In a significant development, the Trump Administration has passed an executive order which prohibits U.S. investments in Chinese companies, which are owned or controlled by the Chinese military.
The executive order is likely to impact some of China biggest companies, including surveillance equipment maker Hikvision and telecoms firms China Telecom Corp Ltd, and China Mobile Ltd.
The move is aimed at deterring U.S. investment companies, including pension funds and others from buying shares of the 31 listed companies that were designated by the Department of Defense as being backed by the Chinese military.
Starting from January 11, 2021, the executive order prohibits U.S. investors from purchasing securities in these companies. Transactions made in order to divest ownership in the companies will be permitted until Nov. 11, 2021.
“China is increasingly exploiting United States capital to resource and to enable the development and modernization of its military, intelligence, and other security apparatuses,” said the order released by the White House.
The Chinese embassy in Washington did not immediately respond to a request for comment.
According to White House trade adviser Peter Navarro, at least half a trillion dollars in market capitalization is represented by the Chinese companies and their subsidiaries.
“This is a sweeping order designed to choke off American capital to China’s militarization,” said Navarro to reporters on a call.
The development is the first major policy initiative by U.S. President Donald Trump since the 2020 U.S. Presidential elections the results of which are now being contested in court midst allegations of widespread voter fraud.
While Biden has supposedly won in key swing states which determines the next president, Trump has so far refused to concede citing claims of voting fraud.
Bidden has not laid out a detailed plan on how he aims to tackle an increasingly aggressive China.
Trump’s executive order echoes a bill filed by Republican senator Marco Rubio last month wherein he sought to block blacklisted Chinese companies from accessing the U.S. capital markets.
“Today’s action by the Trump administration is a welcome start to protecting our markets and investors,” said Rubio. “We can never put the interests of the Chinese Communist Party and Wall Street above American workers and mom and pop investors.”
Rubio’s comments were echoed by Republican Congressman Jim Banks, who described Trump’s executive order as being “one of the wisest and most significant foreign policy decisions President Trump has made since he entered office.”
The development comes in the wake of the U.S. Securities and Exchange Commission and Treasury officials urged Trump to delist Chinese companies that trade on U.S. exchanges earlier this year in August.
While the executive order did not spell out specific penalties for violations, it however provide the U.S. Treasury Department with the ability to invoke “all powers” granted by the International Emergency Economic Powers Act, which authorizes the use of significantly tougher sanctions.
Biden has kept his China policy close to its chest. It remains to be seen whether Biden, who is set to take oath in nine days after the order goes into effect, would enforce it or simply revoke it.
His campaign declined to comment.