President Biden Issues Executive Order Prohibiting Investments in Certain Chinese Companies.

2024-09-24 22:45:02

Recently, U.S. President Joe Biden signed an Executive Order titled "Addressing the Threat from Securities Investments that Finance Certain Companies of the People's Republic of China" ("Executive Order"). Under this Executive Order, U.S. persons are prohibited from purchasing or selling publicly traded securities of any entities listed in the Annex to the Executive Order, as well as any entities subsequently designated by the Secretary of the Treasury ("Treasury Secretary") that fall within the scope of the Executive Order, including securities derivatives of such securities.

The Annex to the Executive Order identifies 59 Chinese entities as being subject to the investment prohibition under the Executive Order. If other Chinese entities (1) operate or have operated in China's defense and related materials sector or surveillance technology sector, or (2) are directly or indirectly owned or controlled by, or affiliated with, any such Chinese companies, the Treasury Secretary may designate such entities as falling within the scope of the Executive Order. For the 59 Chinese entities listed in the Annex to the Executive Order, the investment prohibition will take effect on August 2, 2021. For entities subsequently designated by the Treasury Secretary, the investment prohibition will take effect 60 days after their designation.

Additionally, U.S. persons are required to divest their holdings in the targeted securities of the entities listed in the Annex by June 3, 2022. For entities subsequently designated by the Treasury Secretary, the divestment period will be 365 days after their designation. According to the Annex to the Executive Order, 59 Chinese entities are subject to the investment prohibition under the Executive Order. These 59 entities include many well-known Chinese companies, such as Huawei Technologies Co., Ltd., China Mobile Limited, China Telecommunications Corporation, China Unicom (Hong Kong) Limited, China Aerospace Science and Industry Corporation, and Aviation Industry Corporation of China, among others.