JAKARTA - President Joe Biden signed an executive order banning US entities from investing in dozens of Chinese companies linked to the defense and surveillance technology sector.
A senior administration official in President Biden's administration said the Treasury Department would enforce and update on a rolling basis a new ban list of about 59 companies that prohibits the buying or selling of publicly traded securities in the target companies. Replaces the previous list from the Department of Defense.
The order prevents US investment in support of China's military-industrial complex, as well as military, intelligence, and security research and development programs, President Biden said in the order.
"In addition, I find the use of Chinese surveillance technology outside the PRC, and the development or use of Chinese surveillance technology to facilitate repression or serious human rights abuses, constitute an unusual and extraordinary threat", said President Joe Biden, cited from The Reuters, June 4.
The White House fact sheet on the order said the policy would apply to companies listed on Aug. 2.
Major Chinese companies included in the Defense Ministry's previous list were also placed on the updated list, including Aviation Industry Corp of China, China Mobile Communications Group, China National Offshore Oil Corp, Hangzhou Hikvision Digital Technology Co Ltd, Huawei Technologies Ltd., and Semiconductor Manufacturing International Corp.
SMIC is key to China's national push to boost its domestic chip sector.
"We fully expect that in the next few months there will be additional companies to the new executive order restrictions", a senior official said.
Another senior official said the entry of Chinese surveillance technology firms expanded the scope of the Trump administration's initial order last year, which the White House said was carelessly drafted, leaving it open to court challenges.
President Biden has reviewed a number of aspects of U.S. policy toward China, and his administration has extended the deadline for implementation set by former President Donald Trump's orders when drafting his new policy framework.
The signing of the new executive order is part of President Biden's moves to counter China, including strengthening US alliances and pursuing large domestic investments to boost America's economic competitiveness, amid deteriorating relations between the two countries.
The Treasury Department is said to be providing guidance on what the scope of surveillance technology means, including whether companies facilitate repression or serious human rights abuses.
"We really want to make sure future bans have a solid legal basis. So our first list really reflects that", said a senior official.
The new listing comes as a bit of a surprise to investors looking to see if they need to release more Chinese stocks and bonds. According to a senior official, investors will have time to "let go" of investments.
Interestingly, several companies that have been identified previously, such as Commercial Aircraft Corp of China, which is spearheading China's efforts to compete with Boeing Co and Airbus, as well as two companies that have challenged the ban in court, Gowin Semiconductor Corp and Luokung Technology Corp are not on this list.
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Last month, a judge signed an order to remove Chinese phone maker Xiaomi. This global company has been targeted by the Trump administration for allegedly having ties to the Chinese military.
Separately, former Department of Homeland Security official Stewart Baker said the Treasury's established regulatory and legal regime made it a better place than the Department of Defense to enforce the ban.
"This follows the growing tradition of the Biden administration coming in and saying Trump was in principle right and wrong in executions, and we're going to fix that", Baker said.
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