© Reuters. A logo of the Semiconductor Manufacturing International Corporation (SMIC) can be seen at the China International Semiconductor Expo (IC China 2020) after the coronavirus disease (COVID-19) outbreak in Shanghai
By Alexandra Alper and Humeyra Pamuk
WASHINGTON (Reuters) – The Trump administration stands ready to blacklist China's top chipmaker SMIC and national offshore oil and gas producer CNOOC (NYSE 🙂 in order to restrict access to US investors and tensions escalating with Beijing weeks before President-elect Joe Biden took office.
Reuters reported earlier this month that the Department of Defense (DOD) plans to designate four more Chinese companies as owned or controlled by the Chinese military, bringing the number of Chinese companies affected to 35. A recent order issued by President Donald Trump would prevent US investors from buying securities in listed companies from late next year.
It was not immediately clear when the new tranche would be published in the federal register. However, according to the document and three sources, the list includes China Construction Technology Co. Ltd. and China International Engineering Consulting Corp. and Semiconductor Manufacturing International Corp. (SMIC) and China National Offshore Oil Corp. (CNOOC).
SMIC said it has continued to be "constructive and open with the US government" and its products and services are for civil and commercial uses only. "The company has no relationship with the Chinese military and does not manufacture for military end users or end uses." SMIC shares closed 2.7% on Monday.
The publicly traded unit of CNOOC, whose shares had fallen nearly 14% according to the Reuters report, said in a stock exchange statement that it had checked with its parent company and learned that it had not received any formal notice from the relevant US authorities .
China's State Department spokeswoman Hua Chunying replied to a question about Washington's planned move that China hoped the United States would not create barriers and obstacles to cooperation and discriminate against Chinese companies.
The DOD and the Chinese Embassy in Washington did not immediately respond to requests for comment.
SMIC, which relies heavily on equipment from US suppliers, was already in Washington's crosshairs. In September, the US Department of Commerce advised some companies that they would need a license prior to supplying goods and services to SMIC after they concluded that there was an "unacceptable risk" that the military equipment supplied to SMIC was Purposes could be used.
The imminent move, coupled with similar policies, is set to cement the tenacious legacy of outgoing Republican President Donald Trump and put new Democrat Biden in tough positions on Beijing amid bipartisan sentiment against China in Congress. The Biden campaign declined to comment.
The list is also part of a broader effort by Washington to target Beijing's efforts to persuade companies to use emerging civilian technologies for military purposes.
Reuters reported last week that the Trump administration is on the verge of declaring that 89 Chinese aerospace and other companies have military ties, preventing them from buying a range of U.S. goods and technology.
The list of "Chinese Communist Military Companies" was mandated by a 1999 law requiring the Pentagon to compile a catalog of companies "owned or controlled" by the People's Liberation Army. However, DOD was not complied with until 2020. Giants like Hikvision, China Telecom (NYSE) 🙂 and China Mobile (NYSE 🙂 were added earlier this year.
Earlier this month, the White House released an executive order, first reported by Reuters, that sought to improve the list by banning US investors from buying stocks of blacklisted companies from November 2021.
The directive should not deal a major blow to companies, experts said due to its limited scope, uncertainty about the stance of the Biden administration and the already low holdings of US funds.
However, along with other measures, it is deepening a rift between Washington and Beijing that is already fighting over China's handling of the coronavirus and its crackdown on Hong Kong.
Congress and the government have increasingly sought to curb US entry by Chinese companies that do not conform to the rules of American rivals, even if it means fighting Wall Street.