China: US, Taiwan, and Beijing’s Unreliable Entities List

Published on July 15, 2019

China will, from what we understand, release the names of US firms on its unreliable entities list within the next two weeks in response to the announcement of another round of US arms sales to Taiwan.

*** Beijing has made no secret of its intention to sanction US companies directly involved in arms sales to Taiwan, and sources in Beijing believe that the “Unreliable Entities List” could include Raytheon, General Dynamics, and Oshkosh, as well as FedEx, which has been in Beijing’s crosshairs since re-routing Huawei parcel deliveries in response to US pressure. ***

*** Placement on the unreliable entities list will mean no Chinese enterprises or individuals will be allowed to cooperate with the US firms identified as being involved in arms sales to Taiwan. And while the three firms listed above are not seen to have an arms trade of any significance with China, Beijing warns sanctions could nevertheless affect their non-military sales to the mainland. ***

*** Raytheon, for example, is seeking to merge with the aerospace business of United Technologies, which sells aircraft engines to China and has developed aircraft electronics in collaboration with Chinese partners. General Dynamics, in addition to manufacturing tanks and submarines, is the parent company of Gulfstream, the aircraft company whose private jets, Chinese officials are quick to note, seem to be particularly favored by their billionaires. And Oshkosh, they add, has to date sold rescue, firefighting, and snow removal vehicles to thirty-eight airports in China. ***

Weapons Pipeline and Taiwan Elections

Even on the heels of the G20 Osaka trade truce between Presidents Donald Trump and Xi Jinping, the Central National Security Commission of the Communist Party of China was ringing the alarm bells over a pipeline of impending US arms sales to Taiwan.  

As a reminder, Beijing’s concerns revolve not just around the impending sale of $2.2 billion of light arms, Abrams tanks, and Stinger missiles by the US to Taiwan – the largest arms sale approved by the Trump administration to date. Those concerns also include trepidation over an even more potentially inflammatory sale being considered in Washington, the sale of over 60 revamped “Block 70” F-16s to Taipei (see SGH 7/8/19, “China: Lingering Trade and Security Tensions”).

In the meantime, Beijing has been keeping close tabs on the primary race for the candidate from the more traditionally pro-Beijing Kuomintang (KMT) Party that will run in Taiwan’s presidential elections against incumbent Tsai Ing-wen and the Democratic Progressive Party (DPP) on January 11, 2020 – assuming she wins her own primary as well.

In those just concluded KMT primaries, the populist mayor of Kaohsiung, Han Kuo-yu, appears will have edged out Terry Gou, the founder of the electronics manufacturing giant Foxconn.

Between the two, Beijing had favored Gou, believing his pro-business and cross-strait policies to be most favorable to the mainland, akin to those of former President Ma Ying-jeou. Having said that, Beijing has been expecting Han to ultimately prevail in the primaries.

Going forward, Beijing will now keep a keen eye for any signs of whether Gou might choose to run as a third-party candidate, which would split the KMT votes, and give the election over they believe again to the more independence-minded Tsai, or whether Guo will unite behind Han.  

If Guo unites behind Han, Beijing believes, it would all but ensure a Kuomintang victory over the DPP in January. One can assume pressure from the mainland will be intense.

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