Trump administration bolsters order barring U.S. investment in Chinese
firms
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[December 29, 2020] By
Alexandra Alper
WASHINGTON (Reuters) -The Trump
administration on Monday strengthened an executive order barring U.S.
investors from buying securities of alleged Chinese military-controlled
companies, following disagreement among U.S. agencies about how tough to
make the directive.
The Treasury Department published guidance clarifying that the executive
order, released in November, would apply to investors in exchange-traded
funds and index funds as well as subsidiaries of Chinese companies
designated as owned or controlled by the Chinese military.
The "frequently asked questions" release, posted on the Treasury website
on Monday, came after Reuters and other news outlets reported that a
debate was raging within the Trump administration over the guidance. The
State Department and the Department of Defense had pushed back against a
bid by Treasury Department to water down the executive order, a source
said.
![](http://archives.lincolndailynews.com/2020/Dec/29/images/ads/current/graue_20envision_122820.png)
Secretary of State Mike Pompeo said Monday that the announcement
"ensures U.S. capital does not contribute to the development and
modernization of the People’s Republic of China’s (PRC) military,
intelligence, and security services."
"This should allay concerns that U.S. investors might unknowingly
support (Chinese military-controlled companies) via direct, indirect, or
other passive investments," he added.
The Chinese foreign ministry said on Tuesday that China is firmly
opposed to the "smearing of China's military-civilian integration
strategy."
"Politicizing economy and trade, abusing the power of the state,
stretching the concept of national security, such actions go against the
principles of market competition and international trade that the United
States has always prided itself with," the foreign ministry's
spokesperson's office told Reuters.
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Logos of China National Offshore Oil Corporation (CNOOC) are
displayed at a news conference on the company's interim results in
Hong Kong, China, March 23, 2017. REUTERS/Bobby Yip
![](http://archives.lincolndailynews.com/2020/Dec/29/images/ads/current/debbiesfloral_lda_122820.png)
Specifically, some media outlets reported that Treasury was seeking to exclude
Chinese companies' subsidiaries from the scope of the White House directive,
which bars new purchases of securities of 35 Chinese companies that Washington
alleges are backed by the Chinese military, starting in November 2021.
The guidance released on Monday specifies that the prohibitions apply to "any
subsidiary of a Communist Chinese military company, after such subsidiary is
publicly listed by Treasury." It added that the agency "intends to list"
publicly traded entities that are 50% or more owned by a Chinese military
company or controlled by one.
"Treasury's published FAQ represents a clear victory for the U.S. security
community in its determined effort to preserve strong capital markets sanctions
associated with [the executive order] — the first of their kind,” said Roger
Robinson, a former White House official who supports curbing Chinese access to
U.S. investors.
The November executive order sought to give teeth to a 1999 law that mandated
that the Department of Defense compile a list of Chinese military companies. The
Pentagon, which only complied with the mandate this year, has so far designated
35 companies, including oil company CNOOC Ltd and China’s top chipmaker,
Semiconductor Manufacturing International Corp.
Since the November order, index providers have already begun shedding some of
the designated companies from their indexes.
(Reporting by Alexandra Alper, David Shepardson and Humeyra Pamuk in Washington
and Karen Freifeld in New York; Additional reporting by Yew Lun Tian in Beijing;
Editing by Stephen Coates and Leslie Adler)
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