US President Joe Biden delays Trump’s ban on investments in companies with similar names to blacklisted Chinese firms

Deadline extended until May 27 for companies with similar names to companies deemed to have ties to China’s military
Biden administration is conducting ‘complex reviews’ of Trump policies on China

Joe Biden’s China policy

Chad Bray

Published: 2:00pm, 28 Jan, 2021

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The Biden administration delayed a ban imposed by Donald Trump on American investors, pension funds and financial firms investing in companies that have similar names to a group of blacklisted Chinese firms with purported ties to China’s military.

On Thursday, the Office of Foreign Assets Control (OFAC), an arm of the US Treasury Department, issued a so-called general licence that extended the deadline for US persons to stop engaging in securities transactions in companies “whose name closely matches, but [do] not exactly match” those identified as Chinese military companies. The deadline for companies with similar names had originally been set for January 28 and is now extended to May 27.

In November last year, former US President Donald Trump issued an executive order that barred American investors from owning companies with military ties beginning this month.

The licence does not allow American investors to engage in securities transactions of subsidiaries of a group of companies already identified by the US as being owned or controlled by the Chinese military, OFAC said.

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Investors have until November 11 to fully exit their holdings of designated companies.

The list of designated firms grew to 44 companies in the waning days of the Trump administration, including oil giant China National Offshore Oil Corporation (CNOOC), China’s top chip maker SMIC and smartphone maker Xiaomi.

The investment ban has sown confusion among investors and forced the delisting of China’s three biggest telecommunications companies: China Mobile, China Telecom and China Unicom. It has also led to a reshaping of global stock benchmarks.

The blacklisted telecoms asked the New York Stock Exchange (NYSE) hours after President Joe Biden’s inauguration this month to reconsider delisting their American Depositary Shares (ADS) and allow their stock to be traded in New York while the review was conducted.

China’s President Xi Jinping called for world leaders to put aside the ‘misguided approach of antagonism and confrontation’ in a January 25 speech to the World Economic Forum. Photo: Xinhua

The American bourse has not publicly commented on the request by the telecoms companies.

Under NYSE rules, a review must be scheduled at least 25 business days after receiving the request. The earliest date would fall during the Lunar New Year holiday.

On Thursday, OFAC also issued a clarification regarding transactions in companies added to its list on January 8, including subsidiaries of the telecoms firms. New purchases are now barred, starting from March 9.

The American exchange first announced the delisting plan on New Year’s Day, in an unprecedented step to remove the ADSs of the three Chinese companies to comply with the Trump’s executive order. All three companies are state-owned entities managed by government-appointed managers.

The NYSE reversed its decision several times ahead of a January 11 deadline as it sought additional guidance from regulators. The exchange said it would not delist the ADSs on January 5, only to make an about-face turn a day later.

The shares of the telecoms firms have not traded in New York since OFAC issued additional guidance on January 8. All three companies are listed in Hong Kong and their shares have soared since the US delisting.

Shares of China Mobile rose as much as 2.6 per cent in intraday trade in Hong Kong on Thursday, while those of China Telecom increased as much as 2.2 per cent and China Unicom increased as much as 1.5 per cent.

Biden is expected to take a less combative approach to US-China relations, which deteriorated to their lowest point in decades during Trump’s tenure. White House press secretary Jen Psaki said this week the new administration was undertaking “complex reviews” of various Trump policies towards China.

New US Treasury Secretary Janet Yellen described China as the US’s ‘most important strategic competitor’ during her confirmation hearing. Photo: AFP

Speaking at the World Economic Forum’s Davos agenda conference on Monday, Chinese President Xi Jinping called for world leaders to put aside the “misguided approach of antagonism and confrontation” and warned attempts to “isolate, intimidate, decouple and sanction” others will “only push the world into division, even confrontation”.

However, there remains significant distrust between Washington and Beijing on a variety of issues, including trade, technology and human rights.

During her confirmation before the US Senate, new Treasury Secretary Janet Yellen described China as the US’s “most important strategic competitor”.

“We need to take on China‘s abusive, unfair, and illegal practices,” Yellen said as part of her January 19 testimony. “China is undercutting American companies by dumping products, erecting trade barriers, and giving illegal subsidies to corporations.”