NEW YORK -- U.S. politicians have expressed outrage about a Biden administration move to quietly tell American investors they can hold on to shares of Chinese companies on an investment blacklist for military links, as reported by Nikkei Asia.
"What is the point of a required divestment period if it doesn't actually require divestment?" Republican Senator Marco Rubio said to Nikkei. "Once again, the Biden administration has watered down and weakened critical national tools to take on the Chinese Communist Party."
From across the aisle, Michael Wessel, a Democratic member of the official U.S.-China Economic and Security Review Commission, said: "Treasury simply got it wrong. ... Investors should be required to divest their holdings, not continue to profit from the threats the actions of some of these companies pose to American interests."
Under an executive order issued by President Joe Biden a year ago, U.S. investors had until last Friday to sell or buy the stocks and bonds of 59 "Chinese military-industrial complex" (CMIC) companies.
A previous version of the policy issued five months earlier in the final days of the Trump administration also explicitly required investors to dispose of any holdings in blacklisted companies.
While Biden's update struck out that provision, the administration waited until last Wednesday to address speculation on whether it might still penalize the retention of such securities by adding three entries to an online FAQ prepared by the U.S. Treasury Department's Office of Foreign Assets Control.
The key entry read, "U.S. persons are not required to divest their holdings of CMIC securities during the relevant 365-day divestment period and may continue to hold such securities after the divestment period."
For the business community, the move was a welcome signal that clashes with China over trade and investment might ease.
"This change in policy, coupled with the likelihood of the lifting of some Trump-era tariffs on China goods, may signal a more targeted, pragmatic approach by the Biden administration," said Doug Barry, spokesman for the U.S.-China Business Council in Washington.
He added, "It may also suggest a willingness to listen to the U.S. business community which has long warned of collateral damage from using a blunderbuss approach to trade policy."
However, a tough stance on China is one of the few political positions on which most Democrats and Republicans in Congress agree. This is leading to questions about why the Treasury Department waited so long to clarify its interpretation of the investment blacklist.
The securities of many of the targeted companies, like much of China's technology sector, have fallen over the past year amid Beijing's regulatory crackdowns and tensions with Washington.
Investors would have been keen to avoid realizing big losses on their positions, with some potentially betting on their invested companies getting off the blacklist or the list itself being retired. Some companies blacklisted by Trump, such as smartphone maker Xiaomi, were previously rehabilitated.
"It's the case now that if you didn't sell your securities, now you're counting on some sort of change in your favor," said Derek Scissors, a Republican appointee to the U.S.-China Economic and Security Review Commission and an economist with the American Enterprise Institute.