Source: Axios, Morning Wrap
Still remember that US’s securities ban on Xiaomi (imposed by Trump) was formally lifted in May after a lawsuit? Here’s more - Biden amended Trump’s China blacklist just hours ago, blocking 59 Chinese companies.
Oh really...what are the changes?
#1 Shift of target. Investment ban would no longer be linked to companies owned or controlled by Chinese military (reported by Defense Department) ➡️ but firms operating in defense and surveillance tech sectors (reported by Treasury Department).
- Minor change in wording… but it could mean a lot in terms of scope: camera, internet, technology could all be included under the new rule.
#2 A possible wider universe. 🚫 A large number of previously listed entities would still be kept after amendment, and Treasury will add new entities to the list.
#3 But it also signalled a narrowing of the scope in one key area. ✅ If the parent company is listed in the blacklist, will its subsidiary be listed as well?
- Trump didn’t answer clearly, leaving investors confused.
- Biden would say a clear NO - Parent and subsidiary firms would be treated separately.
+ Wider...narrower? Why does it look contradictory? Not a typo. 😂 It’s somewhat mixed signals. But ultimately, it can give Biden a lot of latitude when it comes to the implementation of the order.
Then how do investors think?
China stocks drifted between gains and losses as investors digested the new plan, before closing lower. Some defense and aerospace stocks fell.
- Xiaomi (+2.4% in HK) would also be a key test to see how the new order would be implemented as it was just removed from the blacklist.
The ban on new investments will take effect Aug 2, and investors would have one year to fully digest.