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Trade war

China to roll out export controls on sensitive technology

Mechanism to 'prevent and resolve national security risks' follows failure of US trade talks

  © Reuters

BEIJING (Financial Times) -- China will establish a mechanism for export control of sensitive technology, raising the spectre of tit-for-tat retaliation amid a souring trade dispute with the United States.

The announcement comes as both sides expand their dispute beyond simple tariffs, after the most recent round of trade negotiations ended without a deal in May.

Since then, the Trump administration has blacklisted Chinese telecommunications equipment maker Huawei, while China has threatened to punish foreign companies that cut off ties with Huawei by listing them as "unreliable".

The export control mechanism - which appears to be based on a draft law first proposed by the Ministry of Commerce two years ago - would "prevent and resolve national security risks", Xinhua said. Details would be released soon, it added.

The new Chinese regulations could prove similar to US export controls on strategic technologies. Those controls, covering military equipment, some encryption technologies, and some dual-use products, have long irked China. Chinese negotiators have often claimed that their trade surplus could be trimmed if the US would relax controls on high-tech goods.

While covering nuclear and military materials, the draft Chinese law also included latitude for retaliation if China is subject to discriminatory export control measures by any other country, according to a 2018 report by consultancy PwC.

"This is a major step to improve [China's system] and also a move to counter the US crackdown," tweeted Hu Xijin, editor-in-chief of the Global Times, a nationalist tabloid that is sometimes used to float ideas that are not yet official policy. "Once taking effect, some technology exports to the US will be subject to the control."

The mechanism will be developed by the National Development and Reform Commission under the guidelines of China's national security law, passed in 2015, Xinhua said. It didn't mention the draft law released by MofCom in 2017, which was based on US regulations that limit export of military and strategic technology.

"China ... appears to be implementing a longer-term strategy that recognises its competitive advantage in manufacturing, while building towards competing for control over the real value in the modern supply chain - intellectual property," Jeanine Daou, a tax specialist at PwC Middle East, concluded in the PwC report.

China has said it would retaliate against foreign companies that arbitrarily refuse to do business with Huawei, putting multinationals in the middle of a tug of war over which country dominates the next generation of technology. Last month, the NDRC implied it would block exports of rare earths, a material with many strategic applications including smartphones, lasers, instrument panels, wind turbines and MRI machines and more than 90 per cent of hybrid and electric cars.

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