China said Saturday it had launched a mechanism enabling it to restrict foreign entities, a much-anticipated move seen as retaliation to US penalties against Chinese companies such as telecom giant Huawei.

An announcement by the Ministry of Commerce did not mention any specific foreign entities, but broadly spelled out the factors that could trigger punitive measures, which may include fines, restrictions on import-export business or investment in China, and the entry of personnel or equipment into the country.

It covers "foreign enterprises, other organisations and individuals", it said.

The launch of the "unreliable entities list" ups the ante in the escalating commercial fight with the Trump administration, which has used its own "entity list" to bar Huawei from the US market on national security grounds.

The announcement also came a day after the United States ordered a ban on downloads of popular video app TikTok and effectively blocked the use of the Chinese super-app WeChat on similar grounds, which prompted a threat by China to strike back.

Beijing would consider sanctions on entities whose activities "harm China's national sovereignty, security, and development interests" or violate "internationally accepted economic and trade rules".

That language closely tracks wording that Beijing has used to repeatedly denounce US actions against Chinese companies.

The ministry said that if an entity is suspected of violating the provisions, an investigation would be launched under China's cabinet, the State Council.

The foreign party in question would have an opportunity to defend its conduct to the Chinese investigators.

China's 'unreliable entities list' is seen as retaliation to US penalties against Chinese companies
China's 'unreliable entities list' is seen as retaliation to US penalties against Chinese companies AFP / WANG ZHAO

Chinese enterprises that rely on business with the targeted organisations also will be allowed to apply for exemptions from any ban on doing business with them, as the US system allows.

The United States and China are engaged in an escalating trade battle centring on technology.

Huawei, the world's leading supplier of telecoms networking equipment, has been a particular target.

Washington has used its own entity list to essentially ban Huawei from the US market and prevent American companies from doing any business with it or with Huawei-affiliated organisations.

The United States says Huawei could be used by Chinese state security to infiltrate communications networks.

China's government and Huawei deny that, saying the US has offered no evidence supporting the claim.

Under a US order on Friday, the Tencent-owned WeChat app would lose functionality in the United States from Sunday. TikTok users will be banned from installing updates but could keep accessing the service through November 12.

China has for years blocked or restricted big US tech companies from operating in its market, including Facebook, Twitter, and Google.

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