The “panicked” phone calls from clients started to come in within hours of the Chinese commerce ministry’s announcement on May 31 that it would compile a list of “unreliable” companies and individuals, according to one person who advises foreign groups operating in the country.

Just a month ago, multinationals and investors were looking forward to an agreement that would end the China-US trade war that has rocked global markets for the past year. Instead, talks broke down as Washington and Beijing accused each other of “reneging” on the terms of an evolving agreement, shortly after which US president Donald Trump further enraged Chinese officials by barring Huawei, the country’s best known telecoms company, from sourcing American components and technology. 

At first it appeared that Chinese president Xi Jinping would counter Mr Trump’s decision to blacklist Huawei by withholding exports of rare earths, most of which are mined in China and are essential for the production of many high-tech and defence products. Instead, it was Beijing’s decision to counter the US Department of Commerce’s “entities list” with a blacklist of its own that has shaken many foreigners who do business in the world’s second-largest economy.