With the approval of the State Council, the Ministry of Commerce (MOFCOM) published the Regulations on the Unreliable Entity List (Ministry of Commerce Order No. 4, 2020) on September 19. Since then, there has been media coverage on the Regulations. In response to the attention of the media and the public, the head of the Department of Treaty and Law answered questions from the press about the Regulation.

Q1. The Regulations published yesterday has attracted much attention from the media. Some have voiced their understanding and support, yet others, especially some foreign media, have expressed their concerns. What are the rationales behind the Regulations?

A. In accordance with the Law on Foreign Trade and the Law on National Security of the People’s Republic of China and other relevant laws, MOFCOM formulated and published the Regulations with the approval of the State Council. The main aims are to protect the lawful rights and interests of Chinese enterprises, organizations, and individuals, correct the illegal actions of certain foreign entities, protect national sovereignty, security and development interest, and safeguard international economic and trade order featuring fairness and freedom.
I should point out the following points.

First, the Chinese government’s position of firmly upholding multilateralism is consistent. As General Secretary Xi Jinping Xi Jinping said, “China always supports and adheres to multilateralism, and pursues development with the rest of the world in the spirit of openness and mutually-beneficial cooperation.”　China’s firm position of supporting and safeguarding multilateralism will not change, which is reiterated in Article 3 of the Regulations. Besides, the Regulations do not target any specific country or entity. China will implement the Regulations in accordance with international rules.

Second, the Chinese government’s position of deepening reform and expanding opening-up is consistent. Reform and opening-up are China’s fundamental state policies and provide fundamental driving force for its development. Starting from January 1, 2020, the Foreign investment Law and its implementing regulations, as well as the Regulations on Optimizing the Business Environment have come into force, sending a clear signal that China remains committed to expanding opening-up. China will open its door wider to the rest of the world in more and more areas and of a higher quality. In the future, the Chinese government will continue to be dedicated to expanding opening-up and optimizing the business environment, to share China’s development opportunities with investors from around the world.

Third, the Chinese government’s position of protecting the lawful rights and interests of all market entities is consistent. The Regulations aim only at a limited number of foreign entities that disrupt market rules and violate Chinese laws. There is no need for good-faith and law-abiding foreign entities to be worried. In the meantime, China keeps improving its legal framework regarding market entities to better protect them. The Chinese Civil Code implemented this year constitutes a systematic summary of previous civil laws and regulations. It is a milestone for the protection of the property rights and personal rights for natural persons, legal persons, and other organizations. The Chinese government is also committed to the protection of intellectual property rights (IPR). The amendment of the Trademark Law, Copyright Law, and Patent Law paves the way for strengthening IPR protection. Going forward, the Chinese government will better protect the lawful rights and interests of all market entities as always.

Q2. What criteria are used when adding a foreign entity to the unreliable entity list? What are the consequences?

A. According to the Regulations, the state shall establish a working mechanism in charge of coordinating the implementation of the unreliable entity list, which will work in strict accordance with law.

First, relevant elements will be considered in accordance with law. When deciding to add a foreign entity to the list, the working mechanism shall give full consideration to such elements as its damage to China’s national sovereignty, security, and development interests, as stipulated in Article 7 of the Regulations.

Second, relevant procedures will be carried out in accordance with law. Under its mandate, or based on a recommendation or complaint, the working mechanism may decide whether to investigate the action of a foreign entity, and shall make announcements as to which entity it decides to investigate. Based on the outcomes of the investigations, the working mechanism may decide whether to incorporate the entity involved to the list. Where the facts are clear regarding the illegal action of the foreign entity, the working mechanism may, in light of other legal elements, make a decision as to whether to add the entity to the list, and shall make announcements if it rules so.

Third, relevant measures will be taken in accordance with law. When adding a foreign entity to the unreliable entity list, the working mechanism may present the risk of conducting transactions with this foreign entity, so that relevant parties may be more alerted and fend off risks. Based on realities, the working mechanism may employ one or multiple measures pursuant to Article 10 of the Regulation, including restrictions on trade, investment, and the entry of personnel or transport vehicle at borders, or other necessary measures.

Four, a timeframe for rectification will be provided in accordance with law. When deciding whether to add a specific entity to the list, the working mechanism may, based on realities, designate a period of time for the entity to rectify its action, during which no measures will be taken against this entity. If the entity fails to rectify within the timeframe, measures will be imposed pursuant to the Regulations.

