SecurityWorldMarket

17/11/2020

Investments in Chinese military linked companies banned in US

Washington, DC

On 12th November 2020, in a document declaring a state of national emergency, President Trump signed a new executive order, set to come into effect from 11th January 2021. The order declares a move to prohibit and deter US citizens from investing in any publicly traded securities associated with any Chinese companies that may provide any investment links to exposure to the Chinese military.

This is the first major policy initiative that Trump has introduced since the US election, and within the executive order he states,

"I, DONALD J. TRUMP, President of the United States of America, find that the People’s Republic of China (PRC) 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..."

 Accuses companies of  supporting PRC military
The executive order goes on to say that China's government is funding the development of its military development by compelling civilian Chinese companies to support its activities. "Those companies, though remaining ostensibly private and civilian, directly support the PRC’s military, intelligence, and security apparatuses and aid in their development and modernization." states the official Whitehouse document.

"I therefore further find that the PRC’s military-industrial complex, by directly supporting the efforts of the PRC’s military, intelligence, and other security apparatuses, constitutes an unusual and extraordinary threat." concludes the statement, prior to laying out the full detail of the order.

Huawei and Hikvision
According to various reports from Reuters, CNN and the Wall Street journal this could impact companies such as Huawei, China Telecom Corp Ltd, Hikvision, China Mobile Ltd, and China United Network Communications Group Co. Ltd, the parent company of China Unicom in Hong Kong. 

Reuters also reported that White House trade adviser Peter Navarro estimated that at least half a trillion dollars in market capitalisation was represented by the Chinese companies and their subsidiaries.

Current investments excluded
The consensus of various financial media seems to suggest that it is unclear how investors might react. The debate is around the issue that the order bans transactions, which are defined as “purchases,” so investors may technically be able to hold onto current investments.


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