On Thursday, the White House released an executive order barring U.S. investment in several Chinese businesses, which reportedly have connections to the People's Liberation Army, highlighting the administration's effort to try and break China bonds in the country.
The order forbids any U.S. residents or entities from creating new investments in businesses considered by the Pentagon and the various federal agencies to benefit China's military effective on January 11, 2021, and targetting some 31 firms. These firms have been identified by the Department of Defense and have until November 2021 to sell their current shares.
"The People's Republic of China (PRC) is increasingly exploiting United States capital to resource and to enable the development and modernization of its military, intelligence, and other security apparatuses, which continues to allow the PRC to directly threaten the United States homeland and United States forces overseas," the order stated.
That investment "continues to allow the PRC to directly threaten the United States homeland and United States forces overseas, including by developing and deploying weapons of mass destruction, advanced conventional weapons, and malicious cyber-enabled actions against the United States and its people," it further said.
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The U.S. claimed that all these industries allow China's military growth through access to better technology and expertise and have, in turn, contributed to the extensive global expansion of Beijing as a consequence.
The consequences of the ban are ambiguous. China's leading publicly traded technology companies do not seem to be included in the list of impacted firms.
Still, many companies claimed to be affected by the ban, such as Huawei, which does not trade on stock exchanges. Many are major state-owned defense contractors that do not have foreign stockholders, such as China Electronics Technology Group Corp.
The Chinese Embassy in the United States has yet to reply to the request for comments on the new order.
One of the most challenging foreign policies facing the upcoming president is the extension of the armed forces of China.
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An investment analyst located in San Francisco for Matthews Asia, Andy Rothman, considered the order's effect underwhelming.
"Only a small fraction of publicly listed Chinese companies are associated with that country's military-industrial complex," he stated in an email. "So, it is not apparent that U.S. investors play a role in financing China's military or that American investments in China's stock market provide Washington with much political or economic leverage."
The directive is one of a series of bans done in the previous months by the Trump administration to attempt to sever trade and investment ties with China.
This included directives to ban TikTok and WeChat Chinese smartphone applications from the U.S. app stores and an increasing number of trade restrictions designed to limit the selling of U.S. semiconductors and other technology to Chinese businesses.
