U.S. adds SMIC and other Chinese giants to its blacklist

The Trump administration on Thursday blacklisted SMIC, China’s largest chip maker, and oil giant CNOOC, in a move likely to escalate tensions with Beijing before President-elect Joe Biden takes office.

The Ministry of Defence has identified a total of four additional companies as owned or controlled by the Chinese military, including China Construction Technology and China International Engineering Consulting Corp.

The move brings the total number of blacklisted companies to 35. While listing does not mean any sanctions so far, Republican President Donald Trump’s latest executive order will prevent U.S. investors from buying shares in blacklisted companies, starting late next year.

The Chinese Embassy in Washington referred to the press, previous statements made by a spokesman for the Ministry of Foreign Affairs, in which he said: “China strongly opposes the politicization of the relevant Chinese companies.”

In a statement to the stock market, SMIC said: It strongly opposes the US Department of Defense’s decision, which reflects the US administration’s misunderstanding regarding the end uses of its business and technology. The company also said: It doesn’t have much impact to add to the list.

SMIC – which relies heavily on equipment from American suppliers – was already being targeted by the US administration. In September, the US Department of Commerce informed some companies that they needed to obtain a license before supplying goods and services to SMIC, after concluding that there was an unacceptable risk that the equipment supplied to them could be used for military purposes.

The expanded blacklist is seen as part of an attempt to solidify Trump’s hard-line legacy toward China, and implicate Biden – the Democratic president-elect who takes office on January 20 – in hard-line positions with Beijing amid anti-Chinese sentiment from the Democratic and Republican parties in Congress.

The action against SMIC is also part of a broader effort by Washington to target what Beijing sees as its corporate recruiting effort to harness emerging civilian technologies for military purposes.

It is noteworthy that the list of (Communist Chinese military companies) was approved in 1999 under an official law requiring the Pentagon to compile a list of companies owned or controlled by the Chinese People’s Liberation Army. And last November, the White House issued an executive order seeking to leverage the list further by prohibiting US investors from purchasing securities from blacklisted companies beginning in November 2021.

Congress and the Trump administration have increasingly sought to limit Chinese companies’ access to US markets that do not comply with the rules faced by US competitors, even if that means antagonizing Wall Street.

On Wednesday, the US House of Representatives passed a law to expel Chinese companies from US exchanges if they do not fully comply with the country’s auditing rules, giving Trump another tool to threaten Beijing before leaving office.

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