US issues executive order blocking investment in military-owned Chinese firms

The Donald Trump administration on Thursday revealed an executive order prohibiting U.S. investments in Chinese firms that Washington says are owned or controlled by the Chinese military, Reuters reported.
China smartphone userThe order could impact some of China’s biggest companies, including telecoms firms China Telecom, China Mobile and surveillance equipment maker Hikvision.

The move is designed to deter U.S. investment firms, pension funds and others from buying shares of 31 Chinese companies that were designated by the Defense Department as backed by the Chinese military earlier this year.

Starting Jan. 11, the order will prohibit purchases by U.S. investors of the securities of those 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.

White House trade adviser Peter Navarro estimated that at least half a trillion dollars in market capitalization was represented by the Chinese companies and their subsidiaries.

“This is a sweeping order designed to choke off American capital to China’s militarization,” he told reporters on a call.

The move is the first major policy initiative by President Donald Trump since losing the Nov. 3 election to Democratic rival Joe Biden and indicates that he is seeking to take advantage of the waning months of his administration to crack down on China, even as he has appeared laser-focused on challenging the election result.

Thursday’s action is likely to weigh on already fraught ties between the world’s top two economies, which are at loggerheads over China’s handling of the coronavirus pandemic and its move to impose security legislation on Hong Kong.

Joe Biden has not laid out a detailed China strategy but all the indications are that he will continue a tough approach to Beijing, with whom Donald Trump has become increasingly confrontational in his last year in office.

In August, U.S. Securities and Exchange Commission and Treasury officials urged Trump to delist Chinese companies that trade on U.S. exchanges and fail to meet its auditing requirements by January 2022.