US President Joe Biden’s mandate last week to ban US investment in some Chinese companies is broader than the one signed by Donald Trump’s predecessor and has a lower limit, making it easier to add more companies later.
Legal experts say it could also help the administration avoid embarrassing defeats in court after a failed coup near the end of the Trump administration failed to meet legal challenges.
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Biden’s order will ban US investment in about 60 Chinese defense or surveillance companies.
“It has a wider scope and is a much lower level of registration,” said Washington W. Kevin Wolf, a former Commerce Department official, adding that he should be better able to withstand legal scrutiny.
The new order bans investment in companies “operating or operating” in China’s defense or related materials sector or in surveillance technology or owned or controlled by someone who does. Its purpose is to restrict the flow of money to companies that undermine US security or “democratic values”, which allows entries for human rights violations.
Trump’s ban was imposed on Chinese military companies as defined years ago in the National Defense Act: companies owned or controlled by or affiliated with the People’s Liberation Army, a government ministry or the defense industry base of the People’s Republic of China.
The revised mandate eliminates the requirement for a direct connection to the Chinese state, using the more ambiguous language that a company should “operate” in the areas of defense or surveillance.
Trump’s mandate had to be analyzed after three companies went to court to challenge it. Two names have stopped and there is no decision in the third case.
“Courts are usually reluctant to bypass the president when deciding on national security,” said Bill Reinsch, a senior adviser at the Center for Strategic and International Studies (CSIS). “The fact that they did this indicates a really bad pension on the part of the Trump people and a bad defense of the decisions that have been made.”
Beijing-based smartphone maker Xiaomi, which lost about $ 10 billion in market capitalization a month after joining the list of banned companies, was the first to bring a case that sought to expose flaws in Trump’s class.
The judge suspended Xiaomi’s appointment in March, citing a lack of evidence that he was affiliated with the PLA or the PRC, calling his listing “arbitrary and capricious”.
Government evidence included an award given to Xiaomi’s president, which had been received by more than 500 businessmen since 2004, including the leaders of a baby company. He also referred to Xiaomi’s investments in 5G technology and artificial intelligence, but the judge noted that fast-moving standards for consumer devices, not just military modernization, are becoming available.
The judge also noted errors in the government decision note, including the incorrect reference to the statute in question, and said that the government did not meet the definition of “affiliated with”, that is, “effectively controlled by another or affiliated with others under joint ownership or control” “
Last month, Biden’s management agreed to remove the company from the list.
Luokung Technology Corp., a mapping technology company, won a similar initial decision.
Neither Xiaomi, nor Luokung, nor Gowin Semiconductor, the third company to challenge its definition, are on the revised list.
Major Chinese companies included in both orders include China National Offshore Oil Corp (CNOOC), Hangzhou Hikvision Digital Technology Co. Ltd, Huawei Technologies Ltd and Semiconductor Manufacturing International Corp.
Hong Kong-based lawyer Wendy Wysong, who has been considering Trump’s case, said Biden’s entries appear to be more consistent.
“It may be more difficult to challenge the characterization, because the underlying reasoning will probably not be so weak, and the characterization criteria are not so narrowly worded,” Wysong said.
Many more companies could be affected by Biden’s order depending on “how aggressive the US government is,” said CSIS Reinsch.
“Theoretically it could expand the universe quite significantly,” he said.