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Factbox-Trump administration measures against Chinese companies

(Reuters) - Outgoing U.S. President Donald Trump has toughened his stance towards Beijing in the final months of his presidency with a slew of measures targeting Chinese companies.

FILE PHOTO: U.S. President Donald Trump departs on travel to West Point, New York from the South Lawn at the White House in Washington, U.S., December 12, 2020. REUTERS/Cheriss May//File Photo

Here is an outline of moves so far, the fallout in financial markets and China’s response:

DELISTING THREAT

* Trump signed the Holding Foreign Companies Accountable Act into law on Dec. 18. It allows U.S. authorities to remove foreign firms from stock exchanges if they fail to comply with U.S. audit rules for three years.

* It applies to companies from any country, but can require firms to disclose any Chinese Communist Party members on their boards and is seen aimed at Chinese firms with U.S. listings, such as Alibaba, Pinduoduo, PetroChina, Netease and JD.Com.

* Investors have been shifting their holdings in such firms out of the United States, if other listings are available.

INVESTMENT BANS

* On Nov. 12, Trump signed an executive order barring U.S. investors from buying exposure to firms deemed linked to the Chinese military after November 2021.

* The list of “Communist Chinese Military Companies” was mandated by a 1999 law requiring the Pentagon to compile a catalogue of companies “owned or controlled” by the People’s Liberation Army, but it was only drawn up in 2020.

* Companies such as SMIC, China’s biggest chipmaker, oil company CNOOC and surveillance firm Hikvision are among the 35 on the list, but have denied military links. (See this FACTBOX for others:)

* On Jan. 6, sources told Reuters and the Wall Street Journal that the Trump administration was considering adding tech giants Alibaba and Tencent.

SOFTWARE BANS

* On Jan. 5, Trump signed an executive order banning transactions with eight Chinese software applications, including Ant Group’s popular Alipay.

* The Commerce Department will define which transactions will be banned within 45 days of Jan. 5.

* In August, Trump had sought to ban some transactions with WeChat and the Chinese-owned video app TikTok, although U.S. courts have so far blocked these plans.

TRADE RESTRICTIONS

* On Dec. 18 the United States added dozens of Chinese firms to an “entity list” that restricts their ability to trade with U.S. companies.

* SMIC and drone maker SZ DJI Technology were among the additions to a list that since 2019 included Hikvision and Huawei Technologies.

MARKET REACTION

* Money managers say selling of banned shares by U.S. investors could weigh on prices in the short term, but do not see big consequences yet and say that fine print could allow them to get around some of the trade restrictions.

* Index makers FTSE Russell, S&P Dow Jones Indices and MSCI have removed some of the listed firms from index products, weighing on their share prices as passive investors sell. (See this FACTBOX for details:)

* The New York Stock Exchange said it would delist China Mobile, China Telecom Corp and China Unicom on Jan. 11 and index providers say they will delete them, prompting heavy share price drops.

* Tencent and Alibaba shares also fell after it was reported that the U.S. may extend investment bans to them.

* Investors have shifted holdings of Chinese firms out of U.S. listings, saying there is a risk that more Chinese companies could be affected.

* Elsewhere widely-held securities such as SMIC’s Hong Kong shares have seen modest price pressure, while others such as Hikvision have gained in recent weeks. CHINA’S RESPONSE

* China has described the U.S. moves as wanton oppression of its companies, said they lack evidence and asked the United States to cease abusing the concept of national security.

* In response to reports of sanctions extending to Tencent or Alibaba, China said it would take necessary measures to safeguard companies’ rights and interests.

* Hikvision has called its inclusion on the Defense Department list “groundless” and other firms have issued similar strongly-worded statements.

Compiled by Tom Westbrook in Singapore; Editing by Alex Richardson and Shailesh Kuber

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