US President Donald Trump’s administration on Thursday added China’s top chipmaker, Semiconductor Manufacturing International Corp (SMIC, 中芯國際), and oil giant China National Offshore Oil Corp (CNOOC, 中國海洋石油) to a blacklist of alleged Chinese military companies, a move likely to escalate tensions with Beijing before US president-elect Joe Biden takes office.
The US Department of Defense designated a total of four additional companies — including China Construction Technology Co (中國建設科技) and China International Engineering Consulting Corp (中國國際工程諮詢) — as owned or controlled by the Chinese military.
The move, first reported by Reuters on Sunday, brings the total number of companies blacklisted to 35.
While the list did not initially trigger any penalties, a recent executive order issued by Trump would prevent US investors from buying securities of the blacklisted firms starting late next year.
The Chinese embassy in Washington referred Reuters to prior remarks made by its Ministry of Foreign Affairs spokesperson that “China firmly opposes the politicization of the relevant Chinese companies.”
CNOOC did not respond immediately to a request for comment.
SMIC said in a stock market statement that it was assessing the impact of its addition to the list and said investors should be aware of the investment risks.
SMIC shares declined by more than 2 percent yesterday before trading in the company’s Hong Kong shares was suspended, while CNOOC slipped 0.7 percent in early morning trade.
Shares of CNOOC’s listed unit CNOOC Ltd had fallen by nearly 14 percent after the Sunday report.
SMIC, which relies heavily on equipment from US suppliers, was already in Washington’s crosshairs.
In September, the US Department of Commerce informed some firms they needed to obtain a license before supplying goods and services to SMIC after concluding there was an “unacceptable risk” that equipment supplied to it could be used for military purposes.
The expanded blacklist is seen as part of a bid to cement Trump’s tough-on-China legacy and to box Biden, who is to take office on Jan. 20, into hardline positions on Beijing amid bipartisan anti-China sentiment in Congress.
The measure is also part of a broader effort by Washington to target what it sees as Beijing’s efforts to enlist corporations to harness emerging civilian technologies for military purposes.
The list of “Communist Chinese Military Companies” was mandated by a 1999 law requiring the Pentagon to compile a catalog of companies “owned or controlled” by the People’s Liberation Army, but the defense department only complied this year.
Giants like Hangzhou Hikvision Digital Technology Co (杭州海康威視數字技術), China Telecommunications Corp (中國電信) and China Mobile Ltd (中國移動) were added earlier this year.
Last month, the White House published an executive order that sought to give teeth to the list by prohibiting US investors from buying securities of the blacklisted firms from November next year.
Top US asset managers Vanguard Group and BlackRock Inc each own about 1 percent of CNOOC Ltd shares, and together own about 4 percent of SMIC shares, disclosures show.
Congress and the Trump administration have sought increasingly to curb the US market access of Chinese companies that do not comply with rules faced by US rivals, even if that means antagonizing Wall Street.
On Wednesday, the US House of Representatives passed a law to kick Chinese companies off US stock exchanges if they do not fully comply with the nation’s auditing rules, giving Trump one more tool to threaten Beijing with before leaving office.
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