US Capitol, Washington

Republicans push to block investment in companies with Chinese military ties

Image credit: US Capitol

Republican congressmen are planning to introduce a bill that would effectively ban US companies from investing in foreign companies with ties to the Chinese military.

According to a Reuters report, Republican representatives Mike Gallaghar, Jim Banks, and Doug LaMalfa, are planning to unveil their proposals this week. All three men are regular critics of the Chinese government.

The bill would require the Treasury Secretary, Steve Mnuchin, to submit a report to Congress listing all foreign defence companies with “substantial contracts with, ties to, or support from” the Chinese military. Six months after the publication of the report, US companies and individuals would be forced to divest from these companies and banned from making any new investments in them.

This would likely include many technology companies with contracts with the Chinese military to provide products such as surveillance systems, communications equipment, and components for weapons.

In a statement, Banks said: “On one hand, congress is asking taxpayers to help grow our military so we can compete with China. On the other hand, large US investment funds are dumping US dollars into China’s military industrial base. We need to end our cognitive dissonance and stop funding the rise of our chief global adversary.”

Last week, Banks criticised California state pension fund CalPERS for investing in companies with “strong ties to China’s military industrial base” in a Tweet.

It is likely that the bill will be strongly supported by President Donald Trump, who has said that the government will consider new ways to restrict American investment in Chinese companies. Trump also announced last week that Chinese students judged to have tied to the Chinese military would be declined entry to the US to pursue graduate-level research.

It is possible that the bill will also attract bipartisan support, with mounting displeasure with the Chinese government regarding the coronavirus pandemic, a dramatic move to curb Hong Kong’s independence, and renewed threats to use military force to force the self-governed island of Taiwan to “reunify” with China. Last week, the House of Representatives threw support behind a bill which proposes punishing top Chinese government officials for their role in human rights abuses against Uighur Muslims in China.

The new bill will arrive in Congress as the US government doubles down on its restrictions against Chinese companies like Huawei and ZTE. Earlier this month the White House introduced severe new restrictions on Huawei to prevent it using American technology to design and manufacture its electronics.

In May, the Senate approved legislation which could prevent some Chinese companies listing their shares on US exchanges unless they follow US auditing and disclosure standards. Scrutiny of US-listed Chinese companies has intensified after Starbucks rival Luckin Coffee was found to have fabricated hundreds of millions of dollars in sales revenue.

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