U.S. Treasury Department Again Delays Effective Date of Investment Ban on Chinese Military Companies

The U.S. Treasury Department on Tuesday (May 18) issued an announcement delaying the effective date of a ban on investments in certain Chinese companies with Communist Party military affiliations and their subsidiaries by another two weeks.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), which in January delayed the effective date of the ban on investments in certain Chinese companies and their subsidiaries with a Communist Party military background until May 27, has extended the effective date to June 11.

The Office issued General License 1B “authorizing transactions involving the securities of certain Communist Chinese military enterprises,” i.e., all transactions and activities prohibited by E.O. 13959, as amended in January 2021 by E.O. 13974, involving investments in listed securities with similar, but not identical, names. publicly traded securities of CCP military enterprises, or derivatives of such securities, or investments designed to provide exposure to such securities, are permitted until June 11, 2021. However, this permission does not apply to the securities trading activities of Chinese military enterprises and their subsidiaries that are on the sanctions list, including CNOOC Limited, China Mobile, China Telecom, and China Unicom (Hong Kong) Limited, entities that were added to the sanctions list on Jan. 8, 2021.

President Donald Trump issued an executive order on Nov. 12 last year announcing a ban on U.S. companies and individuals from investing in 31 companies that the U.S. Department of Defense has deemed “communist Chinese military companies” starting Jan. 11 of this year.

Beijing views the ban as an unwarranted crackdown on Chinese companies and a serious violation of market competition principles and international trade and economic rules.

The U.S. argues that these companies, which have ties to China’s military and intelligence agencies, pose a threat to U.S. security by going public on the U.S. stock market to raise funds for the modernization of China’s military. The Trump administration reinforced the executive order last Dec. 28, making the investment ban applicable to “any subsidiary of a Chinese PLA company.

The Biden administration is still considering various Trump administration policies on China.

Last week, Xiaomi, a Chinese cell phone maker listed by the U.S. Department of Defense as a company involved in the Chinese Communist Party’s military, reached a settlement with the Pentagon in which the U.S. agreed to no longer list Xiaomi as a company involved in the Chinese Communist Party’s military.