U.S. Expands List of Mainland Chinese Firms Subject to Securities Transaction Ban
11 June 2021
President Biden on 3 June signed an executive order (EO 14032) expanding the scope of a 12 November 2020 executive order issued by President Trump (EO 13959) that banned investments in companies deemed to have direct or indirect ties to mainland China’s military. EO 14032 references the national emergency declared in EO 13959 and modifies the implementation of the ban in several key ways. For example, it expands the list of covered firms from 42 to 59 and includes “surveillance” firms along with “military” firms. It also shifts the authority for implementation to the U.S. Department of Treasury’s Office of Foreign Assets Controls, which has extensive expertise in enforcing economic sanctions.
EO 13959 had blocked Americans from buying securities and investing in funds deemed to support the People’s Liberation Army and related organisations. In taking that action Trump had referenced the U.S. Defense Department’s Section 1237 list, which originated in the 1999 National Defense Authorization Act. Section 1237 requires the Defense Department to list companies considered to be “Communist Chinese” related military companies.
Biden administration officials described EO 13959 as “flawed and legally vulnerable”, as two firms – Luokung Technology Corp. and Xiaomi Corp. – had secured court-ordered exemptions from coverage. Additionally, the implementation of Luokung’s ban had initially been delayed as a result of a spelling mistake by the Trump administration.
EO 14032 bans U.S. citizens from buying publicly traded securities of any entity determined by the Treasury Secretary, in consultation with the Secretaries of State and Defense, to be operating in the defence and related materiel sector or the surveillance technology sector of mainland China’s economy. To do this, EO 14032 creates a new Non Specially-Designated Nationals Chinese Military-Industrial Complex Companies (NS-CMIC) List, administered by OFAC. While the Section 1237 List included 42 mainland Chinese entities, the new NS-CMIC List will start with 59 entities. A fact sheet justified the expansion of coverage to include surveillance technology firms by arguing that such technology “is used to facilitate repression or serious human rights abuses” that “constitute unusual and extraordinary threats”, and that U.S. investment in such firms would “undermine the security or democratic values of the United States and our allies.”
The new ban will take effect on 2 August 2021 and covers the following companies:
- Aero Engine Corporation of China
- Aerospace CH UAV Co. Ltd.
- Aerospace Communications Holdings Group Company Limited
- Aerosun Corporation
- Anhui Greatwall Military Industry Company Limited
- Aviation Industry Corporation of China Ltd.
- AVIC Aviation High-Technology Company Limited
- AVIC Heavy Machinery Company Limited
- AVIC Jonhon Optronic Technology Co. Ltd.
- AVIC Shenyang Aircraft Company Limited
- AVIC Xi’An Aircraft Industry Group Company Ltd.
- Changsha Jingjia Microelectronics Company Limited
- China Academy of Launch Vehicle Technology
- China Aerospace Science and Industry Corporation Limited
- China Aerospace Science and Technology Corporation
- China Aerospace Times Electronics Co. Ltd.
- China Avionics Systems Company Limited
- China Communications Construction Company Limited
- China Communications Construction Group (Limited)
- China Electronics Corporation
- China Electronics Technology Group Corporation
- China General Nuclear Power Corporation
- China Marine Information Electronics Company Limited
- China Mobile Communications Group Co. Ltd.
- China Mobile Limited
- China National Nuclear Corporation
- China National Offshore Oil Corporation
- China North Industries Group Corporation Limited
- China Nuclear Engineering Corporation Limited
- China Railway Construction Corporation Limited
- China Satellite Communications Co. Ltd.
- China Shipbuilding Industry Company Limited
- China Shipbuilding Industry Group Power Company Limited
- China South Industries Group Corporation
- China Spacesat Co. Ltd.
- China State Shipbuilding Corporation Limited
- China Telecom Corporation Limited
- China Telecommunications Corporation
- China Unicom (Hong Kong) Limited
- China United Network Communications Group Co. Ltd.
- CNOOC Limited
- Costar Group Co. Ltd.
- CSSC Offshore & Marine Engineering (Group) Company Limited
- Fujian Torch Electron Technology Co. Ltd.
- Guizhou Space Appliance Co. Ltd.
- Hangzhou Hikvision Digital Technology Co. Ltd.
- Huawei Investment & Holding Co. Ltd.
- Huawei Technologies Co. Ltd.
- Inner Mongolia First Machinery Group Co. Ltd.
- Inspur Group Co. Ltd.
- Jiangxi Hongdu Aviation Industry Co. Ltd.
- Nanjing Panda Electronics Company Limited
- North Navigation Control Technology Co. Ltd.
- Panda Electronics Group Co. Ltd.
- Proven Glory Capital Limited
- Proven Honour Capital Limited
- Semiconductor Manufacturing International Corporation
- Shaanxi Zhongtian Rocket Technology Company Limited
- Zhonghang Electronic Measuring Instruments Company Limited.
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- North America
- Mainland China