Biden tightens ban on US investments in China

US president Joe Biden's administration is expanding an existing prohibition for US investments in Chinese companies, in the latest US action aimed at decoupling the world's two largest economies.

An executive order Biden signed today listed 59 Chinese companies that it said "undermine the security or democratic values of the US and our allies." US investors will have until 2 August to stop trading in securities issued by the companies and until 3 June 2022 to divest from them.

The list, which includes China's state-owned CNOOC and state-controlled refiner Norinco, adds to entities blacklisted under executive orders issued by former president Donald Trump in his final months in office. But the Biden White House is taking a different approach, directly naming the companies to be banned from the US financial and equity markets rather than relying on a 1998 law that cuts off access to the US financial system for entities Washington contends are tied to the Chinese military.

CNOOC and Norinco were already made off limits to US investors, but under the previous executive order and Treasury Department guidance, US investors had until 11 November to divest from the companies. A prohibition for US companies to trade CNOOC securities went into effect in March.

CNOOC has one of the largest overseas portfolios of any Chinese energy firm, notably through its 2013 acquisition of Canada's Nexen that gave it operational control of the Buzzard field in the North Sea. Its US assets, operated by its CNOOC International arm, include acreage in the Eagle Ford and Niobrara shale basins, as well as stakes in the Appomattox platform and Stampede fields in the Gulf of Mexico.

No other Chinese energy company is included on the list of 59 entities blacklisted in Biden's executive order today, which includes flagship Chinese technology firm Huawei and a broad array of technology, construction, transportation and manufacturing enterprises.

The Pentagon's separate list of 35 "Chinese military companies" included two other energy firms, state-controlled refiners Sinochem and ChemChina. The Treasury guidance issued today clarified that it would only apply the investment ban against companies directly listed in Biden's executive order, meaning that Sinochem and ChemChina would not be subject to the prohibition. But the two companies have limited US exposure in any case.

The reworked executive order comes after two Chinese technology companies included in the Pentagon's list have successfully challenged their designations through US courts, which backed their argument that the US government has provided little to no evidence to prove their affiliation with the Chinese military.

The tactic chosen by today's executive order appears to prevent further legal challenges to the designations.

US relations with China remain as tense under Biden as they were under Trump. The two countries recently resumed discussions on trade issues, but Biden's administration has signaled that it plans to maintain punitive tariffs against the majority of imports from China.

By Haik Gugarats