US blacklists Xiaomi and Cnooc in flurry of actions to counter China


The US has placed new restrictions on Chinese companies and given the federal government more power to curb the import of technology from the country, as the Trump administration races to increase the pressure on Beijing in its final days in office.

The last-minute flurry of activity included adding companies including the state-controlled China National Offshore Oil Corporation and the mobile phone manufacturer Xiaomi to government blacklists, and giving the US commerce department powers to block imports from countries deemed a security threat.

The commerce department on Thursday morning put Cnooc on its “entity list”, meaning that US groups will be unable to export products or technology to the company in the absence of a hard-to-obtain licence.

And just hours later, the Pentagon placed Xiaomi — which in November surpassed Apple to become the world’s third-biggest smartphone manufacturer by units sold — and eight other businesses on a list of companies with alleged connections to the Chinese military.

Following an executive order signed by President Donald Trump in November, Americans are banned from investing in companies on that list. The move means US investors will be unable to purchase Xiaomi securities, and will eventually have to divest any they already own.

The focus on China in the days before Joe Biden is inaugurated on January 20 comes at the tail-end of an administration that has made countering the rise of Beijing a centrepiece of its economic and foreign policy.

Cnooc acted as “a bully” for the Chinese military to help intimidate China’s neighbours in the South China Sea, said Wilbur Ross, US commerce secretary.

The commerce department said Cnooc had “repeatedly harassed and threatened offshore oil and gas exploration and extraction” in the South China Sea in order to raise political risk, including for Vietnam, which has a longstanding dispute with China over oil resources.

“China’s reckless and belligerent actions in the South China Sea and its aggressive push to acquire sensitive intellectual property and technology for its militarisation efforts are a threat to US national security and the security of the international community,” said Mr Ross.

Xi Jinping, Chinese president, in 2015 promised Barack Obama, then US president, that China would not militarise disputed areas in the South China Sea despite its efforts to reclaim land for construction.

Over the past couple of years, the US has put other Chinese companies on the entity list, including Huawei, the telecoms equipment provider, and Semiconductor Manufacturing International Corporation, the chipmaker. Most recently, it placed DJI, the world’s biggest maker of commercial drones, on to the blacklist.

Cnooc is China’s third-largest oil company and is controlled by the central government, adding more symbolism than with the moves against private groups.

But it is not the first state-owned enterprise to be targeted by the Trump administration, which included China’s three largest telecommunications companies in its military-related ban.

Xiaomi shares trading in the US dropped as much as 14 per cent on the news that it had been added to the Pentagon’s list of companies with alleged ties to the Chinese military. The other companies added included Commercial Aircraft Corporation of China and China National Aviation Holding.

The US defence and state departments had pushed to also include three of China’s largest tech companies — Alibaba, Tencent and Baidu — on the Pentagon list. But Steven Mnuchin, the Treasury secretary, prevailed in an internal battle, arguing it would harm US investors.

As well as the new blacklistings, the Trump administration on Thursday said it had finalised new rules that would allow the commerce department to block Americans from importing some sensitive technology from China and other US adversaries.

The rule applies to six categories of software and hardware, ranging from products used in critical infrastructure and telecoms networks to artificial intelligence and quantum computing. It could also apply to apps that collect user data or, for example, drones and network surveillance cameras that use cloud services to store data.

Also on Thursday, the US International Development Finance Corporation struck a deal to help Ecuador repay billions of dollars in loans to China in exchange for excluding Chinese companies from its telecom networks.

Follow on Demetri Sevastopulo on Twitter 

Video: What a Biden presidency means for the US-China tech war


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