The US government has issued a directive to prohibit US investments into Chinese firms that are deemed to be owned or controlled by China’s military, the People’s Liberation Army (PLA).
An executive order by the White House on 12 November said the move is intended to address China’s ‘civil-military fusion’ strategy to leverage commercial technologies and investments for military gains.
The executive order – applicable from January 2021 – bans purchases by US investors of publicly traded securities issued by Chinese companies linked to the PLA or China’s military-industrial complex. It also prohibits US investments in derivatives “designed to provide investment exposure to such securities” owned by such Chinese firms.
A White House executive order has banned US investments in ‘Communist Chinese military companies’ with the intent to address risks posed by China’s civil-military fusion strategy. (Getty Images)
Transactions to divest ownership in such Chinese firms will be allowed until November 2021, said the executive order.
Explaining its decision, the executive order said that through its civil-military fusion strategy China expands its military-industrial complex by “compelling” civilian companies to support its military activities.
It added, “At the same time, those companies raise capital by selling securities to US investors that trade on public exchanges both here and abroad, lobbying US index providers and funds to include these securities in market offerings, and engaging in other acts to ensure access to US capital. In that way, [China] exploits US investors to finance the development and modernization of its military.”
Chinese firms covered by the ban are those described by the White House as “Communist Chinese military companies”, which were identified in lists published by the US Department of Defense (DoD) in June and August 2020.
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