Trump signs executive order barring US investors from investing in companies linked to Chinese military

The White House on Nov. 12 announced an executive order signed by President Trump prohibiting companies or anyone in the United States from investing in Chinese companies with ties to the Chinese military. The executive order will go into effect on Jan. 11 of next year.

The U.S. Department of Defense earlier this year designated 31 Chinese companies as owned or controlled by the Chinese military, and the executive order issued by the White House on Thursday is intended to prevent U.S. investment firms, pension funds or anyone from buying or selling stock in the 31 Chinese companies. The rules could affect the 31 Chinese companies, which include China Telecom, China Mobile and Haikang View.

The executive order will go into effect at 9:30 a.m. ET next Jan. 11. The order will prohibit U.S. investors from making any transactions in the securities of the aforementioned Chinese companies. At the same time, it also prohibits Americans from trading in the securities of these companies for 60 days after they are identified as “Chinese military enterprises.

The executive order Trump signed that day reads that China is “increasingly” using U.S. capital to “develop and modernize its military, intelligence, and other security apparatus,” posing a threat to the United States. He stated that “through its national strategy of military-civilian integration, the PRC has expanded the size of the Chinese military-industrial complex by pressuring Chinese civilian companies to support its military and intelligence activities. While these companies remain ostensibly private and civilian, they directly support China’s military, intelligence, and security apparatus and help develop and modernize it.”

Trump said, “At the same time, these companies raise capital by selling securities to U.S. investors trading on public exchanges at home and abroad, lobbying U.S. index providers and funds to include these securities in market offerings, and engaging in other acts to secure access to U.S. capital. In this way, China uses U.S. investors to finance its military development and modernization.” He continued, “As a result, I further find that China’s military-industrial complex directly supports the work of China’s military, intelligence, and other security agencies and poses an unusual and extraordinary threat to U.S. national security, foreign policy, and economy, a threat that comes in large part from outside the United States. To protect the U.S. homeland and the American people, I hereby declare a national emergency regarding this threat.”

The laws under which Trump made this executive order include the U.S. International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (IEEPA), the National Emergencies Act (50 U.S.C. 1601 et seq.), and Title 3, Section 301 of the United States Code.