Washington prepares to tighten regulations on US investments in China

The United States is planning to tighten regulations that restrict investments in Chinese enterprises deemed to have links with the People's Liberation Army (PLA) and its supporting military-industrial complex.

The Department of the Treasury's Office of Foreign Assets Control (OFAC) said on 16 February that the move will see the introduction of a “comprehensive set of regulations, which may include additional interpretive guidance and definitions, general licences, and other regulatory provisions”.

OFAC said the new regulations will strengthen previous measures including an executive order introduced in November 2020 and an amendment to that directive announced in June 2021.

The executive order, numbered 13959, was enacted by the then president Donald Trump. The directive bars US investors from acquiring stocks and securities issued by Chinese firms that Washington believes have links to the PLA.

The executive order also provided a consolidated list of about 30 so-called ‘Communist Chinese Military Companies' in which US investment is banned.

An amendment to this executive order, introduced by President Joe Biden in June 2021, extended the scope of the ban to include Chinese companies involved in developing surveillance technologies.

This expanded the list of Chinese firms to 59. The list was also renamed as ‘Chinese Military-Industrial Complex Companies' or the CMIC List.

Enterprises on the CMIC List include many of China's biggest defence firms, all of which operate subsidiaries listed on stock exchanges in various countries.

These parent groups include the Aviation Industry Corporation of China (AVIC), China Aerospace Science and Industry Corporation (CASIC), China Aerospace Science and Technology Corporation (CASC), China Electronics Technology Group Corporation (CETC), and China State Shipbuilding Corporation (CSSC).