Huawei to China Mobile, Joe Biden expands Trump-era investment ban on Chinese firms
President Joe Biden has expanded on Trump's ban on investments in Chinese firms, with an executive order late on June 3. The order will now prevent Americans from investing in 59 firms, up from the 48 that Trump listed. The move is a surprising one since Biden was widely believed to take a softer stance on China, and avoid direct confrontation, unlike Trump.
The main reason for the order is to prevent US dollars from financing China's geopolitical ambitions, which have been growing of late. In April, Chinese hackers targeted New York's MTA system using the 'Zero Day' software flaw. In recent months, China has also stepped up military patrols in the Indo-Pacific and committed numerous human rights violations in Hong Kong and Xinjiang. That led Biden to issue a stern warning in March at a virtual meeting.
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Hacking and security have been an ongoing concern for the US, especially in light of the information that many Chinese firms are being controlled by the government. As a result, Trump banned many firms from seeking American investments and limited their scope of operations in the US. Now, Biden seems keen to continue that policy, despite China's warnings in the past.
Banned firms
Broadly, the executive order covers three areas -- defense, surveillance and companies owned/controlled by people listed in an annex. Some of the many companies banned include Aero Engine Corporation of China, China Aerospace Science and Industry Corporation Limited, China General Nuclear Power Corporation, China Telecommunications Corporation, Nanjing Panda Electronics Company Limited, China Mobile Limited; China Telecom Corporation Limited and Huawei. The order also bars Americans from investing in funds that then invest in these firms.
Interestingly, the order excludes TikTok's parent company ByteDance, DJI and WeChat, which have widely been criticized for their ties to China. In 2020, Trump banned TikTok and WeChat from US app stores, but that ban was placed on hold by the Biden administration. It is unclear how they plan to proceed.
A White House press release said the order was meant to counter Chinese surveillance technology, "as well as the development or use of Chinese surveillance technology to facilitate repression or serious human rights abuses, constitute unusual and extraordinary threats." It added, "This E.O. allows the United States to prohibit – in a targeted and scoped manner – US investments in Chinese companies that undermine the security or democratic values of the United States and our allies."
The order will take effect on August 2, 2021, giving American investors time to review and pull out their investments. The move affects three of China's biggest telecom firms - China Mobile Communications Group Co, China Unicom Ltd and China Telecommunications Corp. The order also lists Hangzhou Hikvision Digital Technology Co, the company that makes surveillance cameras and facial recognition technology used to allegedly persecute Uyghurs.
In the coming hours, the Treasury Department is expected to release guidance on the penalties for violating the order. In response to the news, a representative for the Chinese Foreign Ministry told reporters in Beijing, "The US should respect the rule of law and the market, correct its mistakes, and stop actions that undermine the global financial market order and investors’ lawful rights and interests."
The move comes as lawmakers across both parties have been pushing Biden for increased action on China, but has itself been unwilling to allocate any required funding. In 2020, the Federal Communications Commission (FCC) designated Huawei and ZTE as "threats to national security", but both firms are believed to have already invested billions in America's telecommunications network. Reportedly, the FCC estimated it would cost $1.8 billion to replace their equipment, but Congress is yet to allocate the funds for it.