Trump Administration Tightens Ban on Investing in Chinese Companies

WASHINGTON, Dec 28 (Reuters) – The Trump administration on Monday reinforced an executive order that prohibits US investors from buying securities of companies allegedly controlled by the Chinese military, following disagreement between various US departments over how tough the directive should be. .

The Treasury Department released guidance clarifying that the executive order, published in November, will apply to investors in exchange-traded funds and index funds, as well as subsidiaries of Chinese companies designated as owned or controlled by the Chinese military.

The “frequently asked questions” statement was posted on the US Treasury website on Monday after Reuters and other media reported that a debate on the issue was taking place within the Trump Administration. The State Department and the Defense Department had rejected an offer from the Treasury Department to relax the executive order, a source said.

US Secretary of State Mike Pompeo said Monday that the announcement “ensures that US capital does not contribute to the development and modernization of the military, intelligence and security services of the People’s Republic of China (PRC).”

“This should allay concerns that US investors may unknowingly support (companies controlled by the Chinese military) through direct, indirect or other passive investments,” he added.

Specifically, some media outlets pointed out that the Treasury was trying to exclude subsidiaries of Chinese companies from the scope of the White House directive, which prohibits as of November 2021 new purchases of securities by 35 Chinese companies that, according to Washington, they are backed by the PRC army.

Guidance published Monday specifies that the bans apply to “any subsidiary of a Chinese communist military company, after such subsidiary is listed by the Treasury.”

The guidance indicates that the department “intends to list” listed entities that are 50% or more owned by a Chinese military company.