The CHANGE IN the United States’ listing of Chinese companies that could face financial sanctions is more than merely administrative.
Under the Biden administration, the US Treasury’s Office of Foreign Assets Control, the agency responsible for economic and trade sanctions, will create the list based on connections to China’s defence and surveillance technology sectors.
Under the Trump administration, the US Defense Department kept a Congressionally-mandated list that targeted companies owned, controlled or otherwise affiliated with the People’s Liberation Army. This list will continue and is likely to be expanded when its delayed update is released.
President Joe Biden signed an executive order on June 3rd, authorising the new list. It broadens the focus of US sanctions policy from curtailing the technological modernisation of the PLA to having a means of addressing human rights issues.
Listing bans US investment in the companies’ debt and equity securities. There will be a 60-day grace period to August 2nd before sanctions take effect. US individuals and institutions already invested in the firms—either directly or via mutual and index or other funds—have one year to divest.
The new executive order also puts the listings on more secure legal ground and removes some of the ambiguities that investors had complained about with the Trump regulations.
The change will also likely grow the number of sanctioned companies. A few of the companies previously alleged to have connections to the PLA may fall off, but added surveillance technology companies will more than replace them. The Treasury’s list starts with 59 names.
Spokesperson Wang Wenbin took the moral high ground when asked about the new list at the Foreign Ministry’s regular daily press briefing:
The US should respect rule of law and the market, correct its mistakes, and stop actions that undermine the global financial market order and investors’ lawful rights and interests.
Wang was careful to frame most of his comments in relation to the previous administration’s measures, but Beijing is likely to respond proportionately.
The executive order came shortly after a resumption of high-level economic talks between the two countries. Vice Premier Liu He talked to US Treasury Secretary Janet Yellen via video on June 2nd.
Beijing is keen to get the bilateral relationship back onto an even keel where it can. It would like to deal with economic and trade issues on a pragmatic basis, and use that as an anchor for the broader relationship.
Yet it is becoming increasingly clear that Biden is not changing the direction of Trump’s China policies, as much as Beijing clings to a slither of hope that he will.