Outgoing President Donald Trump this week signed an order barring US investments in Chinese firms owned or controlled by the military, the latest White House bid to pressure Beijing over what it views as abusive business practices.
China is "increasingly exploiting" US capital for "the development and modernisation of its military, intelligence, and other security apparatuses", posing a threat to the US, according to the executive order.
The order prohibits investment firms and pension funds from buying and selling the shares of 31 Chinese companies designated by the Pentagon as having military ties.
Relations between the US and China are expected to remain rocky despite Trump's defeat by Joe Biden in the elections last week. The Trump administration has continued to follow through on vows to punish Beijing over the coronavirus pandemic, its treatment of Muslim minorities and the crackdown on dissent in Hong Kong.
Shares of top Chinese firms, including China Mobile and China Telecom, have tumbled.
China has threatened to react to previous Trump administration actions with its own blacklist of US firms.
Dongshu Liu, an associate professor of Chinese politics at the City University of Hong Kong, said Beijing would likely shrug off such "symbolic" provocations while it waits to see what the Biden administration does.
"Those [companies] clearly owned by the military don't have a lot to do with the US," Liu said. "China is waiting for Trump to step down. It will avoid being too sensitive . to any of Trump's actions as his term winds down."
The latest prohibition will go into effect on January 11, and allows US investment firms and pension funds to divest holdings in companies linked to the Chinese military over the next year.
US national security adviser Robert O'Brien said many of the companies were traded on exchanges around the world. US investors could unknowingly provide funds through passive investments such as mutual funds and retirement plans.
Bloomberg
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