According to Nikkei Asia, Chinese military-industrial companies are now looking for new investors after being struck by U.S. sanctions.
The measures forbid U.S. investors from selling their stakes without Washington’s permission. It is meant to cut these black-listed firms off the American capital they needed to develop.
Nikkei Asia reported on September 29 that 40 of the 68 these firms have had their shareholding arrangements modified significantly.
Thirty-four of the listed companies have released similar shareholder data from the end of June last year and this year. More than 60%, or 21 of them, have experienced a decrease in the number of stockholders. The publication nonetheless noted that the full effect of the sanctions is hard to clarify.
Instead, there has been more footprint from Beijing. This includes raising money through state funds, enabling “homecoming listings” in Shanghai, and promoting mergers.
For example, four companies have already been removed from the New York Stock Exchange due to U.S. restrictions on investment in firms with connections to the Chinese military. Three of them, China Telecom, China Mobile, and CNOOC, were given “homecoming” listings in Shanghai, which widened their shareholder bases.
Besides, China has also directed the National Military-Civil Fusion Industry Investment Fund to hoard stocks of U.S.-sanctioned firms.
The program is now the fifth-largest shareholder in the Shenzhen-listed company AVIC Jonhon Optronic Technology, which makes essential connecting components for optical communications. It also holds a significant stake in other sanctioned entities, such as AVIC Heavy Machinery, hydraulic and iron castings producer, and drone maker Aerospace CH UAV.
Then comes merger deals. According to Nikkei Asia, China has recently allowed AVIC division China Avionics Systems to acquire AVIC Electromechanical Systems, which is listed on the Shenzhen Stock Exchange.
Expert on Chinese and regional defense issues Tai Ming Cheung comments that the sanctions have forced these Chinese companies, which rely heavily on U.S. funding, to be more self-reliant. He believes they will take time to recover from the blow.
Tai, a professor at the University of California San Diego, says, “They are hoping, in a few years, that these Chinese firms can resume their technological developments, despite these hits.”