Internasional - US Affirms Prohibition of Investing in Companies Linked to the Chinese Military

Internasional - US Affirms Prohibition of Investing in Companies Linked to the Chinese Military

Internasional Kastra Jatim - WASHINGTON. The United States government (US), Monday (28/12), affirmed an executive order that prohibits owners of capital in their country from buying securities issued by companies that are suspected of being controlled by the Chinese military. The assertion came after a number of government agencies in the US said it was difficult to implement the order issued in November.

US Affirms Prohibition of Investing in Companies Linked to the Chinese Military

The US Treasury Department issued guidance stating that the executive order released last month applies to investments in exchange traded funds and index funds. The prohibition also applies to investing in subsidiaries of Chinese companies that the US Government claims is owned or controlled by the Chinese military.

Internasional - US Affirms Prohibition of Investing in Companies Linked to the Chinese Military

Internasional Kastra Jatim - The confirmation in the form of a frequently asked question was published on the website of the Ministry of Finance, last Monday. The announcement came after Reuters and other news agencies reported on the emerging debate in the Donald Trump Administration over the implementation of the guidelines. The Ministry of Foreign Affairs and the Ministry of Defense have rejected the Ministry of Finance’s offer to simplify executive orders, said the sources quoted by Reuters.

US Secretary of State Mike Pompeo said Monday (28/12), the announcement ensures the US does not contribute to the development and modernization of China’s military, intelligence and security services.

“This should allay concerns that US investors may unconsciously support (Chinese military-controlled companies) through other direct, indirect or passive investment,” he said.

The White House has banned investors in the US from buying securities issued by 35 Chinese companies suspected of having affiliations with the Chinese military, starting November 2021. Some media reported that the US Treasury is trying to exclude subsidiaries of the 35 companies from being targeted by the White House order.

Internasional - US Affirms Prohibition of Investing in Companies Linked to the Chinese Military

Internasional Kastra Jatim - Guidelines released on Monday stipulate that the ban also applies to “any subsidiary of a company suspected of being linked to the Chinese military, once the subsidiary has been publicly registered by the Ministry of Finance. The announcement added that the ministry would list public companies, which are 50% or more owned or controlled by companies linked to the Chinese military.

“The Treasury Department’s published FAQ represents a clear victory for the US security community in its quest to maintain strong capital market sanctions,” said Roger Robinson, a former White House official who supports restricting Chinese companies’ access to US capital. The executive order, issued last November, gave teeth to a law passed in 1999 that mandated the Ministry of Defense to compile a list of companies linked to the Chinese military.

The Pentagon, which has fulfilled that mandate this year, has named 35 names on a list of companies linked to the Chinese military. Names on the list include oil company CNOOC Ltd and China’s top chip maker Semiconductor Manufacturing International Corp. Since the executive order issued last November, index compilers in the US have removed the names of several companies on the list from the index-forming group of stocks.