Trump administration to mull expansion of China investment ban -sources (updated)

Alltronics Holdings

07/01/2021 20:18

(Adds background, updates to present)
    By Alexandra Alper, Humeyra Pamuk and Mike Stone
    WASHINGTON, Jan 7 (Reuters) - Trump administration officials
are expected to discuss a proposed expansion of an executive
order banning U.S. investment in alleged Chinese military
companies at a Thursday afternoon meeting, according to two
people familiar with the matter. 
    At the meeting, officials from the Defense, State and
Treasury Departments will consider, among other things, proposed
changes to the November directive, which has spurred confusion
among investors and firms seeking to comply, five sources said.
 urn:newsml:reuters.com:*:nL1N2JH23U
    One change that is likely to be discussed is a draft
amendment that would direct U.S. investors to completely divest
their positions in the blacklisted companies by Nov. 11, 2021,
according to two of the sources.
    If approved, the proposed change would dramatically broaden
the scope of the directive, which now states only that U.S.
investors must stop buying securities of the blacklisted
companies by that date. 
    It was not clear if any final decisions would be made at the
meeting. The State and Treasury Departments did not immediately
respond to requests for comment and the Defense Department
declined to comment.
    The executive order, signed by President Donald Trump in
November, is part of his bid to cement his tough-on-China legacy
in the waning days of his administration. It also sought to give
teeth to a 1999 law that tasked the Defense Department with
drafting a list of Chinese companies it believes are owned or
controlled by the Chinese military.
    The Defense Department has not yet provided a rationale for
designating the companies.
    The Pentagon has so far blacklisted 35 firms, including
China's top chipmaker SMIC  0981.HK  and oil giant CNOOC
 0833.HK . Reuters reported that the administration was
considering adding tech giants Alibaba  9988.HK  and Tencent
 0700.HK .
    A Beijing foreign ministry spokeswoman previously said China
opposed U.S. efforts to suppress its companies, adding that
Washington’s moves run counter to principles of market
competition.
    The November directive spurred some index providers like
MSCI to announce plans to shed some of the blacklisted companies
from their indexes. 
    But confusion over what the order requires prompted the New
York Stock Exchange last Thursday to announce plans to delist
three Chinese telecom companies that the Pentagon added to the
blacklist. On Monday, the NYSE scrapped the move and then in a
surprise twist the exchange reversed course a second time on
Wednesday and vowed to continue with its bid to delist the
firms.
    The confusion comes against a backdrop of tension among U.S.
agencies about how aggressively to implement the order. Reuters
and other news outlets reported that the State and Defense
Departments had pushed back against the Treasury Department
after it planned to issue draft guidance that was seen as
watering down the order.
    Both U.S. Secretary of State Mike Pompeo and Treasury
Secretary Steven Mnuchin later wrote in tweets that there was no
disagreement over the executive order.

 (Additional reporting by Karen Freifeld and Andrea Shalal;
Writing by Alexandra Alper; Editing by Sonya Hepinstall and
Aurora Ellis)
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