The White House is reportedly considering to preserve bans introduced by the last administration against China’s military in yet another move that could limit capital flows to the mainland from the west.
The Joe Biden administration is likely to keep the investment bans against China’s military, according to a «Bloomberg» report citing unnamed sources.
On the other hand, the financial sector has urged the administration to fully roll back the investment ban or, at the very least, provide clear guidance from the Treasury’s Office of Foreign Assets Control (OFAC) on compliance.
Discussions remain in their preliminary stages and no decisions have been made, the report added.
Military Ban
First introduced by the Donald Trump administration, the ban aims to prevent American investor ownership of shares linked to China’s military over concerns of national security risks.
«It is common sense that U.S. dollars should not flow to entities close to the Chinese Communist Party’s military, which is building weapons and capabilities designed to kill American service members,» said Marco Rubio, a Republican senator from Florida.
«The Biden administration should reject any efforts by the investor class to erode the Trump-era sanctions and it should work with Congress to codify those penalties into law.»
Financial Sector Response
Multiple financial players have already made moves to comply with the bans including hundreds of related product delistings in Hong Kong by American banking giants and the booting of three major Chinese telecom firms by the New York Stock Exchange.
One notable firm that has openly resisted compliance is State Street Global Advisors which made a decision to resume investments of banned stocks in its renowned Tracker Fund in Hong Kong.
The passive fund initially said its index tracker would exclude banned stocks but reversed the decision following pressure from the Hong Kong government, including a public announcement by chief executive Carrie Lam to potentially seek a replacement manager.
