US adds dozens of Chinese companies to trade blacklist, including chipmaker SMIC and drone company SZ DJI

Dozens of Chinese companies, including top US chipmaker SMIC and Chinese drone maker SZD DJI Technology, were blacklisted on Friday as US President Donald Trump’s administration sparked tensions with China in its final weeks in office.

First Reuters Reported In addition The minimum wage And other companies before Friday. The move is the latest in a series of attempts by Republican Trump to burn his tough China image as part of a long-running tussle between Washington and Beijing over trade and a number of economic issues.

The U.S. Department of Commerce said there was evidence of Beijing’s attempts to use civilian technology for military purposes and of activity between the concerned SMIC and China’s military industry.

Secretary of State Wilbur Ross said in a statement that the Commerce Department “does not allow modern U.S. technology to assist in building a growing anti – war military.”

The division also said it was adding the world’s largest drone company DJI To list along with AGCU Syntech; China National Scientific Instruments and Materials, and the Kwang-chi Group for initiating “widespread human rights violations.”

“The United States will use all available negative measures, including measures to prevent (Chinese) companies and organizations from exploiting U.S. goods and technology for malicious purposes,” Secretary of State Mike Pompeo said in a statement.

SMIC and other companies did not immediately comment.

However, some legislators, industry officials and former officials were questioned about the action taken against SMIC on Friday. Generally, entity-listed companies must apply for licenses from the Department of Commerce, which faces stringent scrutiny when seeking permission to receive goods from the U.S. Department.

SMIC meets strict review criteria only when applying for licenses for the most advanced US chipmaking devices at 10 nanometers or less. The Commerce Department said it would review the licenses of all other goods shipped to the company one by one.

“This is a good (public relations) line: ‘We put it on the list of these bad guys,'” said William Reinsch, a former Commerce Department official who said he had ines hinted that the agency would already prevent SMIC from exporting such technology. “As a matter of practice … it doesn’t change anything.”

Michael McCall, a Republican member of the House Foreign Affairs Committee ranking, echoed Reinsch’s comments, saying he feared the regulations would “bark more than bite”. “I am concerned that this will weaken the intent, and may create an exception for bad actors to evade U.S. export controls,” he said in a statement.

‘Arbitrary suppression’

But Chinese officials have not commented on Washington’s latest gambit.

In a speech to the Asian Society on Friday, Chinese State Councilor Wang Yi, who is also the country’s foreign minister, noted the expansion list of US sanctions and called on Washington to stop “unilaterally suppressing” Chinese companies.

In fact, the Chinese Foreign Ministry said the blacklisting would be evidence of US repression of Chinese companies and that Beijing would continue to “take necessary steps” to protect their rights.

“We urge the US to stop the misconduct of undue repression of foreign companies,” ministry spokesman Wang Wenbin told a news conference in Beijing on Friday.

The Commerce Department has released a list of 77 so-called entity lists and subsidiaries, including 60 Chinese companies.

The agency said that some companies in China, in the capacity of the Commerce Department, had initiated human rights violations and were helping some to build and militarize artificial islands in the South China Sea.

It also cites companies that have purchased US-origin goods in support of the Chinese military and those who have committed theft of U.S. trade secrets.

Among the companies previously listed are telecom equipment giants Huawei And 150 subsidiaries, and ZTE Surveillance camera maker Higgins on grant violations, as well as China’s crackdown on the Uyghur minority.

Frying ties

Shares of SMIC, officially semiconductor manufacturing international corporation, fell 5.2 percent in Hong Kong on Friday, while the company’s Shanghai-listed shares fell 1.8 percent. Benchmark indices fell less than 1 percent in both markets.

SMIC is already in the crosshairs of Washington.

In September, the Department of Commerce ordered some equipment suppliers to apply for export licenses, after it was determined that there was an “unacceptable risk” that the equipment supplied to it could be used for military purposes.

Last month, the Defense Ministry added the company to a special blacklist of Chinese military companies, barring U.S. investors from buying its shares, which could open later next year.

SMIC has repeatedly stated that it has nothing to do with the Chinese military.

SMIC is the largest Chinese chip manufacturer, but trails Taiwan Semiconductor Manufacturing Company, The market leader of the industry. Sought to build foundries for the manufacture of computer chips that would compete with TSMC.

Relations between Washington and Beijing have been growing over the past year as Beijing manages the spread of the coronavirus, the imposition of a national security law in Hong Kong and the rise of the world’s top two economies over rising tensions in the South China Sea.

© Thomson Reuters 2020

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