Commentary on Political Economy

Wednesday, 24 June 2020

Pentagon lists 20 companies aiding Chinese military
 China Telecom and China Mobile among groups named in effort to deter US investment in them 
The list includes a number of state-owned entities involved in fields ranging from nuclear power to aviation​ 

 The Pentagon has compiled a list of Chinese companies with ties to China’s military, including two groups listed on the New York Stock Exchange, as part of an intensifying effort by the administration and Congress to make it harder for China to secure US investment and sensitive technologies. The list, which was obtained by the Financial Times, includes a number of state-owned entities involved everything from nuclear power to aviation. But it also includes China Telecommunications and China Mobile, two commercial telecommunications companies that are listed in New York. Congress required the Pentagon to produce the list in 1999, but security officials never followed through. The FT last year reported that the effort gained momentum as lawmakers responded to rising tension with China by telling the Pentagon to name companies it believes help China’s military. A 1999 defence law, which specifies Chinese companies that operate “directly or indirectly” in the US, gives the president authorisation to impose sanctions on any of them.

Congress is not required to act on the list based on the 1999 law. But China hawks say it will boost pressure on US investors to divest from companies that Washington says threaten national security. The compilation of the list comes just weeks after President Donald Trump told the main US government pension fund not to invest in any Chinese-listed companies. The 20 companies in the Pentagon’s list include Huawei, the Chinese telecoms equipment maker that Washington believes helps Beijing conduct cyber espionage. It also names Hikvision, a company that supplies surveillance technology to detention camps in the Xinjiang province where the Chinese government has interned more than 1m ethnic Muslim Uighurs for re-education. The complete disconnect between the US security community and Wall Street fund managers and index providers will probably prove unsustainable, especially for the Wall Street folks Roger Robinson, RWR Advisory Group Mike Pompeo, secretary of state, this month said Xi Jinping, Chinese president, had “greenlighted a brutal campaign of repression against Chinese Muslims”. But John Bolton, the former national security adviser, said in a new book that Mr Trump had told Mr Xi that he did not object to the internments. “In addition to other official lists, we now have an opportunity to examine the US capital markets footprints of a Pentagon list of Chinese [military]-affiliated enterprises,” said Roger Robinson, a former National Security Council official who advocates for a much tougher stance on China. “The complete disconnect between the US security community and Wall Street fund managers and index providers will probably prove unsustainable, especially for the Wall Street folks,” said Mr Robinson, who is president of RWR Advisory Group, a Washington-based consultancy. Eric Sayers, an Asia security expert and adjunct fellow at the Center for a New American Security, said the list would add to the pressure to respond to China’s “military-civil fusion strategy”, which requires Chinese companies that develop certain technologies to share them with the Chinese military.

 Marco Rubio, a Florida Republican senator who has been one of the leading voices in Congress for taking a tougher stance on China, told the FT that the list was a start but was still “woefully inadequate”. “The list only touches the surface of the Chinese government’s exploitation of US capital markets at the expense of retail investors and pensioners by omitting the networks of affiliated and subsidiary companies,” he said. Mr Rubio added that it was important that US investors were told which Chinese companies were involved in spying, human rights abuses, and the broader Chinese military-civil fusion strategy. Recommended Robert Armstrong Business will be the loser in the US-China fight One Pentagon official said releasing the list was “an important step in highlighting and countering China’s military-civil fusion strategy”. He said it would be a “useful tool” for the US government, companies, investors and academic institutions to conduct due diligence, particularly as the Pentagon updates the list, as some lawmakers have demanded. The Pentagon action comes as relations between the US and China continue to spiral downwards over a range of economic, security and global health issues. Mr Trump has blasted China over Covid-19 and blamed Beijing for its global spread. Last month, he threatened to “cut off the whole relationship” with China.

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