Trump administration officials are considering banning Americans from investing in two Chinese Internet giants, Alibaba and Tencent. That could mean further restrictions on Americans investing in Chinese companies before the Trump administration leaves office.
Officials at the State and Defense departments have been discussing in recent weeks whether to expand a list of Chinese companies linked to China’s military or security services that would restrict Americans from investing in them. According to a report in The Wall Street Journal on Wednesday (Jan. 6), sources familiar with the matter said officials at the State and Defense departments interacted with the Treasury Department on what impact adding Alibaba and Tencent to the blacklist would have on the broader capital markets. The plan is still in the discussion stage and will not necessarily be implemented, according to the report.
Tencent and Alibaba are China’s top listed companies by market capitalization. The two companies have a combined market capitalization of more than $1.3 trillion. Dozens of U.S. mutual funds and other investors hold shares in the two companies. On Wednesday, Alibaba’s New York-listed American Depositary Receipts fell more than 5 percent, while Tencent’s ADRs fell about 4 percent on the U.S. over-the-counter market.
The U.S. government released its initial list last November that included 31 Chinese companies. The blacklist is one of the measures taken by the Trump administration to target investment in Chinese companies.
In addition, the New York Stock Exchange on Wednesday again reversed its decision on whether to delist China’s top three telecoms players, saying it will move forward with delisting China Mobile, China Telecom and China Unicom (Hong Kong) based on a U.S. presidential executive order. Earlier this year, the NYSE announced its decision to delist the three Chinese companies. But on Jan. 4, in a surprise move, the NYSE said it would no longer push the delisting plan and would allow their stocks and bonds to continue trading on the NYSE.
The NYSE said Wednesday that trading in the U.S.-listed stocks in question was suspended at 4 a.m. ET next Monday (Jan. 11). The NYSE said it was taking this latest move after receiving “new specific guidance” from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) on Tuesday.
The Trump administration has shown a tougher stance toward China in economic, political, trade and market areas, after decades of U.S. government policies that have extensively cultivated closer ties with China. The impact of the shift in U.S. policy toward China has also rippled through the global economy.
Discussions about moving supply chains out of China have been ongoing. Some U.S. companies have begun moving their production lines out of China or are more concerned about the security of their industry secrets. The Wall Street Journal reported on Wall Street that U.S. financial centers have sought to forge closer ties between the two countries’ financial markets, and that tying investors’ money to China is now increasingly risky.
In the final weeks of the Trump administration, disagreements have emerged across the U.S. government over whether to expand the blacklist of Chinese companies that restrict investment by Americans. Defense Department and State Department officials want to expand the list to include well-known Chinese companies and subsidiaries of those already on the list, according to a report in The Wall Street Journal. The two departments have urged tougher measures to stop Chinese military and security services from accessing U.S. databases, advanced technology and expertise.
The Treasury Department, for its part, wants to narrow the scope of the list because it is concerned that mandatory sell-offs could cause shocks to financial markets, the report said.
While Alibaba and Tencent are not Chinese state-owned companies, the State and Defense departments have long warned that the companies could be pressured by Beijing authorities to provide them with data on U.S. citizens and businesses.
Earlier this week, President Trump also signed an executive order banning U.S. individuals and companies from conducting transactions through eight Chinese apps, including Alibaba-related businesses Ant Financial Services and Alipay, and Tencent’s WeChat Pay, among others. The ban is scheduled to take effect in 45 days.
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