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13 April


US blacklists top China chipmaker SMIC and oil giant CNOOC

Move aims to block investment that could benefit Beijing's military

Photo: Reuters

/NOVOSTIVL/ China's largest contract chipmaker and one of its biggest oil groups have been added to a U.S. blacklist over alleged military ties, escalating Washington-Beijing tensions in the final days of the outgoing Trump administration.

Semiconductor Manufacturing International Co. and China National Offshore Oil Corp. were among the four additions to the U.S. Defense Department's list of "Communist Chinese military companies" on Thursday night.

China Construction Technology Co. Ltd. and China International Engineering Consulting Corp. were also added.

The move comes after President Donald Trump said in an executive order in November that China is increasingly exploiting U.S. capital to enable the development and modernization of its military. The executive order is meant to stop any U.S. capital from going to military-related Chinese companies on the blacklist.

The executive order takes effect on Jan. 11 and prohibits "any United States person" from holding securities, directly or through funds, in companies deemed to have links to China's military. Investors already holding such assets will have until November 2021 to shed them.

SMIC is China's biggest semiconductor company. It delisted from New York last year after being traded in the U.S since 2004, and joined Shanghai's STAR tech board, the country's version of Nasdaq, this summer.

Shares in the Chinese chipmaker also trade in Hong Kong, and several U.S. funds such as the Vanguard Group, BlackRock Institutional Trust Company, Invesco Capital Management and Fidelity Management & Research Company are among its leading investors.

SMIC said on Friday morning in a stock exchange filing that it is aware of the decision from the U.S. Department of Defense and is evaluating the impacts, while warning investors of risks for investment.

Trading in its shares was halted in Hong Kong on Friday.

Previously the U.S. Department of Commerce tightened export control regulations on SMIC by asking American suppliers to apply for licenses before shipping any tools or materials to the Chinese company, citing the "unprecedented risk" posed by the company's alleged links to the military.

Earlier in June, the Defense Department added 20 Chinese companies to the blacklist, including China's largest telecom operator China Mobile, the world's third-largest server provider Inspur, global No. 1 surveillance camera provider Hikvision, and Huawei.

Last year, the department also named China Nuclear Engineering & Construction Corp., the country's research entity for nuclear technology, along with 11 other Chinese entities as alleged military companies.