SMIC, CNOOC: Trump targets Chinese national champions by exiting

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The latest move came on Thursday when the U.S. Department of Defense added China’s leading chipmaker SMIC, oil giant CNOOC and several other companies to a list of companies that the department says are owned or controlled by the Chinese army. This means they are now subject to restrictions, including a ban on Americans investing in them.

Analysts expected the current US administration to continue attacking China until the very end of its term in an effort to solidify President Donald Trump’s approach to Beijing and make it more difficult for Biden to turn the tide.

“The rush of Chinese extremists to push actions against China in January 20 bypassed an already disorganized political process, “said Michael Hirson, head of China and Northeast Asia practice at Eurasia Group. January 20 is Biden’s inauguration date.

There are no clear criteria for a business related to the military, Hirson said, but the Trump administration seems to interpret it broadly to mean companies that directly or indirectly support China’s military modernization.

“It is a particularly large network for Chinese state-owned enterprises,” he said.

Beijing protested Friday against adding CNOOC, SMIC and other companies to the Defense Ministry’s list, and called on the United States to stop abusing the concept of national security.

“China strongly rejects the unwarranted oppression of the United States against Chinese companies,” Chinese Foreign Ministry spokeswoman Hua Chunying told reporters.

The SMIC said in a filing on the Hong Kong Stock Exchange that “there is no major impact” on its operation after being added to the Department of Defense list. The company added that its semiconductors are for civilian and commercial use and has no connection with the Chinese military.
The US government has had the minimum wage in its crosshairs for months. Earlier this year, he warned companies against doing business with the Chinese company because of its perceived ties to the military.

Targeting the minimum wage strikes at the heart of Beijing’s technological ambitions. China is catching up with the West in chip manufacturing and has invested billions of dollars in the industry in hopes of building a local business capable of making advanced chips.

CNOOC did not immediately respond to a request for comment.

A SMIC employee shows off the latest homemade server chip at the China International Semiconductor Expo 2020. The SMIC claims its semiconductors are for civilian and commercial use and has no connection with the Chinese military.
An executive order Trump signed last month banning U.S. companies from investing in companies on the Defense Department’s list has now grown to include 35 Chinese companies.
Smartphone maker Huawei and Hikvision, one of the world’s largest manufacturers and suppliers of video surveillance equipment, are on the list. Some of the other listed companies, including China Telecom (NO), China Mobile (CHL) and now CNOOC (CEO), trade on the New York Stock Exchange.

U.S. investors are prohibited from owning or trading in any securities that originate from or are exposed to these companies. Investors will have until November 2021 to divest from companies.

And Trump has more ammo he could shoot Chinese companies.

Earlier this week, the United States House of Representatives passed a bill which could kick several Chinese companies off Wall Street. The bill, which would prevent companies that refuse to open their books to U.S. accounting regulators from trading on U.S. stock exchanges, won unanimous support in the Senate earlier this year. It only needs Trump’s signature to become law.

Trump, “with near certainty,” will approve the bill before his term ends, says Shirley Yu, a visiting scholar at the London School of Economics and founder of a company that assesses strategy, business and risk policies for companies working in China.

Supported “by the unanimous support of Congress, this decision will be extremely difficult to overturn by the next administration,” she added.

US-China tech and commerce rivalry won't end because Joe Biden is president
The president could also revive the US-China trade war.
China has failed to honor its commitments to buy $ 200 billion worth of US goods, which was part of the “phase one” trade deal signed earlier this year, according to Yu.

Which means that “Trump can again unilaterally increase tariffs on Chinese products … [and] impose higher punitive tariffs, ”she said.

The Chinese Washington Falcons are also eyeing big Chinese tech brands, such as Ali Baba (BABA), Tencent (TCEHY) and Baidu (START), according to Hirson.
Trump once tried to attack Tencent, signing an executive order in August to ban his WeChat app to operate in the United States. A US judge temporarily blocked the order in late September. And a US appeals court in October rejected the US government’s request to immediately ban WeChat from app stores. in the country.

Chinese tech giants could still be added to a list that prohibits US companies from exporting goods to them without first obtaining a license to do so, according to Hirson.

“Some in the administration have been pushing to add one or more of these companies to the Commerce Department’s list of entities or to take other executive action towards these companies,” he said.

Companies added to the entity list – which is separate from the Defense Department’s list – are essentially cut off from US supplies and technology.

Washington added Huawei to the list last year, citing national security risks. Huawei, which has long denied that any of its products pose national security risks, has since seen its global business crippled by US restrictions. The minimum wage was not added to the list, but warned investors last month that possible US export restrictions were of concern.

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