PRESIDENT Joe Biden’s order last week banning US investment in certain Chinese companies is broader than a similar one signed by his predecessor Donald Trump and has a lower bar, making it easier to add more companies later.
Legal experts say it also may help the administration avoid embarrassing defeats in court after a ban imposed near the end of the Trump administration failed to hold up against legal challenges.
Biden’s order will prohibit US investments in about 60 companies in China’s defense or surveillance technology sectors.
“It’s broader in scope and it’s a much lower standard for listing,” said Washington lawyer Kevin Wolf, a former Commerce Department official, adding it should better withstand legal scrutiny.
The new order prohibits investments in companies that “operate in or have operated in” China’s defense or related materials sector, or in surveillance technology, or are owned or controlled by someone who does. Its aim is to limit the flow of money to companies that undermine US security or “democratic values,” which allows listings for human rights abuses.
The Trump ban was placed on Chinese military companies as defined years ago in the National Defense Authorization Act: companies owned or controlled by or “affiliated with” the People’s Liberation Army, a government ministry or the People’s Republic of China’s defense industrial base.
The revised order eliminates the requirement for a direct link to the Chinese state, using the more vague language that a company must “operate in” the defense or surveillance sectors.
The Trump order needed to be shored up after three companies went to court to challenge it. Two got their designations halted, and there’s been no ruling in the third case.
“Courts are usually reluctant to overrule the president when he makes a national security determination,” said Bill Reinsch, a senior advisor at the Center for Strategic and International Studies (CSIS). “The fact that they did so suggests really poor drafting on the part of the Trump people and a poor defense of the decisions made.” — Reuters
