Trump to add China's SMIC and CNOOC to defence blacklist, say sources

Washington

THE Trump administration is poised to add China's top chipmaker Semiconductor Manufacturing International Corp (SMIC) and national offshore oil and gas producer China National Offshore Oil Corp (CNOOC) to a blacklist of alleged Chinese military companies, according to a document and sources, curbing their access to US investors and escalating tensions with Beijing weeks before President-elect Joe Biden takes office.

It was reported earlier that the Department of Defense (DOD) was planning to designate four more Chinese companies as owned or controlled by the Chinese military, bringing the number of Chinese companies affected to 35. A recent executive order issued by President Donald Trump would prevent US investors from buying securities of the listed firms starting late next year.

It was not immediately clear when the new tranche would be published in the Federal Register. But the list comprises China Construction Technology Co and China International Engineering Consulting Corp, in addition to SMIC and CNOOC, according to the document and three sources.

SMIC said it continued "to engage constructively and openly with the US government" and that its products and services were solely for civilian and commercial use. "The company has no relationship with the Chinese military and does not manufacture for any military end-users or end-uses."

CNOOC's listed unit said in a stock market statement that it had inquired with its parent and learnt that it had not received any formal notice from relevant US authorities.

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China's foreign ministry spokeswoman Hua Chunying said, in response to a question about Washington's planned move, that China hoped the US would not erect barriers and obstacles to cooperation and discriminate against Chinese companies. The DOD and the Chinese embassy in Washington did not immediately respond to requests for comment.

SMIC, which relies heavily on equipment from US suppliers, was already in Washington's crosshairs. In September, the US Commerce Department informed some firms that they need to obtain a licence before supplying goods and services to SMIC after concluding that there was an "unacceptable risk" that equipment supplied to it could be used for military purposes.

The upcoming move, coupled with similar policies, is seen as seeking to cement outgoing Republican President Donald Trump's tough-on-China legacy and to box incoming Democrat Mr Biden into hardline positions on Beijing amid bipartisan anti-China sentiment in Congress. The Biden campaign declined to comment.

The list is also part of a broader effort by Washington to target what it sees as Beijing's efforts to enlist corporations to harness emerging civilian technologies for military purposes.

It was reported that the Trump administration is close to declaring that 89 Chinese aerospace and other companies have military ties, restricting them from buying a range of US goods and technology.

The list of "Communist Chinese Military Companies" was mandated by a 1999 law requiring the Pentagon to compile a catalogue of companies "owned or controlled" by the People's Liberation Army, but DOD only complied in 2020. Giants like Hikvision, China Telecom and China Mobile were added earlier this year.

In November, the White House published an executive order that sought to give teeth to the list by prohibiting US investors from buying securities of the blacklisted companies from November 2021.

The directive is unlikely to deal the firms a serious blow, experts said, due to its limited scope, uncertainty about the stance of the Biden administration and already-scant holdings by US funds. REUTERS