Cooperation can very often lead to competition, which can give way to conflict.
 
And even as the Biden administration makes inroads in rolling back some of the previous administration’s more confrontational policies towards China, it’s taking a tack that risks carving up the world along Cold War-era lines yet again.  
 
The Biden administration looks likely to maintain pressure on China by preserving limits on U.S. investments in certain Chinese companies imposed under former President Donald Trump, bucking entreaties from Wall Street to ease the restrictions.
 
Biden officials are still in preliminary discussions about Trump’s investment bans on companies linked to China’s military, which include three of the country’s biggest telecommunications firms.
 
Some of China’s biggest companies which are listed on American stock exchanges, including Alibaba Group Holding (-0.49%), Baidu (-0.41%) and Tencent Holdings (-0.23%) all fell on the prospect that the ban could affect broader American appetite for Chinese companies.
 
The Biden administration is likely to find bipartisan support in Congress for a tougher stance on China and in an e-mailed statement, Republican Senator Marco Rubio of Florida said,
 
“It is common sense that U.S. dollars should not flow to entities close to the Chinese Communist Party’s military, which is building weapons and capabilities designed to kill American service members.”
 
“The Biden administration should reject any efforts by the investor class to erode the Trump-era sanctions, and it should work with Congress to codify those penalties into law.”
 
The blacklist is not only a sore point in Beijing, but also on Wall Street.
 
Wall Street has been actively lobbying the Biden administration to completely roll back Trump’s investment ban, and at the very minimum, banks want clear guidance from the U.S. Treasury’s Office of Foreign Assets Control, or OFAC, on compliance with the ban.
 
The Trump administration confused markets with conflicting announcements about the sanctions during his final months in office.
 
Investors were left scratching their heads when Trump announced in November that U.S. persons would be banned from investments in any firm on the U.S. Treasury Department’s newly created list of “Communist Chinese Military Companies.”
 
Following the announcement, the New York Stock Exchange said it would delist three large Chinese telecom companies, only to reverse that decision amid confusion over the scope of the ban.
 
The NYSE eventually reinstated its plan after pressure from then-U.S. Treasury Secretary Steven Mnuchin.
 
Compiled by Pentagon officials who have access to classified materials and can determine which companies benefit the Chinese military, the Biden administration has already missed an April 15 deadline to submit to Congress a fresh list of Chinese companies linked to the military.
 
U.S. investors have a year to exit companies once they appear on the blacklist.
 
For the companies that appeared on the original list last year, investors have until May 27 to wind down new transactions and until November 11 to fully divest – and the looming first deadline is already sending shares in Chinese firms listed in the U.S. lower.
 
But investors in Chinese firms looking for respite from the saber rattling between Washington and Beijing may have to pare back expectations of a détente, with U.S. Treasury Secretary Janet Yellen and her team indicating a continuation of the Trump administration’s tough stance on China.
 
In his Senate confirmation hearing in February, Deputy Treasury Secretary Wally Adeyemo testified,
 
“It is critical that we use Treasury’s tools to hold China accountable for actions they take that are not consistent with international law and that put our national security at risk.”