Executive order 13959 of Nov. 12 comes into effect, on Jan. 11, today, and declared a national emergency due to the threat that implies the financing of companies linked to the army of the Chinese Communist Party (CCP).
With the money obtained, the CCP achieved “the developing and deploying of weapons of mass destruction, advanced conventional weapons, and malicious cyber-enabled actions against the United States and its people,” according to the White House’s Nov. 12 statement.
Also, the “development and modernization of its military, intelligence, and other security apparatuses,” it added.
The executive order prohibits all U.S. investors from buying or investing in securities of companies identified as “Chinese communist military enterprises” according to the Defense Department, which takes as reference section 1237 of the National Defense Authorization Act of 1999.
It excludes investment in 31 companies, including: Huawei, Chinese Telecommunications, China Mobile, surveillance equipment manufacturer Hikvision and Sinochem, which is considered crucial to the modernization of the People’s Liberation Army of China (PLA).
Two of them trade shares on the United States stock exchanges. They belong to the aerospace, construction, shipbuilding, and technology and communications sectors.
In addition, about 210 Chinese companies with a combined market capitalization of about $2 trillion will be affected, which began trading on the main U.S. stock exchanges in October.
This executive order was extended on Dec. 28 prohibiting listed and indexed funds from financing the military enterprises of the CCP and any subsidiaries owned or controlled by the Chinese military.
“The ban ensures that U.S. capital does not contribute to the development and modernization of the military, intelligence, and security services of the People’s Republic of China (PRC),” Secretary of State Mike Pompeo said in the statement.
In addition, the statement gives the secretary of Defense the power to determine that an entity, including a subsidiary, is a Chinese military company that operates directly or indirectly in the United States or in any of its territories or possessions, and therefore to mark it as such for as long as necessary.
Pompeo also noted, “Under Xi Jinping, the CCP has prioritized something called ‘military-civil fusion.’ … Chinese companies and researchers must … under penalty of law—share technology with the Chinese military.”
He added, “The goal is to ensure that the People’s Liberation Army has military dominance. And the PLA’s core mission is to sustain the Chinese Communist Party’s grip on power.”