On November 12, President Donald Trump signed an Executive Order on Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies (the “Executive Order”). [1] The Executive Order states that the People’s Republic of China (“PRC”) is “increasingly exploiting United States capital to resource and to enable the development and modernization of its military, intelligence, and other security apparatuses, which . . . directly threaten[s] the United States homeland and United States forces overseas.” The Executive Order declares a national emergency requiring action to prevent the PRC from “exploit[ing] United States investors to finance the development and modernization of [the PRC’s] military.” [2]

As detailed below, the Executive Order will prohibit U.S. persons [3] from purchasing or investing in publicly traded securities [4] of companies identified by the U.S. government as “Communist Chinese military companies.” The term “Communist Chinese military company” includes any company that the U.S. Department of Defense (“DOD”) has identified pursuant to Section 1237 of the National Defense Authorization Act for FY 1999. Currently, 31 companies meet this criterion, including two companies whose shares are traded on U.S. exchanges. [5] The list of firms includes aerospace, shipbuilding, construction, technology and communication companies.

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