Reuters reported on Friday (Jan. 15) that financial executives expect the Trump administration’s ban on Chinese portfolio investment to continue, and believe that changes to China investment policy are unlikely under the current political situation and after President-elect Joe Biden takes office.
President Trump on Wednesday (Jan. 13) issued another order reinforcing Executive Order 13959, issued last November, requiring U.S. investors to divest securities of Chinese companies deemed to be owned or controlled by the Communist Party of China’s military starting Nov. 11, 2021 EST.
This is the latest move issued before Trump leaves office to curb Chinese Communist Party access to U.S. capital markets.
Because the executive order will take effect after Biden takes office, financiers are waiting to see how Biden will handle the issue, but at the same time expect that the likelihood of Biden reversing Trump’s policy is low. Investors will increasingly be limited in their access to China’s capital markets.
Franklin Chu, president of investment firm Sage Capital, told Reuters, “It’s unlikely there will be immediate, major changes because the current political climate won’t encourage him to make changes.”
More than half of the financial sources interviewed by Reuters agreed with this view.
A senior executive at a major U.S. trading platform said, “We’re going to move forward and view this order as permanent.”
A source familiar with the views of three U.S. banks also said the institutions doubted Biden would reverse or significantly ease Trump’s ban on investment in China in the short term.
Several executives said lifting Trump’s ban related to the Communist Party’s military expansion is unlikely to be a priority for the Biden administration amid a raging coronavirus (the Chinese Communist Party virus), a weakening economic recovery and both parties staying tough on their perceptions of China.
Leland Miller, CEO of the U.S. consulting firm China Beige Book, said, “[Hopefully] it’s highly unlikely that the incoming Biden administration will use political leverage early on to do anything that could be construed as soft on China.”
Until there is more clarity on White House policy, many investors say they will avoid dabbling in investment matters that could be restricted by the rules.
On Jan. 14, the U.S. formally blacklisted Xiaomi, along with eight other companies, including SMIC Semiconductor Equipment Corporation, Wuxiao Basket Technology Corporation, Beijing Zhongguancun Development and Investment Center, Guangdong Gao Yun Semiconductor Technology Corporation, Da Xinhua Airlines, CML Technologies, China Aviation Group and Commercial Aircraft Corporation of China.
The blacklist of Chinese companies identified by the Ministry of Defense as owned or controlled by the Chinese Communist Party’s military has now been expanded to 44.
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