China to create company blacklist as US trade war escalates

China on Friday said it would release a blacklist of "unreliable" foreign companies and individuals, hitting back after the United States targeted telecom giant Huawei in their escalating trade war.

The announcement was made a day before Beijing is due to increase tariffs on USD 60 billion in US goods, capping a week marked by rising Chinese threats of retaliation after President Donald Trump blacklisted Huawei.

The US Commerce Department placed Huawei on an "entity list" on grounds of national security on May 16, a move that curbs its access to US-made components it needs for its equipment. A 90-day reprieve was later issued.

China's commerce ministry announced on Friday that it will release its own list of "unreliable entities".

Ministry spokesman Gao Feng said the list will include "foreign enterprises, organisations or individuals that do not comply with market rules, deviate from a contract's spirit or impose blockades or stop supplies to Chinese enterprises for non-commercial purposes, and seriously damage the legitimate rights and interests of Chinese enterprises".

The detailed measures against firms on the list will be released shortly, Gao said.

The Chinese move appears aimed at pressuring foreign companies to maintain commercial relations with Huawei -- Washington is reportedly also considering adding Chinese surveillance firms to its list for alleged human rights violations.

Google, whose Android operating system is vital to Huawei phones, is among the companies that have announced that they will abide by the US order.

Another critical partner, ARM Holdings -- a British designer of semiconductors owned by Japanese group Softbank -- said it was complying with the US restrictions.

"Some foreign entities have violated normal market rules and the spirit of their contracts" to cut off supplies and "take other discriminatory actions against Chinese companies damaging their legitimate rights and interests, and endangering China's national security and national interests," Gao said, according to state-owned Global Times.

Huawei has been thrust to the centre of the trade spat, with Trump suggesting last week that the company could be included in a deal.

The United States claims the company has deep links to China's Communist-led government and warns that its equipment could serve as a Trojan horse for Chinese intelligence services.

Huawei -- the world's second smartphone maker and a leader in developing next-generation 5G networks -- vehemently denies the charges.

China's entity list will help safeguard a rule-based global supply chain, said Zhang Yansheng, chief researcher at the China Center for International Economic Exchanges think tank.

Firms that substantially harm a company or supply chain may face punishments or sanctions, he told AFP.

"Trade Protectionism, unilateralism and populism are affecting the normal operation of the global supply chain," Zhang said.

"In the past commercial deals were based on contracts but now those can be changed over so-called security issues."