President Joe Biden on Thursday signed a new executive order barring U.S. entities from investing in 59 companies with ties to the Chinese military in response to threats from Chinese military firms. In announcing the decision, the White House said it “demonstrates that the administration will not hesitate to block the flow of U.S. capital into China’s defense and related materiel sectors,”
The U.S. Department of Defense has included a total of 44 Chinese military-linked companies on a list called “Communist Chinese military companies” after three updates since last June, and former President Trump last November Based on this list, former President Trump issued an executive order last November prohibiting all U.S. individuals or entities from participating in investments related to these companies.
The new ban amends and expands the previous list of military-related companies, increasing the total number of Chinese companies barred from U.S. investment from 44 to 59.
The new executive order, which will take effect Aug. 2, will allow the federal government to prohibit U.S. “investments in Chinese companies that undermine the security or democratic values of the United States and its allies.
This is one of the most high-profile actions taken by the Biden administration to date, as it conducts a broad assessment of the previous administration’s China policy.
Audrey Fritz, a fellow at the Australian Strategic Policy Institute, said it shows the Biden administration is intent on maintaining its policy of pressuring China. In an interview with Voice of America, she said, “It does show that the new administration is taking China very seriously, that the Trump administration has responded to a lot of Chinese threats, and that they [the Biden administration] will continue to push back in the face of those threats.”
Audrey Fritz (D-N.Y.) noted that the new blacklist expands the coverage of the enforcement ban to include companies that engage in surveillance outside of China, use Chinese surveillance technology to suppress human rights and create threats. In a press release issued Thursday, the White House said that China’s use of surveillance technology outside its borders, its development, its use of surveillance technology for oppressive rule or its gross violations of human rights “poses an extraordinary and distinctive threat to the United States.
On the other hand, in order to ensure the legal reasonableness and sustainability of the ban, the new list also excludes several companies, including Xiaomi and Basket. Both companies had filed lawsuits in U.S. courts after President Biden’s inauguration, insisting that their designation as “military-related companies” was unfounded. The U.S. court last lifted the Department of Defense’s designation of Xiaomi as a “Chinese military company” and lifted restrictions on U.S. investors buying or holding Xiaomi securities.
Two other semiconductor companies were removed from the former blacklist: Advanced Micro-Fabrication Equipment Inc. and GOWIN Semiconductor Corp. In addition, Commercial Aircraft Corporation of China Ltd. and Sinochem Corporation were not included in the new list.
The 15 new companies include Changsha Jingjia Microelectronics Company Limited, a leading company in China’s graphics processing chip industry.
Asked about the issue at a press conference Friday, Chinese Foreign Ministry spokesman Wang Wenbin slammed the U.S. for generalizing the concept of national security and said China will take necessary measures to safeguard the legitimate rights and interests of Chinese companies.
The list is also expected to be expanded, with more companies added on a rolling basis like the previous list.
China’s military-related companies are countless
Although the U.S. has included more and more Chinese companies on the list of military-related companies in recent years, analysts say there are still a large number of Chinese companies with military backgrounds or that provide products and services to the military that are not listed and whose activities in the U.S. are not properly restricted and scrutinized because of the long-standing blurring of the line between Chinese military companies and other companies.
In a report last week, the Foundation for Defense of Democracies (FDD), a Washington, D.C.-based think tank, noted that the companies previously listed by the Defense Department are only a starting point, and that there are “countless” Chinese multinational companies in the “civil-military integration” strategy. The “civil-military integration” strategy provides international support to the military.”
Emily de La Bruyere, a senior fellow at the Foundation for Defense of Democracies and one of the authors of the report, told VOA of the previous DoD list: “One of the main points of our report is that many Chinese companies operating in the United States are also associated with providing support to the PLA. Those companies far outnumber the 44 that have been identified, and that’s just the tip of the iceberg.”
The U.S. National Defense Authorization Act for Fiscal Year 1999 requires the Secretary of Defense to compile and publish a list of Chinese Communist Party military-related companies operating directly or indirectly in the United States. After a 21-year hiatus, the Defense Department began publishing a list of Chinese “military-related Chinese companies” last June, and former President Trump subsequently issued an executive order based on that list, prohibiting Americans from investing in those companies deemed to have military affiliations, noting that investments in those companies would fund China’s military ambitions. “pose a direct threat to U.S. homeland and U.S. forces overseas.”
