US continues to attack Chinese firms; 89 companies with ‘military ties’ identified

By Rahul Vaimal, Associate Editor
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According to reports, the Trump administration is close to announcing that 89 Chinese aerospace and other firms have military connections, blocking them from buying a range of US products and technology.

If published, the list could further increase trade tensions between the two largest economies of the world and hurt US companies that sell civil aviation parts and components to China, among other industries.

Chinese Foreign Ministry spokesman Zhao Lijian, speaking in Beijing, said China “firmly opposes the unprovoked suppression of Chinese companies by the United States.”

He added that what the United States is doing seriously violates the definition of market competition and international trade and investment practices that the US claims to uphold.
Chinese companies have always operated in accordance with the law and strictly follow local laws and regulations when operating overseas, including in the United States, Zhao said.

Military end users

Commercial Aircraft Corp of China Ltd (COMAC), which is spearheading Chinese efforts to compete with aircraft manufacturers Boeing and Airbus, is on the list, as is Aviation Industry Corporation of China (AVIC) and 10 of its related entities. The list is included in a draft rule that identifies Chinese and Russian companies the US considers “military end users,” a designation that means US suppliers must seek licenses to sell a broad swath of commercially available items to them.

According to the rule, it is more likely that applications for such licenses are rejected than granted.

US President Donald Trump has stepped up his actions against China in recent months. Ten days ago, he released an executive order restricting US investments in Chinese enterprises that the administration believes to be owned or controlled by the Chinese military.

The pending list comes after the Commerce Department expanded the definition of “military end user” in April this year. The April rule includes not only armed service and national police, but any person or entity that supports or contributes to the maintenance or production of military items even if their business is primarily non-military.

Hurting international businesses

The export restriction applies to items as disparate as computer software like word processing, scientific equipment like digital oscilloscopes, and aircraft parts and components. The items include everything from brackets for flight control boxes to the engines themselves when it comes to aircrafts.

News of the list comes at a sensitive time for the US aerospace industry as Boeing seeks Chinese approval of its 737 MAX after it was cleared by US regulators last week. In March 2019, China was the first nation to ground the jet following two fatal crashes and it is already expected to wait months to lift the ban.

Experts claim that the regulation and list could still be modified and that the clock was running out for it to come into force under the Trump administration, as by mid-December it will have to be cleared and submitted to the Federal Register, the official US regulatory publication.

In the draft law, the Commerce Department said it was “vital for protecting US national security interests” to be able to monitor the flow of US technology to the listed companies.
But a former US official said “merely creating a list and populating it is a provocative act.” An aerospace industry source said it could spur China to retaliate.

In addition to the 89 Chinese listings, 28 Russian entities are also identified by the draft law, including Irkut, which also aims to break into the Boeing market with its MC-21 jetliner development.

“The list of 117 companies is not comprehensive,” said the draft rule and is considered an “initial tranche.”

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