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China retaliates against Lockheed Martin for Taiwan missile parts sale

Beijing

CHINA will impose unspecified sanctions on defence contractor Lockheed Martin Corp after the United States approved a possible US$620 million deal to supply missile parts to Taiwan, marking the latest in a volley of punitive actions by the superpowers as relations grow colder.

"China firmly opposes US arms sales to Taiwan," Chinese Foreign Ministry spokesman Zhao Lijian said at a briefing in Beijing on Tuesday.

"We will impose sanctions on the main contractor of this arms sale, Lockheed Martin," he said, without elaborating.

The move comes as tensions grow between the US and China on a number of fronts, from the trade war and territorial claims in the South China Sea to the coronavirus pandemic and new security law Beijing imposed on Hong Kong. Mr Zhao called on the US to cut military ties with Taiwan - which China considers part of its territory - to avoid "further harm to bilateral relations."

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"It's tit-for-tat between the two countries," said Shukor Yusok, founder of aviation consultancy Endau Analytics in Malaysia. "The impact this time is going to be small, but it could be the start of more to come."

US arms manufacturers face strict limitations on what kind of business they can do with countries deemed by Washington to be strategic rivals, such as China.

Lockheed generated 9.7 per cent of its revenue in the Asia-Pacific region last year, according to data compiled by Bloomberg. Sikorsky Aircraft Corp., which is owned by Lockheed, has a joint venture (JV) called Shanghai Sikorsky Aircraft Co that does business with aviation companies and government-backed enterprises.

"It's a futile exercise that will have no direct effect on Lockheed Martin given that they aren't allowed to sell anything to China," said Nick Cunningham, an analyst at Agency Partners in London. "China may have a go at disrupting supplies, but that will only further accelerate the US attempts at autarky."

China previously threatened to sanction US companies, including General Dynamics Corp and Honeywell International Inc, on numerous occasions over arms sales to Taiwan. It also threatened to blacklist FedEx Corp, while Ford Motor Co's main JV partner in China was fined 162.8 million yuan (S$32.4 million) last year, days after the US put a ban on doing business with Huawei Technologies Co.

"This is completely just a countermeasure in response to the US taking a more destructive approach to Taiwan and Hong Kong issues, and escalating long-arm jurisdiction," said Tian Feilong, associate professor with the Law School of Beihang University.

China and its state media have alluded to further action against US companies, but the sanctions against Lockheed are a concrete move, signalling Beijing is willing to intensify its pushback as the US criticises it on political fronts like Hong Kong and the South China Sea.

"It further confirms how we expect the Chinese government to behave in terms of international relationships," said Steve Tsang, director of the SOAS China Institute in London. "There will be a lot of 'you are either with us or against us,' so companies will be forced to choose." BLOOMBERG

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