On June 3, 2021, President Biden signed an executive order to “solidify and strengthen” a Trump-era executive order prohibiting investment in certain companies with ties to the Chinese military. The purpose of the order is to counter “the threat posed by the military-industrial complex of the People’s Republic of China (PRC),” and to curtail the proliferation of “Chinese surveillance technology” that “facilitate[s] repression or serious human rights abuse[s].”

Although the new order supersedes the Trump Administration’s order, its structure is very similar. The order prohibits “United States persons” from purchasing or selling securities of “any person listed” in the order’s Annex. The term “United States person” is defined as “any United States citizen, lawful permanent resident, [or] entity organized under the laws of the United States.” The Annex includes 59 companies from a wide range of industries, such as telecommunications, oil, semiconductors, and aerospace.

The order’s investment ban will take effect in staggered fashion. The general prohibition on purchasing or selling securities in the companies at issue takes effect on August 2, 2021. However, purchases or sales of such securities that are “made solely to effect the divestment, in whole or in part, of such securities by a United States citizen” are permitted for a full year—until June 3, 2022.

This executive order is another indication that continuity, not change, appears to be the trend in the Biden Administration’s China policy. As a result, United States companies and individuals may want to consider taking action to insulate their supply chains and investment activities from current and future China-related restrictions. Periodic evaluation of investment portfolios and sanctions-list screening of business partners in China may also be warranted. And, for a company that finds itself on a sanctions list, it may be possible to challenge the designation through court action.