WASHINGTON: On Thursday, the Trump administration blacklisted China top SMIC chipmaker and oil company CNOOC to a blacklist of suspected Chinese military firms. A development that is likely to intensify tensions with Beijing before President-elect Joe Biden takes office.
A total of four additional companies were classified by the Defense Department as owned or operated by the Chinese military. It includes China Construction Technology Co Ltd and China International Engineering Consulting Corp.
The step, first reported on Sunday by Reuters, takes the total number of blacklisted firms to 35.
Although no sanctions were initially placed on the list, a new executive order released by President Donald Trump would bar US investors from purchasing blacklisted companies’ shares beginning late next year.
Requests for comment were not immediately answered by the Chinese embassy in Washington, Semiconductor Manufacturing International Corp (SMIC) and China National Offshore Oil Corp (CNOOC).
After the Sunday report, the shares of CNOOC’s listed CNOOC Ltd unit dropped by nearly 14%.
SMIC, which relies heavily on US suppliers’ equipment, was already in the crosshairs of Washington.
In September, after concluding that there was a “unacceptable risk” that equipment shipped to it could be used for military purposes, the US Commerce Department told several companies that they needed to obtain a licence before selling products and services to SMIC.
The extended blacklist is seen as part of a bid to consolidate the hard-on-China legacy of outgoing Republican Trump. It also box incoming Democrat Biden into hardline positions in Congress in Beijing in the midst of bipartisan anti-China sentiment.
The measure is also part of Washington’s larger initiative to target what it sees. It is because Beijing’s attempts to recruit companies for military purposes to exploit new civilian technologies.
“A 1999 law requiring the Pentagon to compile a database of companies “owned or operated” by the People’s Liberation Army required the list of “Communist Chinese Military Companies”. However, DOD complied only in 2020.
Earlier this year, giants such as Hikvision, China Telecom and China Mobile were incorporated.
The White House released an executive order in November, first mentioned by Reuters, aiming to add teeth to the list by banning US investors from purchasing blacklisted companies’ shares from November 2021.
Top US fund managers Vanguard Group and BlackRock Inc each own about 1% of CNOOC’s listed CNOOC Ltd stock. And also jointly own about 4% of SMIC’s outstanding shares, disclosures show.
Congress and the administration have sought increasingly to curb the US market access of Chinese companies that do not comply with rules faced by American rivals, even if that means antagonising Wall Street.
On Wednesday, the US House of Representatives passed a la. It kicks Chinese companies off US stock exchanges if they do not fully comply with the country’s auditing rules. At the same time, it is giving Trump one more tool to threaten Beijing with before leaving office.
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