China readies new law to ban companies on national security grounds

China readies new law to ban companies on national security grounds

China is set to advance a new export control law that would ban Chinese suppliers from dealing with specific foreign companies on national security grounds, taking a page from the U.S. crackdown on Huawei Technologies and its peers.

The Standing Committee of the National People’s Congress will deliberate on the legislation, which has a stated goal of protecting national interests, in a session starting Tuesday. The new law could be enacted as early as 2021.

The bill uses the same national security arguments that the Trump administration has adopted in measures to isolate Chinese companies, including last month’s de facto ban on exports to Huawei of semiconductors built using American technology. China has pushed back against the measures, slamming the U.S. for using national security as an excuse to pressure businesses.

Under Beijing’s new legislation, authorities could ban exports of strategic materials and advanced technology to specific companies on its equivalent of the U.S. Department of Commerce’s Entity List.

Such a blacklist would likely include American corporations, further stoking tensions between the U.S. and China. But companies in Japan and other countries could also face a risk if they abide by U.S. export restrictions on China.

“Japanese companies have no choice but to follow U.S. export rules, but there’s a non-zero chance that will be seen as hurting China’s national security,” according to the Center for Information on Security Trade Control in Tokyo.