WASHINGTON • A group of Republican lawmakers plan to unveil legislation this week to keep Americans from investing in foreign defence companies with ties to China’s military, the latest in a string of measures aimed at curbing US funding for China-based companies.
Representatives Mike Gallagher, Jim Banks and Doug LaMalfa intend to introduce the Bill, which would require Treasury Secretary Steve Mnuchin to submit a report to Congress listing foreign defence firms that have “substantial contracts with, ties to, or support from” the Chinese military, according to a document seen by Reuters.
Six months after the report is issued, American companies and citizens would be required to divest from those firms and would henceforth be banned from making new investments in them.
“On the 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,” Mr Banks said in a statement.
“We need to end our cognitive dissonance and stop funding the rise of our chief global adversary.”
The move comes as the US government begins extending its trade and technology battle with China to the capital markets.
The relationship between the two rival nations has soured further in recent months over the origins of the deadly coronavirus as well as Beijing’s imposition of new national security legislation on Hong Kong after months of social unrest in the former British colony.
While it was not immediately clear if Democrats or other Republicans would support the Bill, anti-China sentiment is running high in the Capitol after China moved to curb Hong Kong’s independence.
Both the Democrat-led House of Representatives and the Republican-controlled Senate approved legislation to punish top Chinese officials for human rights abuses against Uighur Muslims.
President Donald Trump last Friday said his administration would study ways to safeguard Americans from the risks of investing in Chinese companies, ratcheting up pressure on the businesses to comply with United States accounting and disclosure rules.
Last month, under pressure from the White House, an independent board tasked with administering federal worker and military pension funds halted plans to allow one of its funds to track an index that includes controversial Chinese companies.
FUNDING THE ADVERSARY
On the 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.
U.S. REPRESENTATIVE JIM BANKS, on stopping American businesses and citizens from investing in foreign defence companies with links to China’s military.
Those moves came after China’s Luckin Coffee, which trades on the Nasdaq stock exchange, revealed in April that as much as 2.2 billion yuan (S$434 million) in sales last year had been fabricated.
The revelation strengthened the position of China hawks in the Trump administration, who argue that investors in Chinese companies are vulnerable to unforeseen risks because the companies are not subject to the same auditing and disclosure rules as those in the US are.
The Senate passed legislation last month that could prevent some Chinese companies from listing their shares on US exchanges unless they follow standards for US audits and regulations.