What are the effects of the sanctions applied by the Trump administration?
What approach could the Biden administration take and what changes can we expect? Let’s try to make some predictions.
In particular, from November 6, 2020, the Trump administration has:
1. Issued an executive order banning US individuals from trading publicly traded securities of more than 35 “Chinese military companies”;
2. the US Department of Commerce has established a licensing requirement for nearly all exports to 60 previously identified firms;
3. Designated 58 entities as Chinese “military end users” under the Export Administration Regulation (EAR), which also results in restrictions on a wide range of high-tech exports; IS
4. eliminated Hong Kong as a separate destination from China, dropping its preferential treatment for export licenses.
5. During the same period, President Trump signed an executive order blocking transactions with companies that “develop or control” certain Chinese-related mobile and desktop applications and related software, namely Alipay, CamScanner, QQ Wallet, SHAREit, Tencent QQ, VMate, WeChat Pay and WPS Office.
At the same time, previous enforcement orders banning transactions with the owners of TikTok and WeChat have been stopped by federal courts, and the effective date of these orders has been suspended pending the outcome of the ongoing litigation.
Compliance with the prohibition on trading in securities has proved challenging for the financial community, forcing banks and investment companies to sell or restructure hundreds of products containing listed securities of the so-called “Communist Chinese Military Companies” and other companies whose names “closely match” the names of listed companies.
Therefore, the prohibition includes, for example, a mutual fund that includes in its portfolio one or more subject securities or an insurance policy that has a mutual fund option for policyholders holding the securities of such named entities. The NYSE has announced the delisting of these companies, and both NASDAQ and MCSI have announced that they will remove the listed companies from their indices.
In short, the Trump administration has therefore made the decision to block foreign policy towards China. In response, China has adopted its own regulations prohibiting Chinese companies and individuals from complying with “punitive measures mandated by foreign governments”.
Outlook under President Biden
It remains to be seen whether and to what extent the Biden administration will implement or limit the action of these and other restrictions applied by the Trump administration against China. Analysts expect an initial waiting period from the Biden administration until a new team is created, which will evaluate the overall strategic approach towards China.
Some analysts say the Biden administration is likely to share the basic view that China is a strategic competitor and a potential adversary. Hence, the question of how to deal with China remains, as the United States needs it on some important issues.
Therefore it is believed that US policy towards China under President Biden will likely have to proceed with:
– selective disengagement from China in some areas considered more central to national security and cooperation in other areas where national security risks are less significant;
– increased cooperation with allies to define shared approaches to address areas of concern towards China;
– stronger arguments about China’s human rights abuses;
– a more direct engagement with China on areas of concern in order to seek shared solutions.
It is within this general political framework that the Biden administration will evaluate and approach the new and existing Chinese restrictions imposed by the Trump administration. Of course, the Biden administration has the legal authority to nullify or undo nearly all of the Trump administration’s actions.
For these and other reasons, an imminent turnaround in the Trump administration’s action is not expected. Rather, a more balanced approach is expected than we have seen in the last four years, with a refinement of existing sanctions to improve their effects (with FAQs, licenses and the like) while stepping up against China in coordination with closest allies.
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