Wednesday, February 1, 2023

United States extends ban on military investments in China to subsidiaries

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The US Treasury Department said Monday that an executive order issued by Donald Trump banning investment in Chinese companies suspected of military ties would apply to subsidiaries, adopting a harsher interpretation of the president’s crackdown.

The clarification follows a heated debate within the Trump administration over the application of the executive order signed last month, with the State Department and the Pentagon pushing for more sweeping rules to limit U.S. investment in Chinese companies linked to the People’s Liberation Army.

In a question-and-answer section on the executive order released Monday by the Treasury’s Office of Foreign Assets Control, which sets U.S. sanctions, the Trump administration said the investment ban would apply to “any affiliate of” a Chinese Communist Military Society ”.

The Treasury Department added that it planned to publicly list subsidiaries subject to the ban that were “50% owned or more” or “determined to be controlled” by companies suspected of links to the Chinese military.

He added that the US Secretaries of Defense or the Treasury could determine whether “an entity, including a subsidiary” was a “Chinese Communist military company operating directly or indirectly in the United States”, which would also subject it to the ban on investments.

Details provided by the Treasury, which also noted that exchange-traded funds and index funds would be subject to the ban, were acclaimed by Mike Pompeo, US Secretary of State.

“President @realDonaldTrump protects US investors and pension funds. Its decree prohibits investments in ETFs and index funds in Communist Chinese military companies and subsidiaries. Excellent teamwork for today’s announcement ”, Mr. Pompeo wrote on Twitter.

Mr. Trump’s executive order was one of his last major policy steps in China before he left the White House next month. His administration has also added in recent weeks dozens of Chinese companies, including Semiconductor Manufacturing International Corp, China’s largest chipmaker, and drone maker DJI on a Commerce Department blacklist that prevents U.S. companies from selling to them without U.S. government approval.

The move against Chinese companies suspected of military ties comes after the Trump administration considered a series of different actions over the past four years to break the integration capital markets between the two countries. U.S. officials and lawmakers have particularly focused on curb inclusion Chinese companies suspected of threatening US national security interests based on clues at the heart of US investment portfolios.

The Financial Times reported earlier this month that the US Treasury Department had sought to exclude subsidiaries of the investment ban, but the effort was fought by the State Department and the Pentagon.

Steven Mnuchin, US Secretary of the Treasury, and Mr Pompeo both denied on Twitter that there had been a “clash” or “disagreement” on the issue after the report was released.


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