US adds nine Chinese firms, including Xiaomi, to military blacklist
- The Defence Department adds nine more firms on Thursday to its list of companies that it says have ties with the Chinese military
- US Commerce Department adds Chinese oil giant CNOOC to a US economic blacklist, saying it had helped China intimidate neighbours in the South China Sea
The Defence Department added nine more firms on Thursday to its list of companies that it says have ties with the Chinese military, rounding out the total to 44.
The Trump administration is unlikely to add more companies to its blacklist, said Keith Krach, undersecretary for economic growth, energy and environment in a briefing with reporters.
Krach pointed out that Chinese tech giants Alibaba, Tencent and Baidu are “highly strategic” to the Chinese military. On Wednesday, sources said the Trump administration scrapped plans to blacklist Alibaba, Tencent and Baidu.
“China’s reckless and belligerent actions in the South China Sea and its aggressive push to acquire sensitive intellectual property and technology for its militarisation efforts are a threat to US national security and the security of the international community,” Commerce Secretary Wilbur Ross said in a statement on Thursday.
Also referencing CNOOC, US Secretary of State Mike Pompeo announced visa restrictions on individuals, including “executives of state-owned enterprises and officials of the Chinese Communist Party and People’s Liberation Army (PLA) Navy, responsible for, or complicit in, either the large-scale reclamation, construction, or militarisation of disputed outposts” in the South China Sea.
“The United States and all law-abiding nations share a deep interest in the preservation of a free and open South China Sea,” Pompeo said. “All nations, regardless of military and economic power, should be free to enjoy the rights and freedoms guaranteed to them under international law, as reflected in the 1982 Law of the Sea Convention, without fear of coercion.”
“The United States stands with Southeast Asian claimant states seeking to defend their sovereign rights and interests, consistent with international law. We will continue to act until we see Beijing cease its coercive behaviour in the South China Sea,” Pompeo said in Thursday’s statement.
In August, the Commerce Department added 24 Chinese state-owned firms, including China Communications Construction Company Dredging Group Company (CCCC Dredging) to an “entity list” of companies that US firms are not allowed to transact with unless they have a special licence to do so.
Satellite images analysed by defence consultancy IHS Jane’s in 2016 showed that a subsidiary of CCCC Dredging operated most of the giant barges digging sand from the seabed and piling it on remote coral atolls in the South China Sea, including Mischief Reef, Subi Reef and Fiery Cross Reef, which are also claimed by the Philippines and Vietnam.
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One narrative is that the administration’s rush to announce these last-minute measures is a way to make unwinding of the policy difficult for the Joe Biden administration.
But Biden also has South China Sea and Xinjiang forced labour concerns, issues that were touched upon by these measures, said at least one analyst.
“Biden is likely to take enforcement of measures against forced labour even further,” said Andrew Bishop, global head of policy research at advisory firm Signum Global Advisors.
“However, Biden will be quite generous with issuing individual licences to exporters who may need to continue working with companies, like CNOOC,” said Bishop.
And the forced divestments of companies that Washington says have ties to the Chinese military “could be postponed possibly indefinitely” under Biden, said Bishop.
In a development of the trading bans on firms that Washington considers military companies, Trump late Wednesday signed a new executive order in an effort to clarify how US investors should divest their holdings in blacklisted Chinese firms after an initial order caused confusion in the markets.
The clarifications came after Wall Street struggled to follow the initial executive order signed by Trump on November 12. The president’s initial order, which remains in effect, indicated that new purchases in affected companies would be banned starting January 11.
It is unclear whether the new clarification will resolve the wave of questions that financial companies have raised in the past weeks over how to comply with the order.
The amended order also stressed that the rules apply to any subsidiary of these Chinese companies unless the Treasury Secretary removes a particular subsidiary from the list.
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Shares of these three companies gyrated as Wall Street struggled to follow the initial rules that were unclear on whether subsidiaries were included.
Causing confusion was a Treasury Department statement on December 28 that narrowed the definition of the affected entities to exclude subsidiaries unless specifically included by the agency, contradicting the language in the initial executive order.