United States President Donald Trump on Thursday signed an executive order banning Americans from investing in Chinese firms that the administration believes is owned or controlled by the Chinese military, reported Bloomberg. The order will be effective from January 11.
China is “increasingly exploiting” American capital for “the development and modernisation of its military, intelligence, and other security apparatuses” posing a threat to the US, the executive order said.
The order will prohibit US investment firms and pension funds from conducting transactions in 20 Chinese companies that the Pentagon has designated as having military ties in June, in addition to 11 companies added in late August. The investors who have shares in these companies have time till November 2021 to divest them.
Shares of top Chinese firms, including state-owned companies China Mobile Limited and China Telecom Corp Ltd, slumped on Friday on reports of the executive order. China Mobile, whose controlling shareholder China Mobile Communications Group is on the list, fell 5.8% in Hong Kong. China Telecom dropped 4.8%.
“The president’s action serves to protect American investors from unintentionally providing capital that goes to enhancing the capabilities of the People’s Liberation Army and People’s Republic of China intelligence services, which routinely target American citizens and businesses,” said Robert O’Brien, the US national security adviser, according to The Financial Times.
Earlier this year, the US administration had sent a letter to Michael Kennedy, then chairman of the Federal Retirement Thrift Investment Board, asking him to stop all steps involving putting government employees’ savings in funds that have stakes in Chinese companies.
The US has taken tough decisions against China over various matters, including the coronavirus pandemic, freedom in Hong Kong and Taiwan, trade, and human rights abuse. China has, however, denied all allegations levelled against it.
On Monday, the US had imposed sanctions on four officials accused of curbing freedom in Hong Kong. Head of the National Security Division of the Hong Kong Police Force Edwina Lau was among those sanctioned. On Wednesday, it had warned China of further sanctions over a new law Beijing passed that led to the disqualification of four pro-democracy legislators in Hong Kong.