Understanding China's Unreliable Entity List and Its Implications for Australian Businesses

Introduction

Since early 2025, China has significantly ramped up the use of its Unreliable Entity List (UEL) – a regulatory tool first introduced in 2020 but sparingly applied until now. This move has caught the attention of governments and multinational businesses worldwide, particularly as tensions between the United States and China intensify.

While only U.S. companies have been listed so far, the implications of being designated on the UEL are far-reaching and have serious consequences for any company doing business in or with China. Australian businesses, even if not directly listed, may still be affected if their partners or suppliers are.

This article explains what the UEL is, why it was created, who’s been added so far, what it means to be on it, and why Australian companies need to be vigilant.

What is the Unreliable Entity List?

The UEL is a Chinese government blacklist for foreign entities – companies, organisations, or individuals – that China believes undermine its national security or economic interests.

First announced in 2019 and formalised in September 2020 by the Ministry of Commerce (MOFCOM), the UEL is widely seen as China’s counterpart to the U.S. “Entity List” used for export controls.

Entities may be added to the UEL for:

• Endangering China’s national sovereignty, security, or development interests

• Interrupting normal transactions with Chinese entities

• Applying discriminatory measures against Chinese businesses, especially in ways that violate global trade norms

  
  

Once listed, companies may face sweeping restrictions – including import/export bans, investment restrictions, and personal travel bans for staff.

Why Was the UEL Created?

The UEL is a strategic countermeasure—a tool in China’s growing economic statecraft toolkit, developed largely in response to escalating trade tensions with the U.S. over the past decade.

Notably, its development coincided with several U.S. actions:

• Export bans on China's Huawei and semiconductor technologies

• Sanctions on WeChat and TikTok

• U.S. Restrictions on Chinese dual-use components and technologies and

• US defence companies arms sales to Taiwan

• Trump's recent tariffs on imported Chinese goods

  
  

The UEL was established in this context, as a legal mechanism to respond against foreign companies it sees as hostile or harmful.

Key Provisions of the UEL – Especially Article 10

The UEL is governed by a set of formal rules known as the Provisions on the Unreliable Entity List, released by China’s Ministry of Commerce (MOFCOM) in 2020. These outline the legal and procedural framework for how foreign companies, organisations, or individuals can be investigated, listed, and penalised by Chinese authorities.

Here’s a breakdown of the key provisions:

Article 1 – Purpose

The rules are designed to:

1. Safeguard China’s national sovereignty, security, and development interests.

2. Protect fair international trade.

3. Defend the legitimate rights of Chinese companies and citizens against discriminatory actions by foreign entities.

This shows that the UEL is not just about national security — it’s also positioned as a response to unfair or politically motivated treatment of Chinese firms.

Article 2 – Who Can Be Listed and Why

Any foreign entity—a company, organisation or individual—can be listed if they:

• Threaten China’s national interests

• Suspend “normal” transactions with Chinese businesses or citizens

• Impose discriminatory measures that cause serious damage to a Chinese entity

In practice, this is often interpreted broadly. For example, a company complying with U.S. sanctions or refusing to import Xinjiang cotton could be seen as discriminatory under these rules.

Note: The UEL only targets foreign entities. Chinese-invested subsidiaries are generally not directly listed, but they may still be affected if their parent company is.

Articles 5–8 – How the Process Works

Before a company is added to the UEL, it may be:

• Investigated by a multi-agency Chinese taskforce

• Given a chance to respond or defend itself

• Publicly notified that an investigation is underway

However, Article 8 allows for a “fast-track” listing if the facts are clear – meaning the Chinese government can skip the investigation and designate a company immediately.

This gives Beijing flexibility to act quickly when it sees fit — and creates uncertainty for companies who may not be notified in advance.

Article 9 – Rectification Periods

When a company is listed, it may be given a period of time to “rectify” its actions – for example, resuming business with a Chinese supplier or reversing a trade decision. If the company complies within this timeframe, it may avoid penalties. But if it fails to act, China can implement the restrictions outlined in Article 10.

Article 10 – Penalties and Restrictions

This is the most powerful part of the UEL framework. It outlines what the Chinese government can do to listed entities:

1. Ban on import/export to and from China

2. Ban on investment in China

3. Ban on entering China, including staff and transport

4. Cancellation of visas, work permits or residency

5. Fines, depending on the severity of the case

6. Other necessary measures (undefined — could include future tools)

These restrictions are enforceable by Chinese authorities and must be complied with by all Chinese entities.

For example, a listed U.S. company may find that its Chinese suppliers stop shipping parts to them, or their staff are denied entry visas.

Article 11 – Enforcement Timing

Even if a company is listed, penalties may be delayed during the rectification period. This gives companies a short window to reverse course and avoid long-term damage — but there’s no guarantee of leniency.

Article 12 – Exceptions

If a Chinese company must do business with a listed foreign entity for a special reason (e.g. essential supply), they can apply for government approval on a case-by-case basis.

This is only available for trade transactions, not investment or travel bans.

