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WASHINGTON: The Trump administration released an executive order on Thursday (Nov. 12) banning U.S. investments in Chinese companies that Washington says are owned or controlled by the Chinese military, increasing pressure on Beijing after the American elections.
The order, which was first reported by Reuters, could affect some of China’s largest companies, including telecommunications companies China Telecom, China Mobile and surveillance equipment maker Hikvision.
The move is designed to dissuade US investment firms, pension funds and others from buying shares in 31 Chinese companies that were designated by the Defense Department as backed by the Chinese military earlier this year.
Effective January 11, the order will prohibit purchases by US investors of securities of those companies. Transactions made to divest the ownership of companies will be allowed until November 11, 2021.
“China is increasingly exploiting the capital of the United States to obtain resources and allow the development and modernization of its military, intelligence and security apparatuses,” said the order issued by the White House.
The Chinese embassy in Washington did not immediately respond to a request for comment.
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White House trade adviser Peter Navarro estimated that Chinese companies and their subsidiaries accounted for at least half a trillion dollars in market capitalization.
“This is a radical order designed to strangle US capital to the militarization of China,” he told reporters in a call.
The move is President Donald Trump’s first major political initiative since losing the Nov. 3 election to his Democratic rival Joe Biden and indicates that he is looking to take advantage of the final months of his administration to crack down on China, even as it has appeared. . laser focused on challenging the election result.
Biden has won enough states on the battlefield to surpass the 270 electoral votes required in the state-by-state Electoral College that determines the next president, but Republican Trump has so far refused to budge, citing unsubstantiated claims of voter fraud.
Thursday’s action is likely to weigh even further on already strained ties between the world’s two major economies, which are at odds over China’s handling of the coronavirus pandemic and its decision to impose security legislation on Hong Kong.
Biden has not presented a detailed strategy for China, but all indications are that he will continue with a tough approach to Beijing, with whom Trump has grown increasingly confrontational in his last year in office.
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WALL STREET INTERESTS
The order echoes a bill introduced by Republican Senator Marco Rubio last month that sought to block access to US capital markets for Chinese companies that Washington has blacklisted, including those that were added to the Department of Defense list.
“Today’s action by the Trump administration is a welcome start to protect our markets and investors,” said Rubio, one of China’s leading hawks in Congress. “We can never put the interests of the Chinese Communist Party and Wall Street ahead of American workers and family investors.”
His comments were echoed by Republican Congressman Jim Banks, who described the order as “one of the wisest and most significant foreign policy decisions President Trump has made since he took office.”
Rubio’s bill and order are part of a growing effort by Congress and the administration to thwart Chinese companies that enjoy the backing of American investors but fail to abide by the American rules faced by American rivals. It also shows a new willingness to antagonize Wall Street in rivalry with Beijing.
In August, the U.S. Securities and Exchange Commission and Treasury officials urged Trump to delist Chinese companies listed on U.S. exchanges and fail to meet its audit requirements for January 2022.
Thursday’s move received a cool reception on Wall Street, where stocks were already pulling out of recent gains. The iShares China Large-Cap ETF extended declines.
“The market is probably concerned that President Trump will escalate tensions with China and Iran in his last two months as president,” said Chris Zaccarelli, chief investment officer for the Independent Advisor Alliance.
Still, it was unclear how investors would react. The order prohibits transactions, which it defined as “purchases,” so investors could technically keep current investments.
While the document does not detail specific penalties for violations, it gives the Treasury Department the ability to invoke “all the powers” granted by the International Emergency Economic Powers Act, which authorizes the use of severe penalties.
There are also questions about whether Biden, who will take office just nine days after the order takes effect, would enforce it or simply revoke it. His campaign declined to comment.
