In a significant development of strategic trade and military dimensions, the Trump Administration is poised to add China’s top chipmaker SMIC and its national offshore oil and gas producer CNOOC to a trade blacklist. The potential trade action blocks the access of these Chinese military companies U.S. investor funds.
A recent executive order issued by U.S. President Donald Trump would also prevent U.S. investors from buying securities of Chinese companies which are in the U.S. Entity List, starting from late next year.
It is not immediately clear when these companies would be published in the Federal Register. The list comprises China Construction Technology Co Ltd and China International Engineering Consulting Corp, in addition to Semiconductor Manufacturing International Corp (SMIC) and China National Offshore Oil Corp (CNOOC), said three sources.
Incidentally, SMIC, which relies heavily on U.S. equipment was already in U.S. crosshairs. Earlier in September, the U.S. Commerce Department had informed some companies that they need to obtain a license before supplying goods and services to SMIC. This was after the U.S. Commerce Department concluded that there was an “unacceptable risk” that equipment supplied to SMIC could have dual, civil and military purposes.
The move comes midst a bipartisan anti-China sentiment in the U.S. Congress and is part of a broader effort by Washington to target what it sees as Chinese efforts to enlist corporations to harness emerging civilian technologies for military purposes.
The list of “Communist Chinese Military Companies” was mandated by a 1999 law requiring the Pentagon to compile a catalog of companies “owned or controlled” by the People’s Liberation Army, but DoD only complied in 2020.
Earlier this month, White House had published an executive order aimed at providing teeth to the Entity list by prohibiting U.S. investors from buying securities of the blacklisted companies from November 2021. The limited scope of the directive is an issue which limits the impact of the executive order. It is also to be seen how the incoming Bidden Administration takes up the challenge thrown by China, given its soft position towards Beijing. There has been a growing rift between global powers and China over multiple issues, including Beijing’s absurd land claims, the source of the Coronavirus and Beijing’s crackdown on the rule of democracy in Hong Kong.