Article 13 – Removal from the List

A company can be removed from the UEL if it:

• Fixes its behaviour (as defined by China)

• Takes steps to undo the negative impact

  
  

MOFCOM can remove a company on its own initiative, or a foreign entity can apply for removal.

Once removed, any penalties under Article 10 are lifted.

These measures can severely disrupt operations and supply chains, especially for companies that rely on Chinese manufacturing, raw materials, or components.

Who Has Been Designated So Far – And Why?

Since January 2025, China has increasingly used the UEL, with 12 new designations in February and another 10 in March. All of these entities are American, but they are not exclusively in the defence sector.

Defence and Aerospace Focus

Most entities on the UEL are defence-related companies, particularly those involved in arms sales to Taiwan. UEL listed defence sector companies include:

• Lockheed Martin

• Raytheon Missiles & Defense

• Boeing Defense

• General Atomics

• General Dynamics

  
  

While not all of these listings relate to arms trade with Taiwan, most do. These listings signal China’s strong opposition to foreign arms sales to Taiwan, which it considers a core sovereignty issue.

Non-Defence Examples: Cotton and Biotech

Two significant additions reflect broader application of the UEL:

• PVH Group (parent company of Calvin Klein and Tommy Hilfiger) was investigated for refusing to import cotton from China’s Xinjiang region.

• Illumina Inc., a U.S. genetic sequencing company, was banned from exporting gene sequencers to China – despite having no defence ties.

  
  

These show that even consumer goods and biotech firms are not immune if they are seen as discriminating against Chinese companies or complying with foreign laws China considers hostile (like the U.S. Uyghur Forced Labor Prevention Act which PVH Group cited in its refusal to import cotton from China’s Xinjiang region).

What Happens If a Company Is Listed?

The consequences depend on the specific restrictive measures announced. These may include:

• Full bans on doing business in China

• Blocked shipments of Chinese goods, components, or raw materials

• Cancelled investments, deals, or supply contracts

• Refusal of visas or work permits for company staff in China

Some companies have already seen practical impacts:

• A cloud services provider had its Chinese server approval frozen.

• A precision machining firm in the U.S. reported Chinese suppliers refusing new orders.

  
  

What This Means for Australian Companies

At the time of writing, no Australian companies have been listed on the UEL. However, Australian businesses must remain alert for several reasons:

1. Indirect Exposure via U.S. Partners: If you work with American suppliers or customers who are designated, your own supply chain could be disrupted.

2. Shared Technologies or Projects: Companies involved in joint ventures with U.S. firms or who re-export components could be caught in the crossfire.

3. Heightened Risk in Sensitive Sectors: Firms in tech, biotech or strategic resources should consider how perceived discrimination or de-risking from China could be interpreted and do so in a way that upkeeps the principles of open and free trade, backed by flexible protective contractual clauses that allow for "outs" without penalty in certain scenarios.

4. Changing Market Access: The UEL highlights that market access is no longer guaranteed, and geopolitical decisions now play a stronger role. For all businesses, it's increasingly important to stay aware of external factors, such as actions taken by U.S. partners or geopolitical shifts, that could unexpectedly affect supply chains and trade relationships."

   
   

Practical Steps for Australian Companies

Here are some recommended actions:

• Monitor UEL Designations – Track MOFCOM announcements and cross-check your business partners.

• Review Supply Chains – Map out where components come from, especially if they flow through China or Chinese subsidiaries.

• Add Regulatory Exit Clauses – Ensure contracts with Chinese firms and firms with downstream Chinese suppliers include flexibility to exit if your partner is listed.

• Stay Informed – Keep up to date with both U.S. and Chinese trade controls, as decisions in one country often trigger responses in the other.

• Diversify – Reduce reliance on single-country supply chains, especially in critical components.

  
  

Conclusion: A New Era of Trade Politics

China’s Unreliable Entity List is no longer symbolic – it’s operational and expanding. While early usage focused on defence companies and political retaliation, recent designations show a growing willingness to apply the list to non-defence and commercial entities.

Australia is not the target – for now. But that could change. Australian companies should not assume they are immune simply by avoiding military exports. Actions perceived as discriminatory or politically motivated – such as cutting Xinjiang cotton or halting Chinese tech imports – could trigger scrutiny.

The UEL is part of China’s broader strategy to build a “proactive” economic statecraft toolkit—one designed to protect its interests, exert influence, and shape the global economic order on its own terms.

In this new landscape, geopolitical awareness is a business imperative, and companies across all sectors must adapt to a world where trade and politics are increasingly intertwined.

References

• Ministry of Commerce of the People’s Republic of China, Provisions on the Unreliable Entity List (Order No. 4 of 2020)

• The Diplomat, China’s New Economic Coercion Toolkit, 2025

• The Trade Practitioner, Summary of China’s Retaliation Actions Since the Trump Administration, 2025

• Center for Strategic and International Studies, China’s New Economic Weapons, 2024

• China Briefing, What is the Unreliable Entity List and How Should Companies Respond?, 2023

• Reuters, China Adds Illumina, PVH to Unreliable Entity List, February 2025

• China Law Insight, What They Say and What They Mean: China’s Provisions on the UEL, 2020