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The Biden administration bans Americans from investing in dozens of Chinese defense and surveillance technology companies in an effort to prevent U.S. capital from being used by China to undermine national security.
President Joe Biden on Thursday signed an executive order banning investments in 59 companies, including Chinese marquee groups such as Huawei, the telecommunications equipment maker, and Semiconductor Manufacturing International Corporation, China’s largest chip maker. that American intelligence says is fundamental to the Chinese military.
Senior U.S. officials said the ban would take effect Aug. 2, but investors may trade for the next twelve months to divest their stakes. While Americans are not required to divest the securities, they will not be able to sell their holdings after the one-year period has elapsed.
The executive order prohibits direct investment in both debt and equities, but also prohibits Americans from investing in funds that contain Chinese values in their portfolios.
“The new executive order signals the administration’s intention to maintain and rely on bans from Chinese defense companies to ensure that American people do not fund the military industrial complex of the People’s Republic of China.” said a senior US official. “The bans are specifically targeted and scopeed to maximize the impact on targets and minimize harm to global markets.”
The ban marks the Biden administration’s latest effort to take more and more falconry posture in China, from its repression against the Uyghurs to its aggressive military activity in the seas of southern and eastern China. It comes as Biden prepares to head to Europe to attend the G7 summit, where China is expected to be a topic of discussion.
Former President Donald Trump late last year released a order banning investments in companies that the Pentagon included in a list of groups with alleged links to the People’s Liberation Army. But the measure caused confusion in the financial markets because it had little guidance on implementation. Later, U.S. courts also ruled that the government had not provided sufficient evidence in some cases to justify a company’s position on the list of targets.
Senior officials said Biden’s order would ensure that the investment ban was based on a stronger legal basis. They added that it would extend the Trump order to include surveillance companies, including Hikvision, which are accused of helping Beijing persecute more than a million Muslim Uighurs who have been detained in detention camps in the northwest region. of Xinjiang.
Target companies also include China Aviation Industry Corporation, China National Offshore Oil Corporation, China Railway Construction Corporation and China National Nuclear Corporation. The list also includes three major Chinese telecommunications companies: China Mobile, China Telecom and China Unicom.
“At first glance, it’s an extraordinary list of Chinese corporate names. The impetus initiated by the previous administration on capital market sanctions appears to have been maintained and consolidated, “said Roger Robinson, former chairman of the US-China Economic and Security Review Committee. which is run by the consulting firm RWR Advisory Group.
On Thursday, the Pentagon is expected to release an updated version list of chinese companies with PLA connections, after Congress required the defense department to provide a new list each year. But the senior official said the Pentagon list would have no influence on the investment ban described in the new executive order.
The official said the Pentagon list would give him “flexibility to send public messages to a wide range of stakeholders about companies that have a wide range of links with different parts of the Chinese government.”
The latest directive will provide clarity to investors, stock markets and index providers who were caught in the crossfire between hawks of China within the Trump administration and Treasury department leadership over the past year.
In December and January, index providers purged their indices from Chinese stocks with ties to the military. And in the early days of 2021, the New York Stock Exchange announced the withdrawal of US listed shares of China Mobile, China Telecom and China Unicom before briefly reversing the decision.
The exchange finally removed the three companies after pressure from the Trump administration, including then-Treasury Secretary Steven Mnuchin. Financial platforms such as Bloomberg explicitly warn U.S. investors when they can trade at a value subject to sanctions.
Additional reports from Eric Platt in New York
Carry on Demetri Sevastopulo on Twitter
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