Successive lists released so far by both administrations have included overtly military companies, such as China Aviation Industry Corp. The group’s official website shows that its operations include fighter jets, military helicopters and military transport aircraft, and it has branches in 66 countries, including the United States.
Through its subsidiary AVIC International, the group acquired two leading U.S. manufacturers in 2011: Cirrus Design Corporation and Continental Motors (now Continental Aerospace Technologies), a manufacturer of small aero piston engines. Continental Aerospace Technologies). Cirrus is recognized as a leader in aircraft design, while Continental Motors is the world’s leading manufacturer of piston engines and spare parts.
In addition, in the aerospace manufacturer sector alone, AVIC International’s overseas assets include Thielert, a German aero-piston engine company acquired in 2013, and Aritex Aritex Cading, S.A., a major global supplier of automated aerospace assembly lines, acquired in 2016. A.).
Thielert’s main product is a piston engine based on Mercedes-Benz engine technology, which is used in a wide range of unmanned aircraft, including the U.S. Army’s MQ-1C Gray Eagle mainstay drone. The acquisition of Thielett has caused observers to worry that U.S. military engine technology has been penetrated by China.
“The Foundation for Defense of Democracies (FDD) report notes that the DoD report includes 10 large state-owned military companies like the China Aerospace Industry Corporation, but that is far from all of them. For example, the report says that China’s Poly Group and Beidou Xingtong Navigation Technology Co. are not included. Ltd. is a large defense company engaged in the import and export of weapons and equipment in China, while Beidou Xingtong is a large state-owned enterprise established by China to develop the Beidou navigation system.
According to the official website of Beidouxingtong, its overseas enterprises and industrial bases are located in Silicon Valley and Greenville in the United States, as well as in the United Kingdom, Germany, Canada, Austria, the Czech Republic, Romania and other countries.
“Civil-military integration” confuses the boundaries between military and civilian
The strategic concept of “civil-military integration” was introduced in 2007. Former Chinese leader Hu Jintao proposed in his report to the 17th National Congress that year to “develop a path of integrated civil-military development with Chinese characteristics.” In 2015, Xi Jinping elevated it to a national strategy and established a new “Central Committee for Civil-Military Integration and Development”, of which he is the director.
The Chinese Foreign Ministry’s briefly stated position on the issue on its official website is that “promoting integrated civil-military development is a common practice in the international community.”
Emily Weinstein, a fellow at the Center for Security and Emerging Technology at Georgetown University’s School of Foreign Service, said the U.S. certainly has its own civil-military integration system, with Lockheed Martin and Raytheon among the companies that typify the U.S. model, but the two countries have fundamentally different systems. It’s hard for Chinese companies to say no to the government. She told Voice of America, “In the United States, the Department of Defense can approach a company or a university and say to them that we are interested in one of your studies, products or technologies, and those companies or universities have the right and the ability to say no and say to the Department of Defense that we don’t want to work with you.”
Chinese government power is almost all-encompassing, making it quite difficult to define which companies are military-related and which companies provide support to the military. According to a study earlier this year by Sayari, a global business intelligence platform, their analysis of more than 25,000 Chinese companies associated with the U.S. Department of Defense’s list showed that only a handful of companies indicated military ties in their names and published lines of business.
The complexity of the relationships between multinational companies is particularly complicated by the various types of business dealings and ties that some companies have with U.S. companies, such as joint ventures, partnerships, equity participation, and partnerships.
Hailanxin Data Technology Co., Ltd., a high-technology company in the field of marine information technology in China, is a supplier to the Chinese Navy and has publicly stated that its development model is “civilian technology for military use. The Beijing-based public company not only has subsidiaries and R&D centers in Germany, Singapore, Russia and Canada, but its partners also include Texas-based SpeedCast, the world’s largest satellite link provider.
The Wall Street Journal said in a report late last year that top U.S. officials were divided over the scope of China’s list of military-related companies. After an executive order signed by former President Donald Trump banned Americans from investing in companies with a Chinese military background, there was disagreement within the U.S. government at the time around whether subsidiaries of those companies should also be blacklisted, the report said.
On the flip side, Mollie Saltskog, an intelligence analyst at the Soufan Group, a U.S. strategic intelligence consultancy, said that many Chinese companies have party committees within them, a system that presents both challenges but also creates many problems for China itself. She told Voice of America, “The issue of the impact of civil-military integration on U.S. national security is one we should absolutely take seriously, but the Chinese system also has many domestic challenges that have led to problems such as corruption, waste, lack of coordination between departments and many other issues.”