing American companies out of China's electronics supply chain could have a major impact on Chinese manufacturers. It would also most likely hasten strategies by American technology firms to diversify their supply chains away from China.

Yet if Beijing was willing to take that hit, many companies would struggle to immediately replicate production elsewhere. China's density of component makers and assembly factories is unmatched around the world.

“It's a really high-risk way to go about it,” said Andrew Polk, a founder of Trivium, a consulting firm in Beijing. “They are effectively forcing companies to choose, and companies will probably choose the U.S.”

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• Alexandra Stevenson reported from Beijing, and Paul Mozur from Shanghai. Elsie Chen and Ailin Tang contributed research to this story.

• Alexandra Stevenson is a business correspondent based in Hong Kong covering Chinese corporate giants, the changing landscape for multi-national companies and China's growing economic and financial influence in Asia. Before moving to Hong Kong, she covered the world of high finance and its darker corners, charting the influence of billionaire financiers in the markets and on the political stage for The New York Times in New York. She was a reporter for the Financial Times in New Delhi and London prior to joining The New York Times in 2013. Originally from Canada, she has also lived in Thailand, Singapore, and China, where she got her start as a reporter.

• Paul Mozur is a technology reporter based in Shanghai. Along with writing about Asia's biggest tech companies, he covers cyber-security, emerging internet cultures, censorship and the intersection of geopolitics and technology in Asia. A Mandarin speaker, he was a reporter for The Wall Street Journal in China and Taiwan prior to joining The New York Times in 2014. He cut his teeth covering smuggling, wild boars and the courts for The Standard in Hong Kong, and got his start as an editorial assistant at The Far Eastern Economic Review.

• A version of this article appears in The New York Times on Saturday, June 1, 2019, on Page B4 of the New York print edition with the headline: “China, Stepping Up Trade War, Plans a Blacklist of U.S. Firms”.

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