China Adds to Sanctions of U.S. Defense Contractors Over Taiwan Arms Sales
Beijing starts year with fresh warning to Trump of economic statecraft at its disposal
By James T. Areddy Updated Jan. 3, 2025 The Wall Street Journal
China started the year with a broadside against U.S. defense contractors, responding to recently ramped-up Taiwan arms sales by the Biden administration and laying down a fresh warning to President-elect Donald Trump of tools Beijing can use to protect national interests.
Beijing’s Ministry of Commerce on Thursday blacklisted 10 companies as “unreliable entities” barred from doing business in China and said it would block an additional 28 from buying unspecified components that could have dual civilian and military uses.
Most of the defense contractors named have previously been sanctioned by China and have little trade with the country, unlike some of the hundreds of Chinese entities with U.S. operations targeted in punishments by Washington, such as Huawei Technologies.
While the immediate impact is likely minimal, the measures are important as symbolic reminders of the kind of measures China could level more broadly against American corporations in any future conflict.
The ministry cited safeguarding national security in Thursday’s action and Xinhua News Agency said the targeted companies have engaged in military technology cooperation and arms sales with Taiwan in recent years, despite China’s strong opposition.
Beijing’s claim to Taiwan is its pre-eminent source of friction with the U.S., and under leader Xi Jinping, China regularly flexes military muscle with jet fighters and warships that demonstrate how it might conduct an invasion or impose a trade embargo of the island. In a New Year’s address, Xi issued a warning to the U.S. over Taiwan: “No one can ever sever the bond of kinship between us, and no one can ever stop China’s reunification, a trend of the times,” he said.
Despite Beijing’s admonishments, every U.S. administration has sold weapons to Taiwan, most recently Abrams tanks from General Dynamics ordered during Trump’s first term and recently delivered by the Biden administration. Under the 1979 Taiwan Relations Act, the U.S. is committed to providing Taiwan with defensive weaponry and is obligated to treat threats to the democratically run island as a matter of “grave concern.”
During the Biden years through November, the U.S. has reduced a backlog of weapons sold to Taiwan but not delivered, according to a blog post last month by Eric Gomez, a senior fellow at the Washington-based Cato Institute. Gomez pointed out that the Biden administration has put more emphasis on asymmetric systems and maintenance services to Taiwan, which don’t necessarily cost as much as traditional weaponry.
“While the first Trump administration sold Taiwan more weapons, the Biden administration sold Taiwan a better mix of weapons for Taiwan’s self-defense needs,” Gomez wrote.
The 10 companies labeled Thursday as unreliable by China are units of defense contractors General Dynamics, Lockheed Martin and RTX’s Raytheon, all of which have been sanctioned previously by Beijing. Some of those groups’ units are among those now blocked from dual-use item purchases, along with Boeing’s Defense, Space & Security unit, which likewise has previously been targeted by Beijing. The companies declined to comment or didn’t respond to questions.
The companies now cut off from dual-use components include some new names, including Texas-based sensor technology maker Intelligent Epitaxy Technology, which said it is studying the announcement.
In a separate notice on Jan 2, the Commerce Ministry said it was mulling export restrictions on certain technologies used to prepare battery components and process lithium and gallium.
China is a large producer and processor of many critical minerals and a draft of the proposed limits was circulated publicly this week to canvas public opinion. Lithium and gallium are metals commonly used in rechargeable batteries and semiconductors.
The measures build on Chinese sanctions in recent months against a number of American drone industry players. One of the companies, California-based Skydio, said the measure was aimed at its elimination in order to “deepen the world’s dependence on Chinese drone suppliers.” Beijing has also blocked specialty minerals germanium and gallium from export to the U.S., which appeared related to U.S. efforts to limit Chinese access to high-end semiconductors. And it has lashed out at critics of its human-rights record, banning some prominent American politicians from China, including Trump’s designee for secretary of state, Sen. Marco Rubio (R., Fla.).
After more than a decade of telling American companies they were at risk for participating in Taiwan sales, China in 2020 first sanctioned American defense contractors Lockheed, Raytheon and Boeing. Also during Trump’s first administration, China in 2019 said it would compile an unreliable-entity list after the U.S. blacklisted Huawei, then in 2023 added Lockheed and Raytheon following Biden administration sanctions on a clutch of Chinese enterprises blamed for building a spy balloon that traversed the U.S.
As the world’s largest trading nation by value, its No. 2 economy and a consistently large absorber of foreign direct investment, China, like the U.S., has a vast ability to conduct economic statecraft. Its actions against American defense contractors, like special investigations into the safety of U.S. agricultural products like wheat and beef, plus thickets of regulation and its claims of final approval over multinational corporate mergers, provide tastes of how Beijing can try to match the U.S. in levering economic heft to pressure a foreign adversary.
More could be in store once Trump returns to the White House, as the president-elect has vowed significant new pressure on Beijing, including with tariffs.
Before his November election, Trump suggested he would like to see a more transactional relationship with Taiwan—raising the question of whether he would step up arms sales to the island—and separately vowed retaliation against China if it were to threaten Taiwan. Trump told The Wall Street Journal’s editorial board in October that Xi wouldn’t dare to move against Taiwan because, he said, Xi sees Trump as “crazy,” but that if he did, “I would say: if you go into Taiwan, I’m sorry to do this, I’m going to tax you at 150% to 200%.”
In addition to unleashing its full military power, Beijing would be expected to use a variety of economic strategies in a showdown over Taiwan.
“China has been using a wider range of economic statecraft tools in recent years, particularly in response to Taiwan-specific policy moves by other countries, and these new sanctions on defense contractors seem to be consistent with that same pattern,” said Logan Wright, a partner at Rhodium Group in Washington.
A 2023 study by Rhodium Group and the Atlantic Council’s GeoEconomics Center concluded that Beijing has been more systematic in preparing such defenses than Russia was to counter Western sanctions it faced as a result of invading Ukraine.
The study concluded that the major democratic nations that make up the Group of Seven depend on more than $477 billion in Chinese goods that could be restricted from export by Beijing. At least $460 billion in G-7 direct investment assets would be at risk, it said, though Beijing would also need to consider how such measures could undermine domestic employment and other economic factors.
Write to James T. Areddy at James.Areddy@wsj.com
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Appeared in the January 3, 2025, print edition as 'Beijing Blacklists More U.S. Companies'.