A US congressional source also said a Washington-based figure close to the Chinese government told him recently it disliked the Uighur bill more than the Hong Kong bill for “dollars and cents reasons,”
China reacted angrily to President Donald Trump's approval of legislation supporting Hong Kong protesters last month, but movement on another congressional bill, backing Uighur Muslims in China's northwest, has cut even closer to the bone and could trigger reprisals and hurt efforts to resolve the US-China trade war.
US congressional sources and China experts say Beijing appears especially sensitive to provisions in the Uighur Act passed by the House of Representatives this week banning exports to China of items that can be used for surveillance of individuals, including facial and voice-recognition technology.
China will also be upset that the bill - which still requires Senate passage and Trump's signature to become law - calls for sanctions against a member of the powerful politburo for the first time. But its commercial stipulations have even more practical power to hurt the interests of Chinese leaders, sources say.
Senior members of both Congress and the Trump administration have sounded the alarm on China's detention of at least a million Uighur Muslims, by U.N. estimates, in the northwestern region of Xinjiang as a grave abuse of human rights and religious freedom. China rejects the charges.
A Chinese government source, who did not want to be identified, told Reuters China could tolerate the Hong Kong bill, but the Uighur Act went too far and could jeopardize efforts to reach a phase-one deal to end a trade war buffeting the global economy that Trump has made a key priority.
A US congressional source also said a Washington-based figure close to the Chinese government told him recently it disliked the Uighur bill more than the Hong Kong bill for "dollars and cents reasons," because the former measure contained serious export controls on money-spinning security technology, while also threatening asset freezes and visa bans on individual officials.
Victor Shih, an associate professor of China and Pacific Relations at the University of California, San Diego, said mass surveillance was big business in China and a number of tech companies there could be hurt by the law if it passes.
China spent roughly 1.24 trillion yuan ($176 billion) on domestic security in 2017 - 6.1% of total government spending and more than was spent on the military. Budgets for internal security, of which surveillance technology is a part, have doubled in regions including Xinjiang and Beijing.
Shih said investors in such firms included family members of China's political elite, who could suffer financially if the bill became law.
"This bill affects bottom lines, this is why there is a stronger reaction from Beijing," he said.
Shih said the bill would affect the ability of Chinese companies to procure technology from the United States and this would adversely affect their product development. He said it could also affect their ability to list on US markets.
China has warned that the Uighur bill would affect bilateral cooperation, raising concerns about the impact on trade talks, less than two weeks before a new round of US tariffs already threatening another breakdown is scheduled to take effect.
In editorials on Thursday, Chinese official media called for harsh reprisals in response to bill. [L8N28F02P]
The English-language China Daily called the bill a "stab in the back, given Beijing's efforts to stabilize the already turbulent China-US relationship" and warned of reprisals.
"It seems an odds-on bet that more (sanctions) can be expected if the latest approval for State Department meddling goes into the statute books," it said.
China's envoy to the United States, Cui Tiankai, said on Wednesday the two countries were trying to resolve their differences over trade, but "destructive forces" were trying to drive a wedge between them.
The White House has yet to say whether Trump would sign or veto the bill, which contains a provision allowing the president to waive sanctions if he determines it to be in the national interest.
No dates has yet been scheduled for a vote on the bill in the Republican-controlled Senate, a decision which rests with Majority Leader Mitch McConnell. Senator Jim Risch, the Republican chairman of the Senate Foreign Relations Committee, said lawmakers would proceed with caution.
"Because of the relationship we have with China, because of the trade negotiations going on, and everything else, it's important that we don't do anything that would cause those negotiations not to bear fruit," Risch told Reuters.