Two seemingly contradictory moves are in the works in Washington

These two seemingly contradictory moves are in the works in Washington. The Biden administration expanded a Trump era order banning Americans from investing in Chinese military-linked companies. Meanwhile, reports say the agency tasked with enforcing the ban quietly told investors that they would not be punished for holding shares of those companies. Let’s take a closer look.

Trump pushed out the original ban in the final days of his administration, arguing that the Chinese regime exploits the United States investors to finance the development and modernization of its military. He gave American investors one year to divest from some Chinese companies. After that, any investors still holding stake in the companies would face consequences. The one year deadline arrived last Friday. The companies on the banned list are those that help advance the Chinese military or sell surveillance technology to Beijing, used to suppress dissidents or religious minorities.

But in addressing whether investors who don’t meet that deadline will be punished, the Treasury Department wrote “US persons are not required to divest their holdings of CMIC (Chinese military industrial complex) securities during the relevant 365-day divestment period, and may continue to hold such securities after the divestment period”. That statement has raised concerns about whether the investment ban’s key element is getting undercut.

Japanese media Nikkei Asia first reported on the potential workaround. Republican Senator Marco Rubio told the outlet that the Biden administration “watered down critical national tools to take on the Chinese Communist Party”. Michael Wessel is a Democratic member of the US-China Economic and Security Review Commission. He said the Treasury simply got it wrong. As for the list of banned Chinese companies, Biden added more to the roster, but also revaluated some, including smartphone makers Xiaomi.