Biden To Ban Investments In 59 Chinese Companies Including Huawei And China's Largest Chipmaker

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by Tyler Durden
Thursday, Jun 03, 2021 - 01:53 PM

As we first previewed yesterday, President Biden on Thursday signed an executive order banning investments in 59 companies, including marquee Chinese groups such as Huawei, the telecoms equipment manufacturer, and Semiconductor Manufacturing International Corporation, China’s largest chipmaker, which US intelligence says is critical to the Chinese military. Other notable companies included are Aviation Industry Corporation of China, China National Offshore Oil Corporation, China Railway Construction Corporation, China National Nuclear Corporation, China Mobile, Zhonghang Electronic, Jiangxi Hongdu Aviation, as well as telecom giantsChina Mobile, China Telecom and China Unicom.

The executive order, which prohibits direct investment in both debt and equity securities, but also bans Americans from investing in funds that contain Chinese securities in their portfolios, is meant to stop US capital from being used by China to undermine national security.

The new treasury list, which supersedes an EO first signed by Trump, will replace the existing department of defense lists of companies with alleged ties to Chinese military, and is part of a broader series of steps by the administration to counter China. The order will amend the Trump order (and list) to make it broader and more legally defensible in court

The US Treasury will oversee enforcement of the list, which will be updated on a rolling basis with new companies.

As the FT adds, senior US officials said the ban would take effect on August 2. But investors can make trades during the next 12 months to divest their holdings. While Americans are not required to divest the securities, they will be unable to sell their holdings after the one-year period has elapsed.

“The new executive order signals the administration’s intent to sustain and build on prohibitions on Chinese defence companies in order to ensure that US persons are not financing the military industrial complex of the People’s Republic of China,” said one senior US official. “The prohibitions are intentionally targeted and scoped to maximise the impact on the targets while minimising harm to global markets.”

Biden's order is an extension of a similar order signed late last year by Donald Trump which banned investments in companies that the Pentagon put on a list of groups with suspected links to the People’s Liberation Army. But the move caused confusion in financial markets because it came with little guidance about implementation. US courts also later ruled that the government had not provided sufficient evidence in some cases to justify putting a company on the target list.

The senior officials said Biden’s order would ensure that the investment ban was on stronger legal footing. They added that it would expand the Trump order to include surveillance companies, including Hikvision, that are accused of helping Beijing persecute more than 1m Muslim Uyghurs who have been held in detention camps in the northwestern region of Xinjiang.

Later on Thursday the Pentagon is expected to release an updated version of its list of Chinese companies with PLA connections, after Congress required the defence department to provide a new list each year. But the senior official said the Pentagon list would have no bearing on the investment ban outlined in the new executive order.

The official said the Pentagon list would give it “flexibility to message publicly to a wide range of stakeholders about companies that have a wide range of linkages to the different parts of the Chinese government”.

And now we wait for China's response which will hardly be favorable as Beijing was confident that by "investing" in Hunter Biden, all such unpleasantries could be avoided.