To conclude, I would like to highlight two points. First, the scope of application of the Regulations is strictly defined. The Regulations target only the few foreign entities that break the law, and the range will not be expanded arbitrarily. Second, the listing procedures are transparent and well-regulated. According to the Regulations, the launching of investigations, the decision to add an entity to the list, and the decision to adopt measures shall all be announced. In the meantime, foreign entities are entitled to make a statement, or enter a plea during the investigation. These procedures will ensure the orderly operation of the unreliable entity list system and protect the lawful rights and interests of foreign entities.

3. We have noted some concerns voiced upon the promulgation of the Provisions. Will China no longer welcome foreign investment and shift toward protectionism?

Answer: In recent years, protectionism is on the rise globally. Some countries generalize the concept of “national security”, abuse foreign investment reviews, which gravely undermines the international investment and trade order.

Against such backdrop, the Chinese government stays committed to expanding opening-up by further relaxing market access, embracing and protecting foreign investment, improving our business environment, rolling out practical measures, promoting sustained recovery of economy and boosted the world’s confidence. The Provisions is introduced by the Chinese government to provide a more stable, equitable and predictable business environment for those foreign investors in China complying with laws and regulations and to prevent the disturbance of illegal acts. China will, as always, welcome foreign investors to invest and develop business in China. We would remain a hot destination for foreign investment where foreign investors are willing to come, stay and growing robustly.

4. Can the entities included into the Unreliable Entity List be removed from it afterwards? If so, what criteria should be met and what procedures should these entities fulfill?

Answer: The working mechanism will exercise dynamic management on the Unreliable Entity List according to the Provisions. To be specific:

First, an entity can be removed from the List based on actual circumstances. For instance, where significant changes take place to the facts based on which a relevant foreign entity is included into the Unreliable Entity List pursuant to Article 7 and 8 of the Provisions, the working mechanism may decide to remove that entity from the List.

Second, an entity should be removed from the List if consistent with certain circumstances prescribed by law. The working mechanism should decide to remove an entity from the List if the entity has rectified its actions and taken measures to eliminate the consequences of the actions within the time limit of rectification specified in the announcement of the inclusion of that entity.

Third, a foreign entity is entitled to apply for removal in light of protecting procedural rights. The decision of removal may be made by the working mechanism. Relevant foreign entities are also entitled to apply to the working mechanism to be removed from the list. This grants relevant foreign entities the right to apply for removal and protects their lawful rights and interests.

5. When will be the first Unreliable Entity List announced and which companies will be on the List?

Answer: First, the Provisions is not aimed at any particular country or entity. Which companies will be included in the List hinges upon whether their actions violate Chinese laws, endanger national sovereignty, security and development interests of China, and violate normal market transaction principles and block, cut supply to or impose other discriminatory measures on Chinese companies, other organizations and individuals.

Second, the List doesn’t preset a timetable and a list of companies. If a foreign entity does have aforementioned illegal acts, the working mechanism will strictly follow the Provisions, take account of all factors and make serious and prudential decisions as to whether to list a foreign entity and take measures correspondingly. Announcement will be made according to the law if a foreign entity is decided to be included or certain measures to be imposed.

Meanwhile, I’d like to reiterate that the Chinese government’s stance on firmly protecting the lawful rights and interests of all types of market entities remains unchanged. There’s no need to worry if foreign entities do not commit illegal acts.

6. It’s been reported by some media that the Provisions is a countermeasure taken by China in response to the US recent actions on Chinese companies including Huawei, WeChat and TikTok. What is your comment on that?

Answer: First, it is on our planned working agenda to introduce the Provisions. In May 2019, the Chinese government announced to establish the Unreliable Entity List System, since which we initiated and proceeded with the legislative work according to the legislative procedures. Over the past one year or so, we carefully studied and closely examined the legislation, listened to the comments by relevant parties, and completed the legislative procedures recently. Publishing the Provisions is a normal step in our legislative work. The provisions neither targets specific countries nor specific entities.

Second, the Provisions is an institutional design that would effectively safeguard the business environment. The Chinese government is committed to a market-oriented, law-based and internationalized business environment and would take forceful measures to protect the lawful rights and interests of market entities. At the same time, the Chinese government has the right to take necessary measures against the illegal acts specified in the Provisions, which is not only a common practice internationally, but also a necessary move to create a sound business environment.

We always believe that cooperation is the only right choice for China and the US. We hope the US could pull in the same direction with China, respect international law and rules, and engage in dialogues and consultations based on equality and mutual benefits.