As tensions continue to rise between China and the United States, the Chinese government has taken a step forward in actualizing the “Unreliable Entity List,” first announced by China’s Ministry of Commerce on May 31, 2019, following the addition of Huawei and affiliates to the U.S. Commerce Department’s “Entity List.” Now, as the U.S. government pursues restrictions on Chinese technology services providers, including social media apps, the Ministry of Commerce has issued new Regulations on the Unreliable Entity List that set out a framework for the operation of that list.

The new regulations—which can be read in their original Chinese here, and in an official reference English translation here—state that the Unreliable Entity List will target foreign entities seen as

  • “endangering the national sovereignty, security, or development interests of China;” or
  • “suspending [or terminating] normal transactions with Chinese enterprises, organizations, or individuals, in violation of [commonly accepted] market-based principles, [thus] seriously harming the legitimate rights and interests of Chinese enterprises, organizations, or individuals.”

The Chinese government has not yet named companies that it plans to investigate, but the regulations are broadly worded so as to leave substantial discretion in the hands of government decision makers.

For details on this new regulation, read Covington’s client alert on the topic here.