Biden Delays Revamp of Trump Blacklist for China Investments

(Bloomberg) — The White House has again postponed the start date of a ban on new U.S. investments in a list of companies allegedly linked to the Chinese military — this time to June 11.

The Treasury Department on Tuesday moved back the deadline to buy shares in subsidiaries of companies already on a U.S. blacklist or sell shares to Americans from May 27, by which time investors had expected clarity on the scope of the restrictions.

The decision comes as officials draft guidance to clarify a Trump-era policy that confused Wall Street, according to Bloomberg, which cited three officials familiar with the matter. The White House is working to clarify how the China investment ban applies to the subsidiaries, said the people, who discussed the plan on condition of anonymity.

One of the people said the review of the investment ban may be completed by June 11, though the Biden administration’s policy won’t necessarily be published by then.

Biden’s team has been examining former President Donald Trump’s Nov. 12 executive order banning U.S. investments in Chinese companies allegedly owned or controlled by the military. Biden’s decision on the ban has been closely watched on Capitol Hill, where lawmakers are eager for a tougher stance on Beijing.

One administration official said that the U.S. is not changing its policy on investments tied to the Chinese military. The administration seeks to maintain the ban in a way that is legally sound and can be sustained in the long-term, they said.

The official said the review reflects a deep national security concern about U.S. investments linked to the Chinese military.

The administration’s position has been just as scrutinized on Wall Street, where Trump’s order caused confusion over whether the investment ban applied to an array of companies that may be connected — either as a subsidiary or by carrying a similar name — to those on the blacklist.

It has also embroiled global index providers, who have found themselves caught in the political crossfire. FTSE Russell was the first such company to respond to the ban, announcing in December that it would remove eight Chinese company stocks from several of its global indexes based on feedback from subscribers and other stakeholders. S&P Dow Jones Indices LLC and MSCI Inc. had followed suit within days.

The Biden review includes an evaluation of companies on the list, including three of China’s biggest telecommunications firms that the New York Stock Exchange delisted in January — China Mobile Ltd., China Telecom Corp. and China Unicom Hong Kong Ltd. It’s unclear whether the administration will change the list, but Biden intends to keep up financial pressure on Chinese military companies, according to people familiar with the matter.

U.S. courts have found issues with Trump’s executive order. The U.S. agreed to remove Xiaomi Corp. from the blacklist after the Chinese smartphone-maker sued the government earlier this year. Biden officials don’t think the Xiaomi case prevents them from imposing investment restrictions, but they intend to build a stronger argument against each company.

As part of the review, national security aides, Treasury officials and the White House Counsel’s Office staff have also sought to bolster the legal case for restricting U.S. investment to prevent future litigation.

Investors have one year to fully divest from any company once it is added to the list. For the original set of companies, the deadline is Nov. 11.

Contact editor Michael Bellart (michaelbellart@caixin.com)

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