Politics

Biden Expands Trump-Era Ban on Investment in Chinese Firms Linked to Military

President Biden issued a new executive order on Thursday barring Americans from investing in Chinese firms that are linked to the country’s military or that sell surveillance technology used to repress dissent or religious minorities, both inside and outside China.

The new order expands on an earlier, Trump-era blacklist and brings to 59 the total number of Chinese firms banned from U.S. investment. The move intensifies a commercial and ideological battle between Beijing and Washington, one that Mr. Biden has termed the struggle between “autocracy and democracy.”

It comes at a moment when China is both ramping up its ability to spy on its nearly 1.4 billion people — using a mix of facial-recognition cameras and software, phone-scanners and a range of other tools — and exporting that technology to nations around the world. The technology is often sold abroad as part of a package of communications equipment provided by companies like Huawei, or as part of China’s Belt and Road initiative, which aims to expand the country’s trade ties.

China has used surveillance technology against Muslim minorities like the Uighurs and dissidents in Hong Kong and in the Chinese diaspora around the globe.

Mr. Biden’s aides said the move grew from a new American commitment not to facilitate Chinese repression and human rights abuses.

China regularly decries such moves as interference in its domestic affairs, and in the past has sought to retaliate with bans on American companies, leading to fears of broad economic decoupling between the world’s two largest economies. And the Chinese are likely to argue that the United States and other countries use some of the same technologies and techniques to track terrorists and drug lords.

It is unclear how effective Mr. Biden’s order will be at stopping the spread of Chinese espionage technology. To make the investment ban truly effective, he would have to persuade the European allies Japan and South Korea, among others, to join in the effort.

That effort may begin next week, when Mr. Biden goes on his first foreign trip as president to the Group of 7 summit, followed by a meeting of NATO allies. China is expected to be a major subject. In preparations for the meeting, he is already running into resistance from nations that, like Germany and South Korea, rely on China as a big export market for luxury cars, software and electronics.

As described by senior administration officials, the new order will prohibit American companies and those based in the United States from investing in the stock of Chinese companies on the blacklist or in debt issued by those firms. The ban will extend to investments in funds that, in turn, invest in those companies. Those funds will have a year to unwind their investments before facing penalties.

The new executive order is another case in which the Biden administration is building on a Trump-era China initiative. Mr. Biden has also kept tariffs on Chinese goods in place, as leverage in negotiations. In this case, Biden administration officials say they were acting partly to fix the executive order issued by President Donald J. Trump last November, which has been challenged, successfully, in American courts because it did not clearly lay out the factual basis for banning investments in Chinese firms linked to the defense industry.

The list of Chinese firms affected by the new order was put together by the Treasury Department, which has deep experience in issuing sanctions, rather than by the Pentagon. That is partly an effort to make clear the reasons for each company’s designations, officials say, in the hope that the bans will hold up in court.

Administration officials say the number of Chinese firms targeted by the ban is likely to grow.

The order targets several giants of the Chinese telecommunications industry, some of which still operate inside the United States or partner with American companies. It is a signal that scrutiny of Chinese influence over the global technology space has not abated in Washington despite the shift to Democratic control in the White House.

Among the firms Mr. Biden listed on Thursday was Huawei, China’s national champion in telecommunications, and the centerpiece of its effort to export 5G networks around the world. For years the Trump administration tried to marginalize the company, banning the sale of most of its technologies inside the U.S., urging allies to reject them, and attempting to starve the firms of needed chips. For a while, Mike Pompeo, the former secretary of state, and other American officials were threatening to bar allies from sharing in American intelligence briefings if they used Huawei in their networks. That backfired, but the allies have increasingly come to limit Huawei’s role. Huawei is not publicly held, however, so the order would essentially ban Americans from helping to underwrite its debt offerings.

Huawei had no comment on Thursday’s ban.

The order also listed three carriers — China Unicom, China Telecom, and China Mobile — that have been increasingly in the cross hairs of American lawmakers and regulators. In 2019, lawmakers urged the Federal Communications Commission to review China Unicom’s and China Telecom’s licenses to operate in the United States. The agency moved in March to consider restricting China Unicom’s operations. All have been under scrutiny over whether they are diverting phone or internet traffic back to China, for the benefit of Chinese intelligence services.

China Telecom declined to comment on the new order.

In 2019, the Federal Communications Commission also blocked China Mobile’s application to support calls between the United States and other countries, citing risks that the Chinese government could use its control over the company to spy on Americans’ calls.

But the issue is complicated by the firms’ ties to American companies. China Mobile has been supporting iPhones in China since 2014, a deal that was crucial to Apple’s growth in the Chinese market. “Apple has enormous respect for China Mobile and we are excited to begin working together,” Apple’s chief executive, Tim Cook, said in a news release. At the time, China Mobile was the world’s largest cellular network, with 763 million customers.

China Mobile did not respond to a request for comment on the new order, nor did China Unicom.

Also banned was investment in the Semiconductor Manufacturing International Corporation, China’s largest semiconductor manufacturer. The company is a key supplier to the Chinese military, but has struggled to manufacture the most advanced chips.

Jack Nicas contributed reporting.

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