US adds China’s minimum wage and CNOOC to defense blacklist

WASHINGTON (Reuters) – The Trump administration on Thursday added China’s main chipmaker, SMIC, and oil giant CNOOC to a blacklist of suspected Chinese military companies, a move that could escalate tensions with Beijing before the President-elect Joe Biden does take office.

The Ministry of Defense has designated a total of four additional companies as owned or controlled by the Chinese military, also including China Construction Technology Co Ltd and China International Engineering Consulting Corp.

The move, first reported by Reuters on Sunday, brings the total number of blacklisted companies to 35. While the list did not initially trigger any sanctions, a recent executive order issued by Republican President Donald Trump will prevent U.S. investors from buying blacklisted securities. companies from the end of next year.

The Chinese embassy in Washington referred Reuters to earlier remarks by the Foreign Ministry spokesperson that “China strongly opposes the politicization of affected Chinese companies.”

China National Offshore Oil Corp (CNOOC) did not immediately respond to a request for comment.

SMIC said in a stock statement that it strongly opposes the US Department of Defense decision, which reflects a fundamental misunderstanding by the US administration regarding the end uses of its business and technology.

The company also said its addition to the list did not have a major impact. SMIC shares in Hong Kong will resume trading in the afternoon after being suspended earlier on Friday.

Shares of CNOOC listed unit, CNOOC Ltd, had fallen nearly 14% percent following Sunday’s report.

The minimum wage, which depends heavily on equipment from American suppliers, was already in Washington’s sights. In September, the US Department of Commerce informed some companies that they needed to obtain a license before supplying goods and services to the SMIC after concluding that there was an “unacceptable risk” that the equipment supplied to it could be used. for military purposes.

The expanded blacklist is seen as part of an attempt to solidify Trump’s legacy against China and place Biden, the Democratic president-elect who takes office on January 20, in hardline positions on Beijing in the midst of ‘anti-Chinese bipartisan sentiment in Congress.

The measure is also part of a larger effort by Washington to target what it sees as Beijing’s efforts to enlist companies to exploit emerging civilian technologies for military purposes.

The list of “Communist Chinese Military Companies” was mandated by a 1999 law requiring the Pentagon to compile a catalog of companies “owned or controlled” by the People’s Liberation Army, but the DOD only complied with it. 2020. Giants like Hikvision, China Telecom, and China Mobile were added earlier this year.

In November, the White House issued an executive order, first reported by Reuters, that sought to give the list bite by banning U.S. investors from purchasing securities of companies blacklisted from November 2021. .

The major U.S. asset managers, Vanguard Group and BlackRock Inc, each own around 1% of the shares of CNOOC listed unit, CNOOC Ltd, and together hold around 4% of the outstanding shares of the SMIC, according to reports.

Both Congress and the Trump administration have increasingly sought to restrict access to the U.S. market for Chinese companies that do not comply with the rules facing their U.S. rivals, even if that means opposing Wall Street.

The U.S. House of Representatives passed a law on Wednesday to expel Chinese companies from U.S. stock exchanges if they do not fully comply with the country’s audit rules, giving Trump one more tool to threaten Beijing before stepping down. .