Sunday 6 December 2020
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Trump bans investments in firms controlled by China military

Trump has repeatedly vowed to punish Beijing over the coronavirus pandemic, its treatment of Muslim minorities and the crackdown on dissent in Hong Kong

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Politics World Trump bans investments in firms controlled by China military

US President Donald Trump has signed an order prohibiting US investments in Chinese firms that are determined to be owned or controlled by the country’s military. This is the latest bid by the White House to pressure Beijing over what the president has described as abusive business practices ― an aggressive exercise that is likely to stop if or when Joe Biden and Kamala Harris take over the job.

China is “increasingly exploiting” US capital for “the development and modernization of its military, intelligence, and other security apparatuses,” posing a threat to the US, according to the executive order, signed on 12 November.

Relations between the US and China deteriorated following the signing of a trade deal early in the year. Trump has repeatedly vowed to punish Beijing over the coronavirus pandemic, its treatment of Muslim minorities and the crackdown on dissent in Hong Kong. Chinese officials have threatened to retaliate with their own blacklist of US companies.

Shares of top Chinese firms ― like China Mobile Ltd and China Telecom Corp Ltd ― tumbled 13 November on reports of the impending decision. The executive order will prohibit US investment firms and pension funds from buying and selling shares of 20 Chinese companies designated by the Pentagon as having military ties in June, as well as an additional 11 companies added in late August.

China Mobile, whose controlling shareholder China Mobile Communications Group is on the list, dropped 5.8% in Hong Kong opening, the biggest intraday loss in almost eight months. China Telecom slumped 4.8%.

The prohibition will go into effect on 11 January, and allows US investment firms and pension funds to divest their holdings in companies linked to the Chinese military over the next year. If the US determines additional companies have military ties in the future, American investors will be given 60 days from that determination to divest.

US National Security Advisor Robert O’Brien said in a statement that many of the China-linked companies at issue are traded on exchanges around the world. American investors can unknowingly provide funds through passive investments such as mutual funds and retirement plans, he added.

The order “serves to protect American investors from unintentionally providing capital that goes to enhancing the capabilities of the People’s Liberation Army and People’s Republic of China intelligence services,” O’Brien said.

In a move earlier this year to restrict the flow of money, the administration sent a letter to Michael Kennedy, then chairman of the Federal Retirement Thrift Investment Board, telling him to “halt all steps” associated with putting government employees’ savings in a fund that includes stakes in Chinese companies.

Separately, O’Brien on 11 November said China’s latest clampdown in Hong Kong showed that the ‘one country, two systems’ arrangement for the territory amounted to a “fig leaf” for dictatorship, and warned of new sanctions.

The warning came after China’s top legislative body on 11 November passed a resolution allowing for the disqualification of any Hong Kong lawmakers who were not deemed sufficiently loyal. Chief Executive Carrie Lam’s government immediately banished four legislators, prompting the remaining 15 in the 70-seat Legislative Council to resign en masse hours later at a joint press briefing.

While the US has imposed sanctions against Lam and some officials in Beijing, it has so far held off punishing the country’s senior hierarchy. Such a move would infuriate Beijing and accelerate a deterioration in relations between the two nations on a variety of issues.

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