President Joseph R. Biden extended by one year the national emergency declared in Executive Order 13959, and expanded in Executive Order 14032, involving investments related to the military of the People's Republic of China. The two Orders prohibit U.S. persons, including financial institutions, from transacting in the securities of Chinese companies identified as supporting the military, intelligence and security services of the PRC.

EO 13959 was signed by former President Donald J. Trump and went into effect on January 11, 2021. As previously covered, the EO prohibited not only "any transaction in publicly traded securities," but also "any securities that are derivative of, or are designed to provide investment exposure to such securities."

On June 3, 2021, President Biden signed EO 14032, superseding and expanding the scope of prohibitions contained in EO 13959 and prohibiting U.S. persons from engaging in securities transactions with Chinese companies that (i) are identified as operating in China's defense and related material or surveillance technology sector, or (ii) own or control, or are owned or controlled by, such companies.

In extending the national emergency underlying these sanctions, President Biden stated the threat from those securities investments that, among other things, finance certain Chinese surveillance technologies remains "an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States."

Commentary James Treanor

Following issuance of Treasury's 2021 Sanctions Review, covered here, sanctions policy is under scrutiny for evidence that Treasury's recommendations are being put into practice. By this extension, it appears that the Biden administration has concluded that sanctions are the "right tool" to address the identified threats. Prohibitions on dealings in securities of certain Chinese companies look set to continue for the foreseeable future.

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