US Action on Chinese Tech Firms
On June 3, President Joe Biden signed an Executive Order banning US entities from investing in 59 Chinese companies alleged to have ties with China’s military and/or its defense or surveillance technology sectors. The measure, which takes effect on August 2, prohibits US investors from buying or selling publicly traded securities in listed companies. Among the firms targeted are Huawei Technologies, China Mobile, China General Nuclear Power Corporation (CGNPC), China National Offshore Oil Corp (CNOOC), and Semiconductor Manufacturing International Corp (SMIC). The list will be updated periodically.
The move broadens an investment ban imposed by the administration of the former President Donald Trump and shifts responsibility for the list of banned companies from the US Department of Defense (DOD) to the Department of the Treasury. The ban’s impact is highly likely to be greatest for US investors holding securities in the listed companies or engaged in commercial relations with them, and on the flip side, the ban is also likely to hamper the listed businesses’ efforts to attract foreign investment.
More broadly, however, the ban highlights the continuity in the US-China policy despite President Biden replacing former President Trump. This continuity reflects a broad consensus among America’s two major political parties on China, particularly regarding their shared condemnation of Beijing’s trade and human rights practices. US investors with interests in listed Chinese companies should ensure full compliance with the US ban, adjusting investment strategies and portfolios accordingly.
China has reacted angrily to this development, accusing the US of suppressing Chinese economic growth and using too broad a definition of national security. This anger provides yet another layer of resentment felt by China towards the US during a time of increasing tensions. The cooling in relations not only has the potential to affect businesses but also entire nations. Countries that will be closely watching these ever-mounting tensions include Taiwan, Japan, New Zealand, and Australia. Many much smaller states will also be caught up in the dispute, which further shows the significant and wide-ranging impact of the Sino-American relationship. Further deterioration in the two powers’ relationship will create new and increasingly complex diplomatic, moral, and economic dilemmas for these countries.
Given that many of the fears felt by the US around certain aspects of Chinese technological advancement, investment, and political presence are also felt by other countries, there is a considerable possibility that they will implement similar measures. Countries that are most likely to enact this or very similar restriction include Australia, Japan, the United Kingdom, India and smaller Sinosceptic states such as Lithuania and Sweden. Given that this ban on companies was an expansion on a pre-existing list suggests that the US is likely to extend the scope of these sanctions depending on geopolitical, economic and, crucially, technological developments.