As an avid fan of tariffs and deals, US President Trump picked up the trade wars where he left them after his first term. China, one of his favourite targets, responded with its own tariffs, anti-dumping investigations, and export controls. In addition, it added a number of firms to the Unreliable Entity List. Although the list is not new, it is still quite unknown. As a centrepiece of China’s economic statecraft, it deserves more scrutiny.

The Unreliable Entity List was introduced by an order of the Ministry of Commerce in September 2020 and is under the control of the State Council. The council can add foreign entities to the list if they have acted against China’s interests or if they participated in boycotts or sanctions against China. If they are on the list, the entities can be subject to a range of measures, including import, export, and investment restrictions, banning staff to enter and stay in China, and fines.

Several foreign firms have been placed on  the Unreliable Entity List, but the first ones were only added more than two years after the list’s creation. In February 2023, China added Lockheed Martin Corporation and Raytheon Missiles & Defense, two juggernauts of the American military complex, to the list after they had sold arms to Taiwan. Both firms were barred from trading with and investing in China, their senior executives could no longer enter or stay in China and they received a fine. In May 2024, China added three other American defence firms to the list and subjected them to the same measures, also for delivering weapons to Taiwan. In early January 2025 it added ten similar firms, only to add seven more defence firms two weeks later for the same reasons. In the beginning of February, however, China added the first two non-defence firms to the list. PVH Group, the owner of fashion brands like Tommy Hilfiger and Calvin Klein, and Illumina, a biotechnology firm, were included in response to the new US tariffs. The clothing company got into China’s crosshairs because it stopped sourcing from the Xinjiang for fears of relying on forced labour in its supply chain, while Illumina probably made the list because it lobbied to have its Chinese competitors banned from contracting with the US government. Finally, in the beginning of March, another ten American defence firms were added to the list after selling weapons to Taiwan, but coinciding with other retaliatory measures against the latest US tariff increase. After a couple of years of silence and a slow start, the Unreliable Entity List is turning into a key instrument of Chinese economic statecraft, as can be seen on figure 1.

Figure 1: Number of firms on the Unreliable Entity List

Source: Author’s own calculations

Over the last few years, China has sharply increased its use of unilateral economic sanctions due to its growing economic power and geopolitical confidence. China does, however, prefer to keep economic statecraft informal. When sanctions are not officially recognized as such, it offers China the benefit of deniability, which mitigates opposition to its rising economic capabilities. In addition, it allows the Chinese government the flexibility to do as it seems fit, without a constraining legal mandate.

The Unreliable Entity List is, together with the similar Anti-Foreign Sanctions Law, one of the few formal instruments for Chinese economic statecraft. The order that created the list contains 14 articles with details on its functioning. When China put firms on the entity list for the second time, it also issued a press release to stress that China is open for business and that “honest and law-abiding foreign entities” have nothing to fear. So, while framing the entities on the list as treacherous, the government also spreads the message that other (potential) investors shouldn’t worry.

There is little room for comfort in the message. While there is a legal basis for the instrument, the provisions remains vague. The order does, for example, specify the factors that determine whether a foreign entity is added to the list, but leaves room for “other factors to be considered”. Similarly, it sums up all the possible punitive measures, but also includes the possibility of “other necessary measures”. So, in short, any factor can be considered to take up a firm in the list and, once on the list, any measure can be taken. By means of the Unreliable Entity List, it seems that China wants to reassure and attract foreign investors and avoid accusations of unpredictable policy, but also wants to keep wiggle room without restraints and frame specific foreign firms as enemies.

The rising popularity of the Unreliable Entity List for Chinese economic statecraft could have important consequences for Belgium’s strategic interests. Although the firms on the list are - so far - all American, the vague rules make it possible to add firms of other nationalities at any time. China could list European firms as retaliation for tariffs, comments on its human rights record, or support to Taiwan. In addition, the inclusion of American defence firms could have secondary effects on Belgium. For the desperately needed rearmament of the Belgian army, the government is looking at the Patriot air defence missiles of Raytheon and additional F-35 fighter jets of Lockheed Martin. Both firms are already on the Unreliable Entity List, which means that they cannot import from or invest in China. The country is, however, one of the most important suppliers of critical raw materials that are needed for manufacturing advanced missiles and airplanes such as gallium, germanium, and rare earth materials. At the same time, China is also a crucial supplier of intermediate products, such as drone components. When China added the American drone manufacturer Skydio to its export control list, shipments to Ukrainian military were delayed.

The Unreliable Entity List has become a favourite tool for Chinese economic statecraft, as the number of sanctioned entities surged in the last months. Foreign governments should pay close attention, because the formal impression hides a vague and unconstrained sanctioning tool. It could harm Belgian and European interests, even if non-American firms have managed to stay off the list until now.