Yesterday, US President Joe Biden signed an executive order to ban Americans from investing money in companies linked to the Chinese military and surveillance technology as an extension of the policy set out by Donald Trump during his presidency. This policy intends to prevent American capital from being used in measures that would be counterproductive to US national security interests. 59 countries are listed on the report from the US Treasury, all of which are alleged to have links with the People’s Liberation Army.
The previous bill, enacted by Trump, caused a lot of strife within the US. It relied on a previous report by the Department of Defense which used criteria which were different to those in the current plans. The sparse details of the legislation resulted in mass confusion for investors, as the question over whether subsidiaries would fall within the scope of the ban was unclear. Further, it offered few details about the ban’s implementation or deadlines related to it. The report was eventually ruled not to have given sufficient evidence of links to the Chinese military by the US courts.
In its newer form, the ban would stop Americans from investing in Chinese debt and equity securities as well as funds (Chinese or otherwise) owning any such securities. The ban will come into effect on August 2nd, and from then on any Americans that own these holdings will have 12 months to divest them. Americans may hold on to their investments past this point, but they will not be able to realise further gains.
Biden builds on Trump's efforts, and is adding many significant names to the register. The list of companies affected by this includes many of China’s largest technology firms. The phone manufacturer Huawei is among them, as well as their top three telecommunications operators. This may be considered to be an effort to reduce the US’ susceptibility to Chinese cyber-attacks. Hikvision, a surveillance and facial-recognition technology company, also made the list. It is linked to the persecution of Uyghur Muslims by the Chinese government in the Xinjiang region. On the military side, many Chinese aircraft manufacturers feature, including the defence giant Aviation Industry Corp.
This ban serves to solidify Biden’s stance on China, and shows his condemnation of the Uyghur genocide and military posturing in the South China Sea. China is expected to be a key talking point at next week’s G7 summit, and no doubt this ban will feature.
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