Growing 'Jeongchal Balloon' Conflict, China Faces Sanctions Including Lockheed Martin

Included in the 'Unreliable Entity' List
Countermeasure Against U.S. Sanctions on Chinese Companies

[Asia Economy Reporter Hyunju Lee] Amid ongoing tensions between the United States and China over 'reconnaissance balloons,' China has included the U.S.'s leading defense contractors Lockheed Martin and Raytheon on its sanctions list.

On the 16th, China's Ministry of Commerce announced through a public notice that, in order to protect national sovereignty, security, and development interests, it has decided to include Lockheed Martin and Raytheon, which participated in arms sales to the Taiwan region, on the "Unreliable Entities (companies and individuals)" list in accordance with relevant laws such as the Foreign Trade Law and National Security Law.

Regarding the two companies, the Ministry of Commerce stated that it will prohibit their involvement in import and export activities related to China and new domestic investments in China, and ban senior executives of the two companies from visiting China.

A Chinese "reconnaissance balloon" was shot down by a U.S. fighter jet on the 4th (local time) and fell into the sea off Surfside Beach, South Carolina. Lloyd Austin, U.S. Secretary of Defense, issued a statement on the 4th (local time) saying, "This afternoon, under the direction of President Biden, a fighter jet from the U.S. Northern Command successfully shot down a high-altitude reconnaissance balloon sent and owned by China in the airspace off the coast of South Carolina."

Additionally, the Ministry added that it will not permit senior executives of these companies to work in China, nor grant temporary stay or residence permits. Any previously granted permissions will be revoked.

The Ministry further stated that since the enforcement of the "Unreliable Entity List Regulations" (September 19, 2020), it will impose fines amounting to twice the value of military contracts Lockheed Martin and Raytheon have sold to Taiwan, and if payment is not made within 15 days according to the regulations, additional penalties will be imposed.

This is effectively interpreted as a retaliatory sanction against the United States, which sanctioned related Chinese companies citing the entry of Chinese 'reconnaissance balloons' into its airspace. Earlier, on the 10th, the U.S. Department of Commerce announced the addition of five Chinese companies and one research institute related to the development of reconnaissance balloons, including Beijing Nanjing Space Technology and China Electronics Technology Group, to its export control list.

China insists that these are scientific research airships, not reconnaissance balloons.