President Joe Biden is planning to amend the US ban on plants from Chinese military-linked companies this week, after Trump's time policy was challenged in court and left investors confused about how to reach lower corporations, people familiar with the matter said.
Under Biden's amended directive, the Treasury will compile a list of companies that could face fines for their involvement in China's defense and security technology sector, people said. To date, financial sanctions and the selection of target companies have been tied to the Department of Defense's official report.
The amended directive, which Biden is expected to sign later this week, will change the terms of the blacklisted organizations to replace those operating in the defense or security technology sector. Trump's order referred to companies owned, controlled or affiliated with other Chinese troops.
The Biden administration is expected to retain a number of pre-registered businesses and the Treasury Office of Foreign Affairs will introduce new businesses as part of the order, said one person. Treasury will liaise with the Department of State and the Department of Defense on the registration process.
White House spokesmen and the Treasury did not respond to requests for comment.
Other stocks related to China's defense sector fell on Thursday, led by AVIC Jonhon Optronic Technology Co and AECC Aviation Power Co, while Advanced Micro-Fabrication Equipment Inc. already included in the terrorist list fell by about 2.9%. Xiaomi Corp., who was removed from the list last month after challenging Trump's administration order, grew by 2.2% in Hong Kong.
After two Chinese companies successfully challenged the order, the Biden team said a policy review was needed to ensure it was legitimate and sustainable in the long run. By handing over the responsibility to the Treasury, the Biden group aims to strengthen the legal status of the fines, said one observer.
A review of the administration of the ban is closely monitored at Capitol Hill, where lawmakers are keen to take a firm stand in Beijing.
Senator Tom Cotton, of the Arkansas Republican, said in a statement on Wednesday that "it is imperative that the US government continue to expand this list of Chinese military companies - these firms should not have access to U.S. technology and major markets. We are funding and supporting our leading competitors."
In a letter to Defense Secretary Lloyd Austin, a two-party panel - including Florida Republican Senator Marco Rubio, Arizona Democratic Senator Mark Kelly and Attorney Liz Cheney, of Wyoming Republic - demanded the publication of a new list of Chinese military allies. The list was due to be held on April 15 and approved by last year's defense authorization bill.
"The U.S. government must continue to work hard to prevent the Chinese Communist Party's economic explosion against our industrial base," the letter said. "We must not allow China to destroy the US military power."
Read more: Biden Delays Rehabilitation of China's Black Investment List
Biden’s position was also considered on Wall Street, where Trump’s order created confusion as to whether the investment ban applies to many potential affiliated companies - either as a subsidiary or with the same name - for those on the blacklist.
In the wake of the controversy, management last month postponed a deadline to stop investing in subsidiaries, even though a ban on listed parent companies had been in place since November.
The White House and Treasury will also make it clear that the ban applies to listed companies only if the company under it is listed by Treasury, people said. The previous management had intended to retake those companies with very close names to the listed organizations.
"Empowering Treasury when Chinese military companies face major market sanctions could help Wall Street keep the situation at bay," said Roger Robinson Jr., former chairman of the US-China Economic and Security Review Commission.
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