In his first major foreign policy move since Joe Biden lost the presidential election, Donald Trump signed an executive order banning US investors from holding shares in companies suspected of having ties to the Chinese military.
The order would prevent US citizens and corporations from entering into new transactions in stocks in target companies starting January 11, nine days before Mr. Biden’s inauguration as the 46th US President. Investors who currently hold shares in the specified companies would have until November 2021 to sell them.
“The President’s action is to protect American investors from the inadvertent provision of capital to enhance the capabilities of the People’s Liberation Army and the People’s Republic of China’s intelligence services, which routinely target American citizens and businesses,” said Robert O. ‘Brien security advisor.
The action affects more than 30 Chinese companies that the Pentagon warned earlier this year would allow the PLA to engage in military activity that poses a national security threat to the US.
The list, first published in June by the Financial Times, includes several Chinese state-owned companies. This also includes China Mobile and China Telecom, two large Chinese telecommunications groups with subsidiaries listed on US stock exchanges.
The safety quotient should rise under a Biden presidency, even if there is a standstill. We shouldn’t get this unusual type of dictum
The move is the latest in a string of increasingly tough measures the Trump administration has taken against China, from cyber espionage concerns to human rights abuses in the northwestern Xinjiang region. More recently, efforts have been made to introduce a security law in Hong Kong to counter the democracy movement.
Mr Trump took the action by invoking the International Emergency Economic Powers Act, a powerful tool that gives the US President ample scope to take action to protect national security.
A Washington-based securities attorney said the burden would be greatest on big banks concerned about these types of risks. “As of January 11th, they must ban trading in these securities. . . That coincides with the belly. “
A White House official said the deal also prohibits buying or investing in emerging market funds, which could have far-reaching implications beyond China Mobile and China Telecom.
The Biden transition team declined to comment on the order. The incoming president has the power to step down from office as soon as he takes office.
China experts in Washington had expected that if Mr Trump lost the election, he would act more decisively against China in the hopes that Mr Biden would not be willing to overturn measures that could lead to allegations that he was not tough enough on Beijing across from.
Marco Rubio, the Florida Republican who heads the Senate Intelligence Committee, welcomed the government’s move, which is in line with the laws he is promoting in Congress that would have a similar effect.
“The Chinese Communist Party’s exploitation of the US capital markets is a clear and ongoing risk to US economic and national security,” said Rubio. “Today’s actions by the Trump administration are a welcome start in protecting our markets and investors.”
Earlier this year, the Trump administration took several other measures to make U.S. investors more cautious about investing in Chinese companies.
Ed Al-Hussainy, a currency and interest rate analyst at Columbia Threadneedle, said investors are “very aware that some of these names are only vulnerable to this risk,” referring to companies on the Pentagon list.
He added that it was less certain how the order would be implemented. “It’s not clear what the implementation will be like.”
Kathy Bostjancic, chief US financial economist at Oxford Economics, said markets assumed the Trump administration’s latest volley would end with the transition of the White House in January.
“The safety quotient should rise under a Biden presidency, even if there is a deadlock,” she added. “We shouldn’t get this unusual kind of dictum.”
Chinese company stocks fell during the US hours after the list was reported late trading day, saving 0.8 percent from an earlier gain by popular exchange-traded fund iShares MSCI China. The ETF ended the day only marginally higher.
China Mobile’s US depository receipts fell 4 percent in New York trading, while Chinese Telecom stocks in the US fell 5.3 percent.
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Additional coverage from Eric Platt in New York and Kadhim Shubber in Washington