US President Donald Trump’s administration on Monday reinforced an executive order barring US investors from buying securities of alleged Chinese military-controlled companies, following disagreement among US agencies about how tough to make the directive.
The US Department of the Treasury published guidance clarifying that the executive order, released last month, would apply to investors in exchange-traded funds and index funds, as well as subsidiaries of Chinese companies designated as owned or controlled by the Chinese military.
The “frequently asked questions” (FAQ) release, posted on the Treasury’s Web site on Monday, came after Reuters and other news outlets reported that a debate was raging within the Trump administration over the guidance.
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The US departments of state and defense had pushed back against a bid by the Treasury to water down the executive order, a source said.
Specifically, some media outlets reported that the Treasury is seeking to exclude Chinese companies’ subsidiaries from the scope of the White House directive, which bars new purchases of securities of 35 Chinese companies that Washington alleges are backed by the Chinese military, starting last month.
The guidance released on Monday specifies that the prohibitions apply to “any subsidiary of a communist Chinese military company, after such subsidiary is publicly listed by Treasury.”
It added that the agency “intends to list” publicly traded entities that are 50 percent or more owned by a Chinese military company or controlled by one.
“Treasury’s published FAQ represents a clear victory for the US security community in its determined effort to preserve strong capital markets sanctions associated with [the executive order] — the first of their kind,” said Roger Robinson, a former senior director of international economic affairs at the US National Security Council who supports curbing Chinese access to US investors.
Last month’s executive order sought to give teeth to a 1999 law, which mandated that the defense department compile a list of Chinese military companies.
The Pentagon, which only complied with the mandate this year, has so far designated 35 companies, including including oil company CNOOC and Semiconductor Manufacturing International Corp.
Since the November order, Index providers have already begun shedding some of the designated companies from their indices.
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