On June 3, 2021, the Biden Administration issued a new executive order (EO) 14032 in response to the threat posed by the military-industrial complex of the People’s Republic of China (the “PRC” or “China”). EO 14032 prohibits U.S. persons from engaging in the purchase or sale of securities in 59 Chinese companies that are listed in an Annex to the executive order, as well as any person that is determined to operate or have operated in the defense and related materiel sector or the surveillance technology sector of the PRC. EO 14032 aims to prevent U.S. investment from benefiting the Chinese defense and surveillance technology sectors and is intended to cut off the PRC’s military-industrial complex from access to U.S. capital markets. It revamps and clarifies EO 13959, which was issued by Trump Administration in November 2020 and targeted Chinese Communist Military Companies (“CCMCs”).1 That executive order came under criticism for being unclear and difficult to implement.
Executive Order 14032 and Related Guidance
Implications for the Private Sector
1 K2 Integrity. “United States Prohibits Investment in Chinese Companies with Military Ties,” (November 19, 2020), available at https://www.k2integrity.com/en/knowledge/policy-alerts/united-states-prohibits-investment-in-chinese-companies-with-military-ties.
2 “Addressing the Threat from Securities Investments that Finance Certain Companies of the People’s Republic of China,” (June 3, 2021), available at https://home.treasury.gov/system/files/126/eo_cmic.pdf.
3 K2 Integrity. “United States Prohibits Investment in Chinese Companies with Military Ties,” (November 19, 2020), available at https://www.k2integrity.com/en/knowledge/policy-alerts/united-states-prohibits-investment-in-chinese-companies-with-military-ties.
4 K2 Integrity. “OFAC Issues Clarifying Guidance on Communist Chinese Military Companies Sanctions,” (January 7, 2021), available at https://www.k2integrity.com/en/knowledge/policy-alerts/ofac-issues-clarifying-guidance-on-communist-chinese-military-companies-sanctions.
5 United States District Court for the District of Columbia. Memorandum Opinion. Luokung Technology Corp. v. Department of Defense, available at https://ecf.dcd.uscourts.gov/cgi-bin/show_public_doc?2021cv0583-33.
6 United States District Court for the District of Columbia. Memorandum Opinion. Xiaomi Corporation v. Department of Defense, available at https://cdn.vox-cdn.com/uploads/chorus_asset/file/22367849/xiaomi_v_us_dept_of_defense.pdf.
7 “China upbeat on trade talks with U.S., says both 'seek common ground.’” Reuters, (June 3, 2021), available at https://www.reuters.com/business/china-us-will-work-issues-producers-consumers-next-step-ministry-2021-06-03/
8 Tensions between the G7 and China have risen recently, with a May 2021 G7 communique criticizing a range of China’s activities, including “concern regarding [China’s] practices that undermine such free and fair economic systems, including on trade, investment and development finance.” G7 Foreign and Development Ministers’ Meeting: Communique, London, May 5, 20201. Available at https://www.gov.uk/government/publications/g7-foreign-and-development-ministers-meeting-may-2021-communique/g7-foreign-and-development-ministers-meeting-communique-london-5-may-2021.
9 Cate Cadell, Tony Munroe. “China imposes sanctions on 28 Trump-era officials including Pompeo,” Reuters, (January 20, 2021), available at https://www.reuters.com/article/us-usa-china-pompeo-blinken/china-imposes-sanctions-on-28-trump-era-officials-including-pompeo-idUSKBN29P14K
10 James Griffiths, “China sanctions UK lawmakers and entities in retaliation for Xinjiang measures,” CNN, (March 26, 2021), available at https://www.cnn.com/2021/03/25/china/china-uk-sanctions-xinjiang-intl-hnk/index.html
11 K2 Integrity. “OFAC Issues Clarifying Guidance on Communist Chinese Military Companies Sanctions,” (January 7, 2021), available at https://www.k2integrity.com/en/knowledge/policy-alerts/ofac-issues-clarifying-guidance-on-communist-chinese-military-companies-sanctions.
12 “Chinese facial recognition tech installed in nations vulnerable to abuse.” CBS News, (October 16, 2019), available at https://www.cbsnews.com/news/china-huawei-face-recognition-cameras-serbia-other-countries-questionable-human-rights-2019-10-16/.
13 Josh Zumbrun, Kate O’Keefe, and William Mauldin. “U.S. Adds Chinese Firms to Blacklist Citing Repression of Muslim Minorities.” The Wall Street Journal, (October 8, 2019), available at https://www.wsj.com/articles/u-s-adds-chinese-firms-to-blacklist-citing-repression-of-muslim-minorities-11570488642?mod=article_inline.
14 “Biden sanctions Chinese companies as Beijing says ‘normal communication’ resumed’ The Guardian (June 3, 2021), available at https://www.theguardian.com/us-news/2021/jun/03/biden-bans-us-investment-chinese-military-tech-surveillance