US to Add China’s SMIC and CNOOC to Defense Blacklist

  • A few days ago, business giants such as Hikvision, China Telecom and China Mobile have been added to this list.
  • “There will be huge impact on the company because the oil-and-gas value chain involves a lot of U.S. companies from upstream, mid-stream all the way to the gas side,” said Sengyick Tee, an analyst with SIA Energy.
  • Reuters also reported last week that the Trump administration is about to announce that 89 Chinese aerospace companies which have military ties with other companies

A law issued by the United States in 1999 required the Pentagon to compile a list of “Chinese military industrial enterprises” “owned or controlled” by the People’s Liberation Army, but the US Department of Defense did not comply with it until 2020. The Trump administration will not change its tough style towards China.

Semiconductor Manufacturing International Corporation is a partially state-owned publicly-listed Chinese semiconductor foundry company, and the largest in mainland China. SMIC is headquartered in Shanghai and incorporated in the Cayman Islands.

Instead Trump will expand the blacklist of “Chinese military industrial enterprises.”

According to a report by Reuters on Monday (November 30), a document and sources revealed that the Trump administration is preparing to include Chinese chip manufacturers SMIC and China National Offshore Oil as a “Chinese military industrial enterprise”.

A few days ago, business giants such as Hikvision, China Telecom and China Mobile have been added to this list. Reuters reported that the White House issued an executive order to impose sanctions on companies on the blacklist, banning US investors from buying securities of blacklisted companies from November 2021.

This may have an impact on some large Chinese companies, such as China Telecom, China Mobile, Huawei, and Hikvision.

SMIC said it continued “to engage constructively and openly with the U.S. government” and that its products and services were solely for civilian and commercial use. “The Company has no relationship with the Chinese military and does not manufacture for any military end-users or end-uses.”

However, experts said that because Joe Biden is still uncertain about the position and the US fund’s holdings in these companies are not high, the actual blow that the White House can cause is limited.

Nevertheless, this move will deepen the rift between Washington and Beijing. In the future, the US Congress and the government are also expected to propose more measures to curb the entry of Chinese companies that do not abide by US rules into the US market.

China National Offshore Oil Corporation, or CNOOC Group, is one of the largest national oil companies in China. It is the third-largest national oil company in the People’s Republic of China, after CNPC and China Petrochemical Corporation.

Adding the 31 Chinese companies that have been on the list a few days ago, if this report is true, the number of affected Chinese companies will reach 35. According to reports, it is unclear when the new batch of lists will be published in the Federal Register.

“There will be huge impact on the company because the oil-and-gas value chain involves a lot of U.S. companies from upstream, mid-stream all the way to the gas side,” said Sengyick Tee, an analyst with SIA Energy. “This also means they cannot procure parts and software from U.S. companies.”

The U.S. Department of Defense Has Not Yet Responded.

Reuters also reported last week that the Trump administration is about to announce that 89 Chinese aerospace companies which have military ties with other companies, restricting them from purchasing a range of American products and technologies.

“It will be quite negative for CNOOC as it has quite a few U.S. partners in projects alongside Bohai Bay as well as in South China Sea,” Lin Boqiang, director at the China Center for Energy Economics Research at Xiamen University, said by phone.

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Benedict Kasigara

I have been working as a freelance editor/writer since 2006. My specialist subject is film and television having worked for over 10 years from 2005 during which time I was the editor of the BFI Film and Television.

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