Biden signs order banning investment in dozens of Chinese defence and tech firms

The order bans US entities from investing in dozens of Chinese companies with alleged ties to defence or surveillance technology sectors. PHOTO: REUTERS

WASHINGTON - US President Joe Biden on Thursday (June 3) barred Americans from investing in dozens of Chinese companies in the defence sector or whose surveillance technology aids in serious human rights abuses, broadening a blacklist started by the Trump administration last year.

The move is aimed at ensuring that "US investments are not supporting Chinese companies that undermine the security or values of the United States and our allies", the White House said in a fact sheet.

The order prevents American investment from supporting the Chinese defence sector while allowing the US government to better address "the threat of Chinese surveillance technology firms that contribute - both inside and outside China - to the surveillance of religious or ethnic minorities or otherwise facilitate repression and serious human rights abuses", it added.

The executive order signed by Mr Biden goes into effect on Aug 2, and gives American investors a year to divest themselves of stocks affected by the blacklist.

Some 59 companies were on the updated list, up from the 44 firms previously blacklisted by the time President Donald Trump's term ended in January.

The targeted companies include tech giant Huawei, as well as many state-owned companies and their subsidiaries in aerospace, construction, electronics, shipbuilding and other industries, including video surveillance equipment company Hikvision, which the US says is linked to the repression of Uighur Muslims in Xinjiang.

The Biden administration also moved management of the blacklist from the Defence Department to the Treasury Department, which has more experience in administering sanctions.

The move reflects Mr Biden's continuation of his predecessor's hard-line approach to China, but finetunes it to avoid confusion and stave off lawsuits, said analysts.

"While there is considerable continuity between the Trump and Biden administrations on this issue, the updated executive order provides needed clarity on what entities are subject to prohibitions," said Centre for a New American Security senior fellow Martijn Rasser.

"The amended executive order is also stronger in that it centres its prohibitions on companies in specific sectors rather than on ties to the Chinese military, connections which can be murky," he said.

The Trump administration's approach of basing the blacklist on military links opened it up to court challenges and put the onus on the US government to prove those links, which took time and resources and might have involved needing to disclose classified information, he told The Straits Times.

For instance, Chinese smartphone maker Xiaomi was temporarily removed from the blacklist after a federal judge questioned the reasoning behind the Defence Department's decision to add it to its blacklist of companies with military links.

Last year's order also created confusion on Wall Street as the New York Stock Exchange flip-flopped on whether it would delist China Mobile, China Unicom and China Telecom, in line with the Trump ban.

"By focusing the prohibitions on defence and surveillance tech firms, the order is on stronger legal footing," said Mr Rasser.

Earlier on Thursday, Chinese foreign ministry spokesman Wang Weibin said that the Trump investment ban was "in total disregard of facts" and "not only undermined the lawful rights and interests of Chinese companies but also hurt the interests of global investors including those in the US".

"China will take necessary measures to firmly safeguard Chinese enterprises' legitimate and lawful rights and interests and support them in defending their rights and interests according to law," Mr Wang said at a regular press briefing.

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Thursday's executive order also highlights Mr Biden's greater focus on human rights, said analysts.

Said Mr Rasser: "The amended executive order makes it clear that the US government views the proliferation of Chinese surveillance technology and its illiberal use to be a threat to US national security and democratic norms and values.

"This is certainly in line with the Biden administration's views of the dangers of creeping techno-authoritarianism."

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