SMIC, CNOOC: Trump walks out the door to target China’s national champions

The latest move came on Thursday when the U.S. Department of Defense added China’s leading chip maker, SMIC, the oil giant CNOOC and several other companies, to the list of companies the ministry claims are owned or controlled by the Chinese military. That means restrictions are in place today, including a ban on Americans investing.

Analysts expected the current U.S. government to continue China until the end of its term, with the goal of strengthening President Donald Trump’s approach to Beijing and making it more difficult to reverse Biden’s direction.

“The rush of Chinese hardliners to provoke action against China January 20 cut short the already unsettled political process. “said Michael Hirson, practice manager for Eurasia Group China and Northeast Asia. January 20 is Biden’s inauguration day.

According to Hirson, there are no clear criteria for military affiliates. but the Trump administration appears to have a broad interpretation of companies that directly or indirectly support China’s military modernization.

“This is a particularly wide network for Chinese state-owned enterprises,” he said.

Beijing on Friday protested against the inclusion of CNOOC, SMIC and other companies on the Ministry of Defense list and called on the United States to stop abusing the concept of national security.

“China strongly rejects the United States’ unwarranted repression of Chinese companies,” Chinese State Department spokesman Hua Chunying told reporters.

In its submission to the Hong Kong Stock Exchange, SMIC said it had “no significant impact” on its operations after it was listed by the Ministry of Defense. The company added that its semiconductors are for civilian and commercial purposes and have no connection to the Chinese military.
The U.S. government has had SMIC in its hairs for months. Earlier this year, he warned companies to do business with a Chinese company because of its alleged links to the military.

Targeting SMIC is at the heart of Beijing’s technological ambitions. China is catching up to the West when it comes to chip production and has allocated billions of dollars to the industry in the hopes of building a home-based business capable of producing cutting-edge chips.

The CNOOC did not respond immediately to the request for an opinion.

An SMIC employee will present the latest home server chip at China International Semiconductor Expo 2020.  According to the SMIC, the semiconductors are for civilian and commercial purposes and have no connection with the Chinese military.
Trump’s enforcement order, which Trump signed last month and forbade U.S. companies from investing in companies listed by the Department of Defense, has now been expanded to include 35 Chinese companies.
The list includes Huawei, a smartphone maker and one of the world’s largest manufacturers and suppliers of video surveillance equipment, Hikvision. Some other listed companies, including China Telecom (CHA), China Mobile (CHL) and now CNOOC (CEO), trading on the New York Stock Exchange.

U.S. investors are prohibited from owning or trading any securities that originate from or are exposed to such companies. Investors must divest from companies by November 2021.

And Trump still has more ammunition could shoot at Chinese companies.

Previously this week, the U.S. House of Representatives passed the bill this could kick more Chinese companies off Wall Street. The bill, which prevents companies that refuse to open their books to U.S. accounting regulators to trade on U.S. stock exchanges, won unanimous support in the Senate earlier this year. Trump’s signature is only required to sign a law.

Shirley Yu, a hospitality fellow at the London School of Economics and the founder of a company that assesses strategy, business and political risks, Trump will “almost certainly” sign the bill before his term expires. Companies working in China.

“With the unanimous support of Congress, this decision will be extremely difficult for the next administration to reverse,” he added.

Competition between the US and China in technology and trade will not end because President Joe Biden
The president could also revive the US-China trade war.
China has failed to meet its $ 200 billion commitment to buy U.S. products, which Yu said was part of a “first phase” trade deal signed earlier this year.

Which means “Trump can once again unilaterally raise tariffs on Chinese goods … [and] it imposes higher punitive duties, “he said.

Chinese hawks in Washington also pay attention to big Chinese tech brands like e.g. Ali Baba (MIDWIFE), Tencent (TCEHY) and Baidu (BIDU), According to Hirson.
Trump has already tried to go after Tencent, signed an enforcement order in August to ban the WeChat application from operating in the United States. A U.S. judge temporarily blocked the order in late September. And a U.S. appeals court in October rejected a U.S. government request to immediately ban the WeChat app from app stores in the country.

Chinese technology giants could continue to be put on a list that prevents U.S. companies from exporting goods to them without first obtaining permission to do so, Hirson says.

“Some in the administration have sought to add one or more such companies to the Department of Commerce’s entity list or to take other management measures toward these companies,” he said.

Companies listed on the entity list, which are separate from the Department of Defense list, are essentially separate from U.S. supply and technology.

Washington added Huawei to the list last year, citing national security risks. Huawei, which has long denied that any of its products would pose a national security risk, has since crippled its global business by U.S. restrictions. SMIC was not listed, but warned investors last month that possible U.S. export restrictions are a cause for concern.