US warns of investment into ‘Chinese military firms'

The US State Department has warned of continuing US investment into Chinese companies that it says are linked to the People’s Liberation Army (PLA).

The State Department said in a recently published ‘fact sheet’ that the “Chinese Communist Party’s (CCP) threat to American national security extends into our financial markets and impacts American investors”. 

It went on to claim that “many” international stock and bond indices include Chinese companies that are “listed on the US Department of Commerce’s entity list and/or the Department of Defense’s (DoD’s) list of Communist Chinese military companies”.

The entity list identifies firms that are prohibited from involvement in the export, re-export, or in-country transfers of US dual-use technologies without Department of Commerce authorisation. The DoD’s list of ‘Communist Chinese military companies’ identifies firms that US companies are barred from investing in.

The ‘fact sheet’ went on to claim that US investments into companies through indices are supporting Chinese military developments. “The money flowing into these index funds – often passively, from US retail investors – supports Chinese companies involved in both civilian and military production,” it said.

The ‘fact sheet’ went on to state that as of December 2020 at least 24 of the 35 firms identified in the list of Communist Chinese military companies “had affiliates’ securities included on a major securities index”. It added, “This includes at least 71 distinct affiliate-level securities issuers.”

The Department of State added that there are also at least 13 Chinese companies presently on the ‘entity list’, whose parent company or affiliates are included in the major global indices.