White House Bans U.S. Investment in China’s Largest Maritime Companies
/ MARITIME INDUSTRY NEWS / - The Biden administration issued an executive order on June 3rd that bans U.S. investment in some of the biggest maritime companies in China. This ban includes China State Shipbuilding Corporation (CSSC), the largest commercial shipbuilder in the world and the biggest contributor to China’s naval modernization.
What is this ban?
The ban issued by the Biden administration is an expansion of an investment ban signed by the Trump administration in November 2020. Trump initiated this blacklisting because he believed China was “increasingly exploiting United States capital to resource and enable” the development of China’s military and surveillance intelligence. The objective of the new investment ban is to address “the threat posed by the military-industrial complex of the People’s Republic of China (PRC) and its involvement in military, intelligence, and security research and development programs… under the PRC’s Military-Civil Fusion strategy.”
Why implement the ban?
Biden’s amendment to Trump’s order comes after two Chinese companies successfully challenged the original order in the U.S. court. Biden’s team stated that this revision is necessary to ensure that the order is sustainable and legally sound long-term. There are now 59 Chinese firms included in the investment ban, because of their alleged ties to China’s military or surveillance industry. The order went into effect on August 2nd, and U.S. investors will have one year from that date to divest. In addition, U.S. citizens will no longer be allowed to hold securities in CSSC, China Shipbuilding Industry Corporation (CSIC), China National Offshore Oil Corporation (CNOOC), and China Communications Construction Corporation (CCCC). CSIC was recently absorbed by CSSC. CNOOC is China’s top developer for offshore oil and gas. CCCC is an infrastructure firm known for its “Belt and Road” overseas port projects, and they have played a vital role in China’s construction of military bases in the Spratly Islands.
What to expect?
The client relationships between U.S. companies and blacklisted Chinese firms will likely continue. In particular, CSSC has well-publicized research and development connections with a few U.S. maritime entities. CSSC repair yards and services are part of the landscape for port calls in China, so they may be needed for emergency repairs. The order will not ban day-to-day business between U.S. entities and the blacklisted firms, and it will have no effect on non-U.S. entities. All of the blacklisted firms are state-owned, including the maritime companies named above. So, this U.S.-national investment ban will not likely have any material effect other than restricting China’s access to the American capital market.
By Jerry Dowling