US President Joe Biden’s administration is likely to maintain pressure on China by preserving limits on US investments in certain Chinese companies imposed under former US president Donald Trump, six people familiar with the matter said, bucking entreaties from analysts to ease the restrictions.
Biden officials are still in preliminary discussions about Trump’s investment bans on companies linked to China’s military, which included three of the nation’s biggest telecommunications firms, the people said.
No decision has been made.
The people familiar with the matter asked not to be identified because discussions on the ban are not public.
Biden is trying to navigate a fraught relationship with Beijing, as tensions flare over issues ranging from trade to human rights to military postures in the South China Sea. The investment blacklist, which Trump announced in November, touched off a new conflict, prompting China to threaten possible legal action against global firms that followed the US ban.
The Biden administration is likely to find broad support in the US Congress for a tough stance on China.
“It is common sense that US dollars should not flow to entities close to the Chinese Communist Party’s military, which is building weapons and capabilities designed to kill American service members,” US Senator Marco Rubio said in an e-mailed statement.
“The Biden administration should reject any efforts by the investor class to erode the Trump-era sanctions, and it should work with Congress to codify those penalties into law,” he added.
The blacklist is not only a sore point in China, but also on Wall Street. The financial sector has urged the Biden administration to completely roll back the investment ban, four people in the industry said.
At the least, banks want clear guidance from the US Treasury’s Office of Foreign Assets Control, or OFAC, on compliance with the ban.
Trump’s administration confused markets with conflicting announcements about the sanctions during his final months in office. Stock exchanges and investors were left confused when Trump announced in November that US citizens would be banned from investments in any firm on the US Department of the Treasury’s newly created list of “Communist Chinese Military Companies.”
Following the announcement, the New York Stock Exchange said it would delist three large Chinese telecom companies, only to reverse that decision amid confusion over the scope of the ban. The exchange reinstated its plan after pressure from then-US Treasury secretary Steven Mnuchin.
To clarify, in January, Mnuchin’s Department of the Treasury issued a statement naming China Mobile Ltd (中國移動), China Telecom Corp (中國電信) and China Unicom Hong Kong Ltd (中國聯通) as the companies that must be delisted.
“The global financial institutions that deal with these Chinese military company securities are stymied,” said John Smith, a former top sanctions official at the Treasury Department and now a partner at law firm Morrison & Forrester. “All the trading that would normally be done by the biggest global institutions around has stopped because they are deathly afraid of violating US sanctions.”
OFAC has put out limited guidance on how big banks employing thousands of Americans who must comply with the investment ban can conduct business that spans across global trade, Smith said.
The Biden administration missed an April 15 deadline to submit a fresh list of Chinese military-linked companies to Congress.
The list is compiled by Pentagon officials who have access to classified materials and can determine which companies benefit the Chinese military.
A US defense policy law enacted in January over Trump’s veto allows the Biden administration to expand the investment ban to cover more of the Chinese technology sector, including any company tied to espionage, human rights abuses or manufacturing.
The president’s advisers are aware of the possibility, but have not decided on a recommendation, one of the people said.
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