The economic arsenal

After the above events, in 2018 China began developing new tools for economic competition and coercion, further refining and adding to them after Biden took over in 2021. (p. 104)
The Unreliable Entity List, the first and highest profile weapon was created in 2019 and immediately implemented as a retaliatory tool against a US company; no further action was taken under the UEL until 2020 when MOFCOM published provisions listing the criteria under which companies can be included on the UEL and the consequences of listing; in 2023 the list was operationalized when two US defense firms were added to the list for selling arms to Taiwan; in 2024 three more US defense firms were added, and China signaled enhanced implementation of restrictions on any companies doing business with firms listed on the UEL. (pp. 104-106)
In late 2024 and early 2025 China ramped up use of the UEL with thirty-eight firms currently listed, targeting firms complying with the Uyghur Forced Labor Protection Act and in response to Biden’s technology restrictions on China and Trump’s initial imposition of tariffs on Chinese exports, though the UEL is mostly used against defense companies involved in arms sales to Taiwan; China’s use of the UEL has been narrow and targeted on specific entities, such as subsidiaries, involved in the offending action, preserving space for Chinese companies to do business with US counterparts linked to the offending entity; many of the UEL listings in 2025 have been symbolic, focused on sending a message rather than imposing costs; since 2024, most listings have been triggered by a policy action not linked to Taiwan. (pp. 106-109, Chart 1)

In January 2021, China issued “Blocking Rules” to protect Chinese companies from the extraterritorial application of third-country laws; under the rules, the State Council can direct Chinese entities to not recognize, execute, or observe extraterritorial foreign sanctions and to sue for compensation in Chinese courts for losses from such sanctions; to date this tool lacks clear implementing rules and Beijing has not acted on it. (pp. 109-110)
Passed in June 2021, the Anti-Foreign Sanctions Law is now one of Beijing’s top economic weapons of choice, with room for the government to refine and expand the law in the future; the AFSL: i) provides a core legal foundation under anti-sanction measures and statutes like the UEL, ii) fills a gap in the previous two rules by giving the government broad discretion to place individuals and organizations on sanctions lists with their families and senior managers, and iii) provides a legal basis for Chinese companies and entities impacted by foreign sanctions to sue foreign companies and individuals for complying with the sanctions. (pp. 110-111)
Though initially drafted to respond to foreign actions China perceived as violating its sovereignty, the AFSL is increasingly used to enact broader economic goals; it eventually may be used by domestic Chinese tech firms to sue US companies complying with US export control laws for damages in Chinese courts; starting from 2021 and 2022, the AFSL has been used to sanction former US officials, research and advocacy organizations, and Europeans for their positions on Hong Kong, Tibet, Xinjiang, and Taiwan on US firms for arms sales to Taiwan; use of the AFSL accelerated in 2024. (pp. 110-111)
Although China has long used tariffs as an economic weapon, in 2024 China’s national legislature passed the Tariff Law, establishing the formal legal basis for Chinese authorities to impose tariffs; though the legislature holds sole legal authority over taxation, the Tariff Law gives the State Council the authority to impose tariffs on “reciprocity principles”; this change means that China is sharpening its ability to fight trade conflicts on an ongoing basis. (pp. 111-112)
Chinese authorities have bolstered their ability to target and penalize US companies via cybersecurity reviews and investigations, beginning with the formation of the Cyberspace Administration of China in 2014 and the release of the first Cyber Security Review regulations in 2021; in 2023, China used the cybersecurity review process against US companies in apparent retaliation against US export controls on China’s chip industry. (pp. 112-113)
Another important tool is China’s ability to block globally significant merger and acquisition (M&A) deals, ostensibly on antitrust grounds but often for political goals linked to US-China relations; China has blocked several pending M&A deals for political reasons; in 2024 it expanded its powers by announcing an investigation into an already concluded deal; China also revived an antitrust investigation in early 2025 in response to Trump administration tariffs. (pp. 113-114)