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China Threatens Sanctions on Lockheed

July 16, 2020
The U.S. defense manufacturing giant is being called out for a recent sale of missile components to Taiwan, though the prospect of injury to Lockheed is vague.

China announced it will impose sanctions on Lockheed Martin Corp. following news of the manufacturer's $620-million sale of missile components to Taiwan. “China firmly opposes U.S. arms sales to Taiwan,” according to Chinese Foreign Ministry spokesman Zhao Lijian, as quoted by Bloomberg. “We will impose sanctions on the main contractor of this arms sale, Lockheed Martin.”

The specific form of the sanctions was not stated, and Lockheed has not commented on the matter. The importance of the threat has been minimized by financial analysts.

Lockheed has been a supplier of military equipment to Taiwan for decades, so the current reaction is seen as an expression of growing tension between the U.S. and China, involving an array of commercial trade issues as well as U.S. military strategy in Southeast Asia.

For example, Lockheed also is the direct beneficiary of a pending sale of 105 F-35 Joint Strike Fighter aircraft to Japan, which the U.S. State Dept. endorsed last week. “This proposed sale will support the foreign policy goals and national security objectives of the United States by improving the security of a major ally that is a force for political stability and economic progress in the Asia-Pacific region,” the Defense Security Cooperation Agency stated on July 2.

Most U.S. defense contractors are restricted by the terms of their supply deals from engaging in commercial activity with China, or any nation identified by the U.S. as a strategic rival. As such, Lockheed's vulnerability to Chinese sanctions could be minor.

One exception could be Lockheed's wholly owned Sikorsky Aircraft Corp., which has a joint venture called Shanghai Sikorsky Aircraft Co. that does business with Chinese aviation companies and government-backed enterprises.

Also vulnerable could be Lockheed suppliers that do business with China or Chinese enterprises.

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