US move to publish list of Chinese companies with alleged military ties threatens global industrial supply chain

By Tu Lei and Ma Jingjing Source: Global Times Published: 2020/12/22 22:38:39

Washington alleges 58 companies have military connections

The first ARJ21 aircraft Genghis Khan Airlines received from the Commercial Aircraft Corp. of China (COMAC) is parked at Dachang Airbase in east China's Shanghai, Feb. 22, 2019. The delivery marks the beginning of China's indigenously developed jetliners' scale operation. The ARJ21 took off from Shanghai heading for Hohhot Baita International Airport in north China's Inner Mongolia Autonomous Region on Thursday. (Xinhua/Ding Ting)

Tensions between China and the US have not been cooling, and the Trump administration recently escalated the situation by releasing list of Chinese enterprises that allegedly have military connections.

Chinese officials and experts slammed the US government's move, calling it "ridiculous" and "a serious threat" to the security of the global industrial supply chain.

In response, the Chinese Commerce Ministry said on Tuesday that China has firm objections and will take "necessary measures" to firmly maintain Chinese companies' legitimate rights and interests.

"The US move of deploying national power to crack down on foreign companies, including Chinese companies, using the excuse of 'national security' seriously violated fair competition and international trade rules, while disrupting normal internal trade and cooperation," the ministry said in a statement on its website.

"We urge the US to stop unilateralism and practices involving hegemony, give foreign companies including Chinese companies fair treatment, and maintain the normal international trade order," it continued.

Reuters reported that the Trump administration on Monday published a list of Chinese companies with alleged military ties, a move that will restrict them from buying a wide range of US goods and technology.

The list has 58 designated companies, down from 89 in a preview draft after Commercial Aircraft Corp of China (COMAC) was removed, but seven units of Aviation Industry Corp of China (AVIC) remain.

The remaining companies include the Shanghai Aircraft Design and Research Institute, which designs COMAC planes, and Shanghai Aircraft Manufacturing Co, which manufactures COMAC planes.

"It shows that the US is facing great pressure both domestically and internationally, reading from the list made before and after," Wang Ya'nan, chief editor of Aerospace Knowledge magazine, told the Global Times on Tuesday.

COMAC has strong links to the global supply chain. If it is included, opportunities between China and the world's civil aircraft manufacturing industry may be affected, which is why the US government removed it from the list, Wang said.

As with AVIC, if the US makes the decision based on alleged military connections, it makes no sense to define whether a company should be sanctioned, for most US aerospace companies have close ties with its military, Wang added.

China has become part of the global supply chain of the aviation industry, and US planemaker Boeing has strong connections with Chinese suppliers.

Boeing's official website showed that China is involved in the manufacture of all Boeing models that are still in production, including the 737, 747, 767, 777 and 787 Dreamliner, and more than 10,000 Boeing aircraft in service use Chinese-made parts and components. 

Boeing's business in China can reach more than $1 billion each year, including procurement from multiple suppliers, joint venture revenues, and research and development (R&D) investment, the website showed. One example is that AVIC SAC Commercial Aircraft Co delivered the 1,000th 787 vertical tail-leading edge assembly to Boeing in September 2019. 

AVIC is an important partner in subcontracting for international civil aircraft manufacturers, and a partner of US and European businesses. If it was included on the list, the aviation manufacturing industry of the world would be affected, Wang explained.

The list could pose hurdles for Chinese firms such as increasing the approval procedures, but it is hard to see what the actual impact will be, another anonymous insider told the Global Times on Tuesday. 

China's Foreign Ministry on Tuesday criticized the reported moves, saying that China urges the US to immediately stop its wrongdoing and give fair treatment to companies from all countries, including China, and affirming that China will take all necessary measures to safeguard the legitimate rights and interests of Chinese enterprises.

The list comes after Trump administration added dozens of Chinese companies to another US trade blacklist - including the country's top chipmaker SMIC and drone manufacturer DJI - on Friday.

Chinese observers said after trumpeting the "America First" slogan over the past four years and destroying the multilateral norms of trade, the Trump administration seems determined to create more trouble for its successor, the incoming administration of Joe Biden. 

If all civil aircraft production is brought back to the US as the Trump administration has asked, it will not only lead to a fall in supply chain efficiency, but its place as a global core technology leader would be weakened, Wang said. 

The US has used national power and continuously abused export control measures to suppress and contain specific enterprises in other countries for a period of time, said Wang Wenbin, spokesperson of the Foreign Ministry.

China is strongly against this, because it is a serious breach of free trade rules and a serious threat to the security of the global supply chain. It also causes serious damage to the welfare of the people of all countries, including the US, Wang added. 

COMAC could not be reached for comment as of press time.

Newspaper headline: Chinese officials slam US list

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