Since the Trump Administration, the Commerce Department has been adding Chinese tech companies to its Entity List, banning U.S. firms from doing business with them without the approval of Washington.
On Nov. 24, eight new names were added, mostly all of them tied to China’s military industrial complex. To date, unlike capital market sanctions that required Wall Street firms like Vanguard and BlackRock, who have their hand in nearly ever China share you can think of, if the Entity List company is publicly traded, no one was stopping American investors from buying.
Two companies that were added recently, QuantumCTek and Goke Microelectronics count Vanguard as small shareholders in their mutual funds sold to retail clients.
State Street exchange-traded funds, known as the SPDRs, also have small positions in Goke, as does their private wealth division, State Street Global Advisors.
The Biden Administration has already followed in Trump’s footsteps in banning these firms from owning shares in more than 40 companies, all tied in some way to China’s military. They had to start selling their positions beginning Aug. 2, and from what CPA has gathered, all of them have either begun liquidating or already sold out of their positions.
The fact that Entity List names are still allowed access to American capital needs to be revisited as part of the capital markets sanction policy. If American companies can’t sell certain computer components to these companies, should Vanguard be able to fund them?
The eight technology companies added to the Entity List are believed to be assisting the Chinese military’s quantum computing efforts and acquiring or attempting “to acquire U.S. origin-items in support of military applications.”
Commerce Secretary Gina Raimondo said her department was “committed to effectively using export controls to protect our national security.”
Allowing Wall Street to fund companies already deemed a potential risk to national security defeats that purpose.
Here is what Commerce said about the 8 companies now banned from sourcing American computer hardware and other products:
Eight technology entities based in the PRC are being added to the list as part of the Department of Commerce’s efforts to prevent U.S. emerging technologies from being used for the PRC’s quantum computing efforts that support military applications, such as counter-stealth and counter-submarine applications, and the ability to break encryption or develop unbreakable encryption. These PRC-based technology entities support the military modernization of the People’s Liberation Army and/or acquire and attempt to acquire U.S. origin-items in support of military applications. Today’s action will also restrict exports to PRC producers of electronics that the support the People’s Liberation Army’s military modernization efforts.
