China is set to pass a new law that would restrict sensitive exports vital to national security, expanding its toolkit of policy options as competition grows with the US over access to technologies that drive the modern economy.
The Chinese National People’s Congress Standing Committee, the country’s top legislative body, is expected to adopt the measure in a session that concludes today.
The export control draft law primarily aims to protect China’s national security by regulating the export of sensitive materials and technologies that appear on a control list. It would apply to all companies in China, including foreign-invested ones.
The measure would add to Beijing’s regulatory arsenal, which also includes a tech export restriction catalog and an unreliable entity list.
The draft law would also help put China on a similar footing to the US, which regularly uses export controls and licenses strategically against its adversaries.
Mounting tensions between China and the US have spilled over into the realm of technology. Big Chinese companies and brands, including Huawei Technologies Co (華為), ByteDance Ltd’s (字節跳動) TikTok, Tencent Holdings Ltd’s (騰訊) WeChat and Semiconductor Manufacturing International Corp (中芯) find themselves in Washington’s crosshairs.
“Chinese authorities may have learned a lesson from the US and other countries,” said Qing Ren (任清), a partner at Global Law Office in Beijing.
A report by Chinese state-run Xinhua news agency said that the draft law stipulates that China could take reciprocal measures against a certain country or region that has “abused export control measures and damaged China’s national security and interests.”
The official Legal Daily on Thursday reported that some legislators had suggested source code, algorithms and technical documents be added as controlled items, and that China should set up some restrictions on exporting technologies on which Beijing has a competitive edge, such as 5G and quantum communications.
Whether Beijing will allow the export of valuable Chinese technology is one of the biggest uncertainties hovering over the partial sale of TikTok to Oracle Corp and US investors.
China in August asserted the right to block the deal by adding speech recognition and recommendation technology — the core of TikTok’s global popularity — to a list of regulated exports.
The existing control lists are much narrower than the one used by the US, staying limited to materials that could be used for nuclear, chemical or biological weapons, Ren said.
If the list is expanded “then more products or technologies will be subject to export control in China,” he said.
US officials have warned that Huawei — the leader in next-generation wireless patents — controls one-10th of worldwide essential 5G patents, and its deep involvement in international standards-setting could post a threat to US national security.
The company last year ranked among the top 10 recipients of US patents — helping China become the fourth-biggest recipient of US patents, behind Japan and South Korea, but for the first time ahead of Germany.
Chinese companies have also made headway in dominating certain niches. Shenzhen-based SZ DJI Technology Co (大疆創新) controls about three-quarters of the global consumer drones market. Display maker BOE Technology Group (京東方) is aggressively filing patents to get into next-generation OLED screens for smartphones.
In artificial intelligence, companies from Alibaba Group Holding Ltd (阿里巴巴) to Tencent and upstarts like SenseTime Group Ltd (商湯科技) are taking advantage of unparalleled reserves of data to advance in areas such as facial recognition.
When approved, the law would be applied extra-territorially, taking a page from the US Export Administration Regulations’ long-arm jurisdiction that Beijing has frequently criticized.
Officials at the Chinese Ministry of Foreign Affairs have repeatedly accused Washington of stretching and abusing the concept of national security in justifying actions against Chinese companies.
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