Hong Kong
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The Trump Administration ramped up its pressure on Chinese tech firms on Monday by increasing restrictions imposed on sure firms to additionally cowl their subsidiaries, a move that’s drawn the ire of Beijing as the 2 powers stay locked in a know-how race.
The US motion goals to cease sanctioned firms – together with know-how champion Huawei, reminiscence chip big YMTC and drone maker DJI – from evading export controls by funnelling restricted applied sciences by their subsidiaries.
The new rule “closes a significant loophole,” the US Department of Commerce said, by making any subsidiary at least 50% owned by a agency already on the export controls listing face the identical restrictions because the mother or father firm – a shift that would have an effect on tens of hundreds of firms.
In response, a spokesperson for China’s Ministry of Commerce called the move “extremely malicious,” including that the nation would “take necessary measures” to shield the rights and pursuits of its firms.
“Beijing urges Washington to immediately correct its wrongdoing and stop its unreasonable suppression of Chinese companies,” the spokesperson mentioned.
The curbs mark a recent try by Washington to tighten restrictions already imposed on over a thousand of Chinese firms, which the Commerce Department deemed a danger to US nationwide safety or overseas coverage pursuits. Entities on the listing are required to get hold of licenses for exporting sure merchandise or applied sciences.
The restricted applied sciences cowl a big swathe of future-defining industries corresponding to synthetic intelligence, semiconductors, superior robotics, and gear wanted to produce them. The new rule may even lengthen to entities within the “Military End-User list,” which goals to forestall dual-use gadgets from being diverted for army functions.
The announcement injects recent uncertainty into the continued US-China commerce struggle, simply weeks earlier than President Donald Trump and Chinese chief Xi Jinping are expected to meet at the sidelines of the APEC summit in South Korea.
While the rule change doesn’t particularly single out China, Chinese and Russian entities dominate the so-called ‘entity list,’ primarily for aiding their nations’ army know-how developments. China, particularly, has in recent times alarmed Washington with its speedy progress in chip and AI applied sciences, prompting the blacklisting of Huawei in 2019 and tons of of others in subsequent years.
“For too long, loopholes have enabled exports that undermine American national security and foreign policy interests,” mentioned Jeffrey I. Kessler, Under Secretary of Commerce for Industry and Security, within the division’s assertion.
Experts and coverage advisors have lengthy warned towards the chances of restricted firms using their subsidiaries or associates to bypass the curbs. In 2023, the US House Foreign Affairs Committee released a report describing the usage of the entity listing as “ineffective” and calling for a brand new method corresponding to that introduced this week.
In an instance cited within the report, Huawei bought its smartphone model Honor to a consortium that included the Chinese authorities in 2020, after it was added to the entity listing. Honor has by no means been blacklisted. A separate congressional report mentioned the case of Huawei and Honor exemplified Chinese firms “restructuring themselves potentially to circumvent US export and investment restrictions.”
In a policy document accompanying Monday’s announcement, the bureau answerable for export controls at the commerce division mentioned it was involved “the old approach can enable diversionary schemes, such as the creation of new foreign companies to evade Entity List restrictions.”
The growth of controls to cowl subsidiaries of listed entities came about instantly on Monday, with some firms granted exemptions for 60 days, the Commerce Department mentioned.