Trump to blacklist China's top chipmaker, oil giant: Sources

Move will designate firms as linked to Chinese military, curb their access to US investors

The US Commerce Department had concluded there was an "unacceptable risk" that equipment supplied to SMIC could be used for military purposes.
The US Commerce Department had concluded there was an "unacceptable risk" that equipment supplied to SMIC could be used for military purposes.PHOTO: REUTERS

WASHINGTON • The Trump administration is poised to add China's top chipmaker SMIC and national offshore oil and gas producer CNOOC to a blacklist of alleged Chinese military companies, according to a document and sources, curbing their access to US investors and escalating tensions with Beijing weeks before President-elect Joe Biden takes office.

Reuters last month reported that the US Department of Defence was planning to designate four more Chinese companies as owned or controlled by the Chinese military, bringing the number of such firms affected to 35.

A recent executive order issued by President Donald Trump would prevent US investors from buying securities of the listed firms, starting late next year.

It was not clear when the new tranche would be published in the Federal Register. But the list comprises China Construction Technology and China International Engineering Consulting Corp, in addition to Semiconductor Manufacturing International Corp (SMIC) and China National Offshore Oil Corp (CNOOC), according to the document and three sources.

SMIC said it continued "to engage constructively and openly with the US government", and that its products and services were solely for civilian and commercial use. "The company has no relationship with the Chinese military and does not manufacture for any military end-users or end-uses."

SMIC shares closed 2.7 per cent lower yesterday.

CNOOC's listed unit, whose shares fell by almost 14 per cent after the Reuters report, said in a market statement that it had inquired with its parent and learnt that it had not received any formal notice from the relevant US authorities.

China's Foreign Ministry spokesman Hua Chunying, in response to a query about Washington's planned move, said Beijing hoped the US would not erect barriers to cooperation and discriminate against Chinese companies.

The US Department of Defence and the Chinese Embassy in Washington did not immediately respond to requests for comment.

SMIC, which relies heavily on equipment from American suppliers, was already in Washington's cross hairs.

In September, the Commerce Department informed some firms that they needed to obtain a licence before supplying goods and services to SMIC, after concluding there was an "unacceptable risk" that equipment supplied to it could be used for military purposes.

The upcoming move, coupled with similar policies, is seen as an attempt by Mr Trump to cement his tough-on-China legacy and to box incoming president Biden into hardline positions on Beijing amid bipartisan anti-China sentiment in Congress.

The Biden campaign has declined to comment.

The list is part of an effort by the US to target what it sees as China's efforts to enlist corporations to harness emerging civilian technologies for military purposes.

Meanwhile, London said yesterday that British telecommunications firms must not install new Huawei 5G kits after September next year, as part of a plan to purge the Chinese firm's equipment from high-speed mobile networks.

"I am setting out a clear path for the complete removal of high-risk vendors from our 5G networks," Digital Minister Oliver Dowden said in a statement. "This will be done through new and unprecedented powers to identify and ban telecoms equipment which poses a threat to our national security."

Britain has already ordered all Huawei equipment to be removed from its 5G network by the end of 2027, falling in line with its intelligence allies including the US which say the Chinese firm poses security risks.

China has criticised that decision, while Huawei said last week it was disappointed Britain was looking to exclude it from the 5G roll-out after the publication of new laws that could see firms fined £100,000 (S$178,300) if they infringe the ban.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on December 01, 2020, with the headline 'Trump to blacklist China's top chipmaker, oil giant: Sources'. Print Edition | Subscribe