The Washington PostDemocracy Dies in Darkness

Outgoing Trump administration bans investments in Chinese companies it says support China’s military

The order seems to be an effort by Trump’s team to sever more China links before his term ends

Chinese People's Liberation Army soldiers march past a banner depicting President Xi Jinping. (Andy Wong/AP)
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The White House on Thursday issued an executive order banning U.S. investment in a few dozen Chinese companies that it said have ties to the People’s Liberation Army, underscoring the administration’s drive to continue severing China links before President Trump’s term ends in January.

Beginning Jan. 11, the order prohibits any U.S. citizens or funds from making new investments in companies deemed by the Pentagon and other federal agencies to support China’s military. They have until November 2021 to sell existing shareholdings.

China “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 Trump order said.

The impact of the ban is unclear. The affected companies do not appear to include China’s major publicly traded tech firms, and several of the companies said to be affected by the prohibition, including Huawei, don’t trade on stock markets. Others are large state-owned defense contractors, such as China Electronics Technology Group Corp., that don’t have foreign stockholders.

Some of the firms do have foreign investors, including China Mobile Communications Group, CRRC Corp. and China Telecommunications Corp.

The Pentagon didn’t respond to a request for comment, nor did China’s embassy in the United States.

In a post on his Senate website, Sen. Marco Rubio (R-Fla.) said the ban will affect roughly 30 companies, including those on a list the Pentagon released this summer. Rubio applauded the order, saying it resembled legislation he introduced last month.

Andy Rothman, a San Francisco-based investment strategist for the fund manager Matthews Asia, called the impact of the order underwhelming.

U.S. investors own about 2 percent of the value of the companies traded on China’s stock market, he said.

“Only a small fraction of publicly listed Chinese companies are associated with that country’s military-industrial complex,” he said 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.”

David Loevinger, managing director for emerging markets at TCW Group, an asset manager in Los Angeles, called the order “moderately consequential for global markets.” Because it gives investors a year to sell existing holdings, some will wait for clarification from the Biden administration, he said.

Martin Chorzempa, a research fellow at the Peterson Institute for International Economics, called the move “symbolic.”

The order is “not going to be a problem for China’s military and intelligence upgrading. Those do not depend on U.S. investors at all, as far as I can tell,” he said.

“It reads to me like the last attempts of an outgoing administration to do as much as they can to push a decoupling between the U.S. and China without being willing to really rattle U.S. investors” by including bigger Chinese firms on the list, he said.

Chorzempa did not, however, rule out that the Trump administration could expand the list in the coming months.

The order is one of a flurry of bans the Trump administration has issued in recent months to try to cut trade and investment ties with China. Those have included orders to ban Chinese mobile apps TikTok and WeChat from U.S. app stores — bans that U.S. courts have temporarily halted — and a growing number of export restrictions aimed at cutting the sale of U.S. semiconductors and other technology to Chinese companies.

National security adviser Robert C. O’Brien said the order would “protect American investors from unintentionally providing capital that goes to enhancing the capabilities of the People’s Liberation Army and People’s Republic of China intelligence services, which routinely target American citizens and businesses through cyber operations, and directly threaten the critical infrastructure, economy, and military of America and its allies and partners around the world.”