New headlines today show that the American White House and related official offices are adding new firms to a list of Chinese companies that are essentially blacklisted for American business.
One is Chinese chipmaker SMIC – another is the China National Offshore Oil Corporation, now known as CNOOC.
New rules on trade with these entities would prohibit U.S. firms from joining into certain kinds of deals with the named firms starting late next year.
Digging a little deeper, it appears that the groundwork for this limitation on engagement with Chinese businesses began in 1999 when the U.S. legislature tasked the Pentagon with coming up with list of companies involved in a Chinese strategy of “Military-Civilian Fusion.”
Now, in 2020, that list is coming to fruition, as the Trump White House, in the words of writers at Morrison Foerster, gives the list “teeth.”
“Over the past summer, prompted by a bipartisan Congressional letter identifying a two‑decade‑old statute,” write analysts. “This so-called ‘Pentagon List’ itself was accompanied by no specific prohibitions … The Administration (acted) late last week, putting bite to its bark and restricting future U.S. investment in such companies. On November 12, 2020, a lame duck President Trump issued an Executive Order that prohibits any transaction by U.S. persons in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of the 31 companies on the Pentagon List as well as any additional companies that may be added in the future.”
In response, CNOOC calls the move based on “false and inaccurate information” while the Chinese government goes further:
“The U.S. should stop abusing national power and national security concepts to suppress foreign companies,” Chinese foreign ministry official Hua Chunying said in a press statement.
Watch out for more ensuing escalating trade conflict and what it does to the markets.
