President Joe Biden on Thursday followed former President Trump’s lead and signed a measure that would ban U.S. investment in 59 Chinese firms, including tech giant Huawei, that allegedly have ties to Beijing’s military and intelligence agencies over ongoing national security concerns stemming from the previous administration.
The White House noted in a statement that the order Biden signed, which takes effect Aug. 2, “allows the United States to prohibit — in a targeted and scoped manner — U.S. investments in Chinese companies that undermine the security or democratic values of the United States and our allies.”
The order “prohibits United States persons from engaging in the purchase or sale of any publicly traded securities of any person listed” by the president. These include companies that “operate or have operated in the defense and related materiel sector or the surveillance technology sector of the economy of the PRC [People’s Republic of China].” Further, the order seeks to ensure “that U.S. investments are not supporting Chinese companies that undermine the security or values of the United States and our allies.”
Chinese firms on the list of banned companies include those engaged in the aerospace and technology industries, including Huawei, the Asian giant’s biggest telecom.
Biden’s new order builds on an earlier one signed by then-President Donald Trump in November, which applied to 31 Chinese companies that “enable the development and modernization” of the PRC’s military and thus “directly threaten” U.S. national security.
Trump imposed sanctions on Huawei a year earlier following U.S. intelligence reports that the telecom was building so-called ‘back doors’ in its equipment which permitted Chinese intelligence agencies to spy on mobile networks connected to the devices in the U.S. and around the world. In response, the United Kingdom passed legislation in 2020 ordering Huawei to move all of its operations out of the country by 2027.
Chinese officials blasted the move.
“The U.S. should respect the rule of law and the market, correct its mistakes, and stop actions that undermine the global financial market order and investors’ lawful rights and interests,” Foreign Ministry spokesman Wang Wenbin said.
Nevertheless, the order appears to be a long-term strategic move to protect U.S. national security and economic interests, according to Alex Capri, a research fellow at the Hinrich Foundation and a visiting senior fellow at the National University of Singapore.
The E.O. “moves the world a step closer to strategic decoupling in the global financial sector,” he told CNN, adding that it “underscores the difficulty that American financial firms are going to have in the future, trying to sort out which of their investments have ties back to the Chinese state.”
In February 2020, shortly after Britain granted Huawei limited access to its networks, Trump warned countries that the Chinese telecom was a security risk. At the time, then-U.S. Ambassador to Germany Richard Grenell tweeted that Trump had called him from Air Force One with instructions “to make clear that any nation who chooses to use an untrustworthy 5G vendor will jeopardize our ability to share Intelligence and information at the highest level.”
On Inauguration Day in January, a high-ranking State Department official said he believed that the incoming Biden administration would join 60 other countries in an initiative to keep Chinese telecom firms out of their networks.
“Our goal is for the incoming team to have some wins in their first few weeks after walking in the door,” Under Secretary of State for Economic Growth, Energy and the Environment Keith Krach said. “It’s imperative to keep the momentum going for national security’s sake. If momentum is lost, a void opens and the Chinese are ready to pour in.”