China Issues New Export Control Law and Related Policies

China Issues New Export Control Law and Related Policies

INSIGHTi

China Issues New Export Control Law and
Related Policies
October 26, 2020
On October 17, 2020, the Standing Committee of China’s legislature, the National People’s Congress
(NPC), passed the Export Control Law of the People’s Republic of China, which goes into effect on
December 1, 2020 (Chinese text and unofficial English translation).The passage follows three rounds of
legislative deliberations since China’s cabinet, the State Council, first presented a draft to the NPC in June
2017. The law realizes a longstanding Chinese government goal of elevating and consolidating ministry-
level export control authorities under one national-level legal and policy framework. The new law defines
China’s export control authorities as a joint mechanism of units under both the State Council and the
Central Military Commission that perform export control functions. The action is part of a broader effort
by China’s President Xi Jinping to build out national security authorities and reflects themes—such as
China’s right to development—as broad justifications for national security-related trade actions.
The final language includes several new provisions that appear aimed at creating a Chinese policy
counterweight to the U.S. government’s use of export control authorities to restrict the transfer of U.S.
dual-use technology to China, including provisions for retaliatory action and extraterritorial jurisdiction.
(See CRS In Focus U.S. Export Control Reforms and China: Issues for Congress.) The United States and
other governments—such as those in Japan, Taiwan, and Europe—have tightened China’s access to
sensitive technology through strengthened export control authorities and licensing practices over the past
two years. Relatedly, there has been a marked upswing over the past year in the number of countries that
have sought to ban or impose conditions on the participation of China’s telecommunications firm Huawei
in their 5G networks, particularly in Europe.
The Export Control Law gives the Chinese government new policy tools and justifications to deny and
impose terms on foreign commercial transactions—both inside and outside of China—on the grounds of
China’s national security and national interest. The Chinese government traditionally has sought to
restrict foreign investment and imports to advance national industrial goals, although there have been
prominent examples of China controlling the export of strategic commodities, such as coke, fluorspar, and
rare earth elements. China for some time also has used ad hoc import restrictions to create commercial
and political pressures on its major trading partners, a tactic that Beijing has used most recently with
Australia and Canada in restricting agriculture and commodity trade. The law gives China’s government
new rationales and processes to impose terms on transactions among firms and within joint ventures and
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other partnerships within China, as well as on exports and offshore transactions. Key licensing factors
include not only the particular technology, end use, and end user, but also an entity’s “social credit”
rating, highlighting how the government may seek to leverage and enhance the emerging role of China’s
social credit system as a policy tool to influence corporate activity.
The law authorizes the government to exercise export controls in retaliation against other countries’
actions, to impose temporary (up to two years) export controls on items not on a control list, and to
broadly justify actions with several open-ended clauses. The law also includes provisions for China’s
participation in international discussions and regimes and global rulemaking on export controls according
to the principles of equality and reciprocity, a sign that China could become more active in trying to set
rules and norms that advantage China.
Amended Catalogue of Controlled Technologies
In a related action, China’s Ministry of Commerce and Ministry of Science and Technology on August 28,
2020 amended China’s Catalogue of Technologies Prohibited or Restricted from Export (in Chinese) to
impose new controls in technological areas including:
 biotechnology, pharmaceuticals, and medical equipment;
 3D printing;
 construction , petroleum, and power equipment;
 machine tools;
 high speed wind tunnel design;
 aerospace bearings;
 unmanned aerial vehicles (UAVs);
 space–related remote sensing image acquisition, measurement instruments, and data
transmission;
 vacuum technology;
 mapping;
 information processing technologies (e.g., personal interactive data algorithms, speech
synthesis, artificial intelligence-based interactive interface, voice evaluation, and
intelligent scoring); and
 cryptographic and cyber-related technologies.
China’s national industrial plans prioritize these technology areas, and the Chinese government prohibits
or restricts foreign investment in these areas while seeking technology transfer through foreign
partnerships and acquisitions. The timing of the catalogue update and the addition of information
technologies and algorithms used in social media platforms may reflect an effort to influence terms the
U.S. government might impose on the U.S. operations of China-based ByteDance’s social media
platform, Tik Tok.
Unreliable Entity List
In another related action, China’s Ministry of Commerce on September 19, 2020 issued a State Council-
approved Order on Provisions on the Unreliable Entity List that calls for the establishment of a new
system” to identify and respond to entities that endanger China’s sovereignty, security, or development;
violate “normal” market transaction principles; and cause serious damage to the legitimate rights and
interests of Chinese companies, organizations, or individuals. While the list triggers export control action
similar to the U.S. Department of Commerce’s Entity List, China’s justifications for including an entity

