In the latest episode of the US-China geopolitical showdown, President Joe Biden is enforcing a new executive order that bans investment in 59 Chinese companies including Huawei effective from August 2. The new decision prevents US investments in Chinese companies with suspected ties to the Chinese Communist Party. The Biden administration has replaced and expanded Trump-era restrictions on investing in certain Chinese firms deemed supportive of that country’s surveillance and military apparatus.
The E.O. has its roots in the Trump administration’s long-running and evolving blacklist of Chinese companies, whether for government procurement, private investment by U.S. firms, or other purposes. Major tech companies like ZTE and Huawei were put on the list straight away in 2019, but others were steadily added over time.
The Biden order refines these orders, revising certain portions and expanding others, particularly in the definition of what constitutes dangerous behavior or collaboration with Chinese authorities.
The new list of companies includes many of those listed over the last two years and adds plenty more. Seemingly any major company that deals with tech, communications, or aerospace is at risk of being entered on the list, from China Mobile and China Unicom to China Aerospace, Hikvision, and SMIC. Direct investment in the companies is disallowed, as is investing in an intermediary such as an index fund that includes one of the prohibited companies.
With the new sanctions in place, President Biden is reinforcing the hard stance against China’s intelligence and security research firms, which peaked during former President Donald Trump’s four-year term. US investment companies and individuals are allowed to divest any funds in the newly banned companies over a one-year period.
It remains to be seen if other major smartphone makers from China will be added to the list. There’s also no word if Chinese social media and messaging platforms like Tik-Tok and WeChat will be subject to similar bans.
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