Trump bans US investments in companies linked to Chinese military

WASHINGTON (Reuters) – The Trump administration on Thursday unveiled an executive order banning U.S. investments in Chinese companies that Washington says are owned or controlled by the Chinese military, increasing pressure on Beijing after the U.S. election.

The order, which was first reported by Reuters, could impact some of China’s biggest companies, including telecommunications companies China Telecom Corp Ltd, China Mobile Ltd and surveillance equipment maker Hikvision.

The move is intended to dissuade U.S. investment firms, pension funds and others from buying shares of 31 Chinese companies designated by the Defense Ministry as being backed by the Chinese military earlier this year.

As of January 11, the order will prohibit purchases by US investors of the securities of these companies. Transactions carried out with a view to transferring ownership of the companies will be authorized until November 11, 2021.

“China is increasingly exploiting the capital of the United States to recharge its batteries and to enable the development and modernization of its military, intelligence and other security apparatuses,” said the order issued by the White House.

The Chinese Embassy in Washington did not immediately respond to a request for comment.

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

“This is a general order intended to stifle American capital for the militarization of China,” he told reporters on a call.

The move is President Donald Trump’s first major political initiative since losing the November 3 election to Democratic rival Joe Biden and indicates that he is looking to use the final months of his administration to crack down on China, even as ‘He did it. seemed focused on challenging the election result.

Biden has won enough Battlefield States to surpass the 270 electoral votes needed by the State-by-State Electoral College that determines the next president, but Republican Trump has so far refused to concede, citing unsubstantiated allegations of fraud electoral.

Thursday’s action is likely to put further strain on the 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 it. Hong Kong.

Biden hasn’t set out a detailed strategy for China, but everything indicates he will pursue a difficult approach in Beijing, with whom Trump has become increasingly confrontational in his last year in office.

WALL STREET INTERESTS

The ordinance echoes a bill introduced by Republican Senator Marco Rubio last month that sought to block access to U.S. financial markets for Chinese companies that have been blacklisted by Washington, including those added to the list of the Ministry of Defense.

“Today’s action by the Trump administration is a welcome start to protect our markets and our investors,” Rubio, a prominent Chinese hawk, told Congress. “We can never put the interests of the Chinese Communist Party and Wall Street above American workers and mom and pop investors.”

His comments were echoed by Republican Congressman Jim Banks, who described the order as “one of the wisest and most important foreign policy decisions President Trump has made since taking office.”

Rubio’s bill and order is part of a growing effort by Congress and the administration to thwart Chinese companies that enjoy backing from U.S. investors but fail to comply with U.S. rules facing their rivals Americans. It also shows a new willingness to upset Wall Street in rivalry with Beijing.

In August, officials from the Securities and Exchange Commission and the US Treasury urged Trump to deregister Chinese companies that trade on US stock exchanges and fail to meet his audit requirements by January 2022.

Thursday’s move received a cold reception on Wall Street, where stocks were already pulling back from recent gains. The iShares China Large-Cap ETF extended its declines.

“The market is probably concerned that President Trump will increase tensions with China and Iran in his last two months as president,” said Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance.

Yet investor reaction was unclear. The order prohibits transactions, which it defines as “purchases,” so that investors can technically hold onto their current investments.

While the document does not set out specific penalties for violations, it does give the Treasury Department the ability to invoke “all powers” granted by the International Emergency Economic Powers Act, which authorizes the use of severe penalties.

Questions also remain as to whether Biden, who is expected to take office just nine days after the order goes into effect, will enforce or simply revoke it. His campaign declined to comment.