RWR Reference Sheet: Publicly Traded Chinese Military-Industrial Companies Targeted by New Executive Order

Over the past three years, RWR has been track­ing the cap­i­tal mar­kets expo­sure of Chi­nese com­pa­nies under var­i­ous U.S. gov­ern­ment sanc­tions and des­ig­na­tions.  This has includ­ed iden­ti­fy­ing the pub­licly trad­ed secu­ri­ties of these com­pa­nies (as well as their sub­sidiaries and affil­i­ates) and the exchange-trad­ed funds (ETFS), index mutu­al funds, and active­ly man­aged mutu­al funds that include expo­sure to these securities. 

As part of this effort, RWR has com­piled a spread­sheet that iden­ti­fies the pub­licly trad­ed secu­ri­ties of the Chi­nese mil­i­tary and sur­veil­lance com­pa­nies that were added yes­ter­day to the Non-SDN Chi­nese Mil­i­tary-Indus­tri­al Com­plex Com­pa­nies List (NS-CMIC List) by the U.S. Depart­ment of the Treasury’s Office of For­eign Assets Con­trol (OFAC), pur­suant to the new Exec­u­tive Order issued by Pres­i­dent Biden.  The spread­sheet also details the expo­sure of these secu­ri­ties to three of the lead­ing emerg­ing mar­kets index­es that are wide­ly tracked by indi­vid­ual and insti­tu­tion­al investors.

Accord­ing to the EO, U.S. investors will be pro­hib­it­ed from invest­ing in the secu­ri­ties of com­pa­nies on the NS-CMIC List, begin­ning on August 2, 2021.  This new EO expands the scope of EO 13959 (as amend­ed), which was issued by Pres­i­dent Trump on Novem­ber 12, 2020. These pro­hi­bi­tions also apply to invest­ments via index funds.

This RWR spread­sheet doc­u­ments which of the com­pa­nies on the NS-CMIC List are pub­licly trad­ed and there­fore affect­ed by the new EO.  It also iden­ti­fies whether these same com­pa­nies were pre­vi­ous­ly des­ig­nat­ed by the U.S. Depart­ment of Defense as Chi­nese mil­i­tary com­pa­nies under Sec­tion 1237 of the Nation­al Defense Autho­riza­tion Act (NDAA) for FY 1999 and/or Sec­tion 1260H of the NDAA for FY 2021, although these des­ig­na­tions by them­selves no longer car­ry any direct cap­i­tal mar­kets sanc­tions con­se­quence.  As per the new EO, the iden­ti­fi­ca­tion and list­ing of Chi­nese mil­i­tary indus­tri­al com­plex com­pa­nies is now under the sole juris­dic­tion of the Trea­sury Department.

Of the 59 com­pa­nies added to the NS-CMIC List on June 3, 37 are pub­licly trad­ed on the Shen­zhen, Shang­hai, and/or Hong Kong exchanges as A‑shares and H‑shares. Because six of those 37 com­pa­nies are list­ed on more than one exchange (dual-list­ed), there are, in effect, 43 stocks affect­ed by the revised invest­ment ban.

This spread­sheet is intend­ed to serve as an edu­ca­tion­al resource.  Please reach out with any ques­tions or comments.

Down­load the Pub­licly Trad­ed NS-CMIC Spread­sheet here.