Beijing flips the script on the U.S. tech war — and tests the truce weeks before Xi's visit

BEIJING, CHINA - NOVEMBER 11: The national flag of China flies in front of the headquarters of the Ministry of Commerce on November 11, 2025, in Beijing, China. Cheng Xin | Getty Images News | Getty Images China unleashed its broadest package of trade countermeasures since last October's truce, pushing back against a string of recent U.S. restrictions before President Xi Jinping's expected visit to Washington next month. The Ministry of Commerce on Wednesday barred Chinese entities from doing business with seven American companies and organizations, tightened export controls on U.S.-bound drones and related technology, and prohibited Chinese firms from cooperating with U.S. compliance and certification bodies, including in mandatory Chinese factory inspections.Six of the named entities were sanctioned over their involvement in Xinjiang-related sanctions, along with Arizona-based Compliance Testing, which was blacklisted for assisting recent Federal Communications Commission measures against Chinese products. The measures mark the first time Beijing has sanctioned firms that help enforce the Uyghur Forced Labor Prevention Act, with "significant implications" for U.S. businesses operating in China, according to Eurasia Group. Beijing is raising enforcement costs for American firms while keeping the measures reversible ahead of bilateral talks, the consultancy said. The response also signals Beijing is "starting to replicate" Washington's attempts to curb Chinese access to Western technologies, said William Bratton, an analyst at BNP Paribas. "While the various recent U.S. measures are focused on impeding the use of Chinese products and technologies in U.S. supply chains and infrastructures, China's response seems more targeted at constraining the flow of Chinese products and technologies to the U.S." Exports of drones and related dual-use items to the U.S. now face a strict case-by-case review, with no eligibility for license facilitation, the ministry said. Chinese authorities also launched their first-ever national security investigation in the foreign trade sector, targeting imported printing and copying equipment installed with foreign software. The mechanism could be extended to other sectors, according to Eurasia Group, noting that if the probe leads to a software restriction, its effect would be comparable to U.S. curbs on Chinese software in connected vehicles last year. Building up leveragesThe barrage of retaliation underscores persistent strains in the bilateral relations since Xi and U.S> President Donald Trump struck a truce in South Korea last year. Xi's highly anticipated trip to Washington in September would follow Trump's visit to Beijing in May.The tit-for-tat moves are aimed at generating fresh leverage ahead of the summit, said Peter Alexander, founder and managing director of Shanghai-based consultancy firm Z-Ben Advisors. "Both sides are attempting to come up with new approaches, new sanctions, new limitations, where they can then potentially horse trade," Alexander told CNBC's "The China Connection" on Thursday, although most of the measures will likely be "ironed out" by the time Xi arrives in Washington. Beijing attributed the retaliation on Wednesday to a run of recent U.S. actions, such as FCC restrictions on Chinese imports over alleged security risks, including banning new models of drones and power routers. The ministry also noted that Washington's addition of more than 40 Chinese companies to the UFLPA entity list came just a day after the top trade negotiators from both sides had held another round of talks. The U.S. moves "seriously violate" the consensus reached by the two heads of state, it said in the statement. For now, the highly anticipated Trump-Xi meeting remains on track — but Washington's next moves are the key variable, Eurasia Group said. More aggressive steps — such as restricting Chinese open-weight AI models or curbing Chinese firms' access to chips through cloud services — would put the truce at risk, according to the consultancy. — CNBC's Elaine Yu contributed to this report.