FACT BRIEF

Is the impact of a Trump administration ban on owning stocks linked to China’s military largely symbolic?

Tuesday, December 15, 2020

By Austin Tannenbaum

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A Nov. 12, 2020, executive order banning U.S. investment in companies linked to China's People's Liberation Army is a largely symbolic gesture. Chinese companies utilize state bank loans and domestic investment as their primary funding sources rather than seek out foreign investment. China is relatively closed to world investment markets, with only 5.4% of its shares being foreign-owned.

Neither will the ban significantly impact U.S. investors. According to a 2019 Seafarer Funds report, U.S. investment in all Chinese stocks was estimated at less than 1% of all U.S. portfolio holdings.

Trump's executive order applies to 35 Chinese companies and will take effect Jan. 11, 2021. Investors will have until November 2021 to divest the companies from their portfolios.

This fact brief is responsive to conversations such as this one.

Sources

White House: Executive order banning US investment in Chinese military-linked companies

Investopedia: China’s stock markets vs. US stock markets

Seafarer Funds: How exposed are US investors to China?

Reuters: Trump administration adds four more firms to blacklist

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