US President Joe Biden plans to amend a Trump-era restriction on investments in companies found to be affiliated with China’s military after the former administration’s policy confronted legal challenges, Bloomberg reported.
The amended order, which Biden is expected to sign as soon as this week, will switch focus from entities’ ties to the Chinese military to their connection with the country’s defense or technology surveillance sectors, Bloomberg cited sources familiar with the matter as saying. Under the amended order, the Treasury Department will impose financial penalties on companies sharing links to these sensitive sectors.
The Biden administration is likely to keep a large number of previously listed entities and the Treasury Department will add new entities as part of the order. Treasury will consult the State and Defense Departments in the listing process.
Last November, former US President Trump signed an executive order to bar Americans from buying shares or related securities issued by a list of firms with alleged links with the Chinese military, arguing that such investments could pose a risk to national security. The ban affected an array of prominent Chinese technology, manufacturing and infrastructure companies, including 5G pioneer Huawei, chipmaker SMIC, wireless carrier China Mobile and smartphone giant Xiaomi.
Last week, Xiaomi was formally removed from the blacklist, months after the US Department of Defense designated it as a “Communist Chinese military company”, citing an award presented in 2019 to its founder and CEO Lei Jun for his service to the Chinese state, as well as the company’s enthusiasm for 5G and artificial intelligence technologies.
US Judge Rudolph Contreras said in a verdict that the Pentagon had not provided sufficient evidence to deem Xiaomi a military company. The judge pointed out the fact that more than 500 entrepreneurs had received a similar award, adding that 5G and artificial intelligence “are quickly becoming industry standard for consumer electronics devices” and are not necessarily related to the construction of military facilities.
In May, Judge Contreras also ordered a similar halt to the Defense Department’s enforcement of its blacklisting of Luokung Technology, a Chinese mapping and big-data company, after it filed a lawsuit seeking to overturn the designation.
After the two Chinese companies successfully challenged the Trump-era order in court, the Biden team said a reassessment of the policy was necessary to ensure it was legally sound and sustainable in the long term. Biden’s team also aims to consolidate the legal standing for the financial penalties by shifting responsibility to the Treasury Department.
Embattled Huawei is also stepping up its efforts to weather the US clampdown, as another blacklist called the Entity List has cut off its access to processor chips, Google’s mobile services and other technologies from American firms which are needed to make smartphones. The Trump Administration’s export restrictions led to a 42% fall in the company’s smartphone sales in the last quarter of 2020. On Wednesday, Huawei rolled out its own HarmonyOS mobile operating system, two years after the US put it on the trade blacklist.