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U.S. strengthens investor ban on companies accused of being controlled by China's military

Huawei is one of the more than 30 companies that the United States has accused of being controlled by the Chinese military. Photo by Stephen Shaver/UPI
Huawei is one of the more than 30 companies that the United States has accused of being controlled by the Chinese military. Photo by Stephen Shaver/UPI | License Photo

Dec. 28 (UPI) -- The Treasury Department on Monday strengthened an executive order President Donald Trump signed in November to prevent Americans from investing in Chinese military-controlled companies to include subsidiaries.

The Treasury issued the clarifying statement, saying U.S. investors are prohibited from owning securities of subsidiaries of companies accused of being Communist Chinese military companies.

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The U.S. government has so far identified 35 companies under the executive order it accuses of being connected to the People's Liberation Army, including tech giant Huawei, Semiconductor Manufacturing International Corporation and Aero Engine Corporation of China.

The rule is to take effect on Jan. 11, 2021, giving investors time to fully divest from the listed companies.

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The Treasury said it intends to publicly list as subsidiaries any entity that issues publicly traded securities that is a least 50% owned by companies accused of being owned by China's military or controlled or owned by one or more of the companies it has already identified.

U.S. Secretary of State Mike Pompeo said in a statement that the move is to prevent U.S. funds from developing and modernizing China's military, intelligence and security services.

Pompeo said the Treasury's Frequently Asked Questions statement "should allay concerns" from U.S. investors fearful of being punished for unknowingly supporting Chinese military-controlled companies.

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"President Donald Trump is protecting U.S. investors and pension funds," Pompeo said via Twitter. "His Executive Order prohibits ETF and index fund investments in Communist Chinese military companies and subsidiaries."

He also applauded the Treasury for "great teamwork" concerning Monday's announcement.

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Trump issued the executive order on Nov. 12 amid sinking relations between Beijing and Washington as the United States has repeatedly condemned the Asian nation for its handling of its coronavirus outbreak and human rights abuses in Hong Kong and Xinjiang province.

The Trump administration has sought punitive measures targeting China and has also barred its companies from participating in the development of the United States' next-generation 5G wireless infrastructure over national security concerns and has lobbied other countries to do the same.

China has repeatedly balked at the accusations and earlier this month described the White House's blacklisting of Chinese companies and officials as an "emotional lashing out."

Pompeo has called China "the single greatest threat to the United States of America."

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