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Donald J. Trump signed an order banning US investments in Chinese companies determined to be owned or controlled by the country’s military, the latest proposal from the White House to pressure Beijing for what the president has described as practices. abusive commercials.
China is “increasingly exploiting” US capital for “the development and modernization of its military, intelligence and security apparatuses,” posing a threat to the United States, according to the executive order signed Thursday.
Relations between the United States and China have deteriorated after the signing of a trade agreement earlier this year. Trump has also repeatedly promised to punish Beijing for the coronavirus pandemic, its treatment of Muslim minorities, and its crackdown on dissent in Hong Kong. Chinese officials have threatened to retaliate with their own blacklist of American companies.
Shares of major Chinese companies, including China Mobile Ltd and China Telecom Corp Ltd., fell on Friday on reports of the impending decision. The executive order will prohibit US investment firms and pension funds from buying and selling shares of 20 Chinese companies designated by the Pentagon as linked to the military in June, as well as 11 other companies added in late August.
China Mobile, whose majority shareholder China Mobile Communications Group is on the list, fell 5.8 percent at the Hong Kong open, the biggest intraday loss in nearly eight months. China Telecom fell 4.8 percent.
The ban will take effect on January 11 and allows US investment companies and pension funds to divest their stakes in companies linked to the Chinese military over the next year. If the US determines that other companies have military ties in the future, US investors will have 60 days from that determination to divest.
US National Security Advisor Robert O’Brien said in a statement that many of the companies in question are listed on stock exchanges around the world. American investors can unknowingly provide funds through passive investments like mutual funds and retirement plans, he added.
The order “serves to protect US investors from inadvertent capital inflows to enhance the capabilities of the People’s Liberation Army (PLA) and the intelligence services of the People’s Republic of China,” O’Brien said.
In a move earlier this year to restrict the flow of money, the administration sent a letter to Michael Kennedy, then president of the Federal Retirement Savings Investment Board, telling him to “stop all steps” associated with putting the savings of government employees in a fund that includes shares in Chinese companies.
Separately, O’Brien said on Wednesday that China’s latest crackdown in Hong Kong shows that the agreement of one country and two systems for the territory amounts to a “fig leaf” for the dictatorship, and he warned of new sanctions.
The warning came after China’s top legislature passed a resolution on Wednesday allowing for the disqualification of any Hong Kong lawmaker who was not deemed loyal enough. The government of Executive Director Carrie Lam immediately exiled four lawmakers, prompting the remaining 15 on the 70-seat Legislative Council to resign en masse hours later in a joint press conference.
While the United States has imposed sanctions against Lam and some officials in Beijing, it has so far refrained from punishing the country’s top hierarchy. Such a move would enrage Beijing and accelerate the deterioration of relations between the two nations on a variety of issues.
Bloomberg News