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on the list appear to be much broader. In addition to fines, other punitive actions include restrictions or
prohibitions on participation in China-related trade and investment and foreign personnel entry, work,
stay, and residence in China.
Issues to Watch
The Chinese government is expected to issue implementing regulations and is updating its control lists,
offering a window into its views of China’s relative technological strengths and gaps. The Chinese
government may impose or threaten to impose controls against particular companies or technologies in
which the U.S. and other governments have imposed export controls that affect Chinese entities. Beijing
also may seek to impose controls where it has niche advantages or control over certain elements of global
technology supply chains. Such actions could backfire, however, by magnifying the technology risks of
doing business in China—particularly in advanced technology and research and development—and
potentially accelerating technology decoupling. China’s potential retaliatory use of export controls
challenges global rules and norms and could drive the United States and like-minded countries to
strengthen collaboration in licensing practices and multilateral export control arrangements, such as the
Wassenaar Arrangement, to address growing China concerns.
Export Control Law of the People’s Republic of China
Effective December 1, 2020
ARTICLE 2
Defines controlled items to include dual-use items, military items, nuclear items and other goods,
technologies, services and items relating to the maintenance of national security and national
interests, and performance of nonproliferation and other international obligations
ARTICLE 3
Defines transfer to include any transaction outside the PRC and involving foreign organizations or
individuals (implying it includes transactions in China that involve foreign entities)
ARTICLE 4
Defines control list to include lists, catalogues, and directories
ARTICLE 5
Defines export control authorities to include a consultative mechanism of State Council and
Central Military Commission units that perform export control functions
ARTICLES 6 & 32
Call for strengthening international cooperation and participating in global rules related to
export controls; cooperating and communicating with other countries and international organizations
in accordance with international treaties concluded or ratified by China or on the basis of
principles of equality and reciprocity
ARTICLE 7
Encourages companies to work through industry groups and chambers of commerce to
perform export control duties
ARTICLES 8 & 9
Mention both country and product list and determinations
ARTICLE 9
Al ows for temporary controls (up to 2 years in duration) for products not on a control list
ARTICLES 12 & 13
State that license decisions wil consider national security and the national interest. Other
factors include: international commitments; type of export; sensitivity of the items; destination
country or region of the export; end users and end use; credit record of the entities; and other
factors provided in China’s laws and administrative regulations
ARTICLE 14
Includes provisions for internal compliance systems and general licenses
ARTICLE 16
Includes provisions for end-users and end-user; includes restrictions on altering end-use
ARTICLES 34-40
Outline fines and actions in response to various types of violations
ARTICLE 44
Scopes jurisdiction to include transfers that occur outside of China
ARTICLE 45
Addresses trade and transfer via China’s bonded zones

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ARTICLE 48
Provides justification for tit-for-tat retaliatory action:
“If any country or region abuses export control measures to endanger the national security and national
interests of the People’s Republic of China, the People’s Republic of China may, based on the actual situation,
take reciprocal measures against that country or region.”
Source: Export Control Law of China, effective December 1, 2020; available at http://www.xinhuanet.com/2020-
10/18/c_1126624518.htm
Notes: CRS has bolded key provisions.

Author Information

Karen M. Sutter

Specialist in Asian Trade and Finance

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