In a development that marks the expansion of the scope of the previous US Administration, US President Joe Biden banned US entities from investing in a couple of Chinese companies with alleged links to the Chinese military, through an executive order.
The Treasury Department will enforce the ban and update the list of banned Chinese company on a “rolling basis”; the list has around 59 companies.
The executive order prevents U.S. investment from supporting the Chinese military-industrial complex, as well as military, intelligence, and security research and development programs, said the president in the order.
“In addition, I find that the use of Chinese surveillance technology outside the PRC and the development or use of Chinese surveillance technology to facilitate repression or serious human rights abuse constitute unusual and extraordinary threats,” said Biden.
Major Chinese companies including Aviation Industry Corp of China (AVIC), Hangzhou Hikvision Digital Technology Co Ltd, Huawei Technologies Ltd, China Mobile Communications Group, Semiconductor Manufacturing International Corp, China National Offshore Oil Corp (CNOOC), and Hangzhou Hikvision Digital Technology Co Ltd are part of the list.
Incidentally, SMIC is vital to China’s national drive to boost its domestic chip sector.
“We fully expect that in the months ahead … we’ll be adding additional companies to the new executive order’s restrictions,” one a senior official.
Biden, seen widely as being soft towards China, has reviewed a number of U.S. policy toward Beijing and has quietly withdrawn many of the previous Administration’s order, which barred Chinese companies in investing in the US.
The Biden Administration has made efforts to reinforce U.S. alliances and pursue large domestic investments through green investments.
Last month, Biden’s Indo-Pacific policy coordinator, Kurt Campbell, said “a period of engagement with China had come to an end and that the dominant paradigm in bilateral ties going forward would be one of competition”.
According to senior officials the Treasury Department later give guidance on what the scope of surveillance technology means, including whether companies are facilitating “repression or serious human rights abuses.”
“We really want to make sure that any future prohibitions are on legally solid ground. So, our first listings really reflect that,” said a senior administration official.
Reflecting the Biden government’s soft approach towards Beijing, many Chinese investors shrugged off the ban with most of the stocks named in the list, making gains on Friday morning.
Investors will have to “unwind” investments, said an official.
According to the executive order, the ban is effective from August 2 with investors having 365 days from the date of this or future listings to make transactions for the purpose of divesting; divesting later than 365 days after listing would be prohibited without authorization.
The new list sees the adding of 10 10 publicly listed Chinese companies; not included in the list were previously identified companies including Commercial Aircraft Corp of China (COMAC), which is spearheading efforts to compete with Boeing Co and Airbus along with the two Chinese company that had challenged earlier ban in court – Gowin Semiconductor Corp and Luokung Technology Corp. Sinochem, which was earlier on the ban list, has also been dropped.
According to Stewart Baker, a former official from the Department of Homeland Security, the Treasury’s “settled regulatory and legal regime” makes it a better place than the Defense Department to enforce the ban.
“This follows in a growing tradition of the Biden administration coming along and saying: ‘Trump was right in principle and wrong in execution, and we’ll fix that,'” said Baker.