China studying tech firms’ exposure to U.S. suppliers
The effort comes ahead of the release of a retaliatory blacklist
BEIJING—China is studying technology companies’ reliance on American suppliers, according to people familiar with the matter, an apparent attempt to assess their ability to withstand further trade-war shocks, even as Beijing prepares to roll out a retaliatory blacklist of foreign businesses.
The interagency effort, which involves officials canvassing domestic companies, has taken place over the past few months as the trade war has intensified.
A Chinese official last week reiterated plans to release “in the near future” an “unreliable entity list” of foreign businesses and individuals that would face restrictions in their dealings with Chinese counterparts. The list, which was first floated by Beijing in May, is an apparent planned response to Washington’s attempts to shut out telecommunications giant Huawei Technologies Co.
The survey of domestic companies is part of China’s longerterm goal of weaning itself off dependence on U.S. technology as a divide widens between the world’s two largest economies. Chinese companies have long relied on American technology and suppliers for its semiconductors, modems and jet engines.
The survey also highlights the care Beijing officials are taking to ensure local players aren’t hurt as they attempt to match the U.S. in the trade dispute with countermeasures—a reflection of fragility in the Chinese economic outlook.
Officials from China’s National Development and Reform Commission, Ministry of Industry and Information Technology and Ministry of Commerce have been reaching out to certain domestic businesses to ask about supplychain structure and exposure to U.S. companies, according to the people familiar with the matter.
Those contacted by the Chinese government include some of the country’s best-known smartphone makers—Xiaomi Corp., Oppo and Vivo, these people said.
Xiaomi, Oppo and Vivo declined to comment. The three government agencies didn’t respond to requests for comment.
China’s attempt to gain more technological independence from the U.S. predates the trade dispute. But it gained fresh impetus after Washington last year barred American companies from doing business with Chinese telecom gear maker ZTE Corp. and chip maker Fujian Jinhua Integrated Circuit Co. ZTE was banned as punishment for violating terms of an earlier deal to settle allegations that it engaged in sanctions-busting sales to Iran and North Korea, while Jinhua was accused of stealing technology secrets, a claim it had denied. The ZTE ban has since been lifted, but tensions were renewed after the U.S. blacklisted Huawei this year.
On Thursday, a spokesman for China’s Ministry of Commerce urged the U.S. to lift its sanctions against Huawei. “If someone wants to forcefully decouple the economies of the two countries, the consequences will surely be harmful to themselves and others,” spokesman Gao Feng said in a briefing. Tensions have seesawed recently. On Friday last week, President Trump urged U.S. companies to find alternatives to doing business in China as both countries ramped up tariff threats. By Monday, he sounded a more optimistic note about trade talks: “I think they want to make a deal,” he said.
Meantime, in Beijing, leaders this week have been renewing their emphasis on protecting
China’s supply chain, a point made at separate events by President Xi Jinping and Vice Premier Liu He, China’s point man on trade talks, according to state media.
More broadly, senior Chinese leaders and local cadres have stepped up public inspection of sites linked to scientific development. In June, Mr. Liu visited the Chinese Academy of Sciences, where he called for stronger core technology research. Days before Mr. Liu’s visit, Vice Premier Sun Chunlan toured sites in Shanghai linked to integrated circuits, saying selfreliance was critical to succeeding in an environment fraught with uncertainty.
Some Chinese companies have already moved to cut U.S. technology out of their supply chains. Cisco Systems Inc. Chief Executive Chuck Robbins said earlier this month that the company, which in the past has sold products to China’s large carriers and state-owned enterprises, was no longer being asked to participate in bids.
When China’s Ministry of Commerce first announced the unreliable entity list in May, Beijing officials said they would target foreign entities that violate market rules and contracts, that disrupt supplies to Chinese companies for “noncommercial purposes” or that otherwise hurt Chinese national interests. It has yet to name any specific companies or individuals, or spell out what the consequences would be.
Naming specific foreign businesses to a list of unreliable entities would add more uncertainty to the trade dispute, while deterring foreign investment, said Jeff Moon, a former assistant U.S. trade representative for China.
“Blacklisting foreign companies in China would further undermine business confidence among investors currently in the China market, encourage firms to relocate out of China and discourage new investment in China,” Mr. Moon said.