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Trump bans investment in "military-linked" Chinese firms

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Losing the US election hasn’t stopped Donald Trump from taking further shots at China in recent days.

On Thursday Trump issued an order to block US citizens from investing in Chinese companies that officials believe to be linked to the Chinese military, the People’s Liberation Army (PLA), declaring the threat a national emergency.

Initial reports have highlighted the potential impact on telcos and tech firms although further details continue to emerge. Huawei, Hikvision, China Telecom and China Mobile are just some of those who have been named so far.

US firms are permitted to divest as of 12 November and many of the new regulations will come into force at 9.30am on 11 January.

In the order, Trump said China is “compelling civilian Chinese companies to support its military and intelligence activities”.

“Those companies, though remaining ostensibly private and civilian, directly support the PRC’s military, intelligence, and security apparatuses and aid in their development and modernisation,” he continued. Classification of such a company is at the discretion of the Secretary of Defense.

Trump further accused such companies of raising capital “by selling securities to United States investors that trade on public exchanges both here and abroad, lobbying United States index providers and funds to include these securities in market offerings, and engaging in other acts to ensure access to United States capital. 

“In that way, [China] exploits United States investors to finance the development and modernisation of its military,” he wrote.

Risk assessment

Trump’s relationship with China has been a defining feature of his presidency. In recent months alone he has banned Huawei and ZTE and blocked US carriers from connecting with Chinese telcos.

However, this is his first move since losing the 3 November election and AFP said further developments could be expected over the coming 67 days.

According to the reports, US officials have complained that China’s ruling Communist Party “takes advantage of access to American technology and investment to expand its military”. 

In its 20th annual report to congress, the Department of Defense (DoD) wrote: “It is likely that Beijing will seek to develop a military by mid-century that is equal to—or in some cases superior to—the US military, or that of any other great power that the People’s Republic of China views as a threat.

“As this year’s report details, the PRC has marshalled the resources, technology, and political will over the past two decades to strengthen and modernise the PLA in nearly every respect.”

The report went on to claim China was “ahead of the United States in certain areas”, specifically ship building, land-based conventional ballistic and cruise missiles, and integrated air defence systems. There was no mention of technology in this part of the report.

However, elsewhere the report detailed that China “seeks to become a leader in key technologies with military potential”. These include AI, autonomous systems, advanced computing, quantum information sciences, biotech, and advanced materials manufacturing.

The report continued: “The PRC pursues many vectors to acquire foreign technologies, including both licit and illicit means. The PRC’s efforts include a range of practices and methods to acquire sensitive and dual use technologies and military-grade equipment to advance its military modernisation goals.”

It went on to say that in 2019 China acquired “dynamic random access memory, aviation, and anti-submarine warfare technologies”.

 

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