The Trump administration is poised to add China's top chipmaker SMIC and national offshore oil and gas producer CNOOC to a blacklist of alleged Chinese military companies, according to a document and sources quoted by Reuters.
Such a move would curb their access to US investors and escalate tensions with Beijing weeks before President-elect Joe Biden takes office.
Earlier this month it was reported that the US Department of Defense (DOD) was planning to designate four more companies as owned or controlled by the Chinese military, bringing the number of firms affected to 35.
A recent executive order issued by President Donald Trump would prevent US investors from buying securities of the listed firms starting next year.
The document and several sources have said the four firms on the list are:
# China Construction Technology Co Ltd;
#China International Engineering Consulting Corp;
# Semiconductor Manufacturing International Corp (SMIC);
# China National Offshore Oil Corp (CNOOC).
It was not immediately clear when they would be published in the Federal Register.
SMIC said it continued "to engage constructively and openly with the US government" and that its products and services were solely for civilian and commercial use. "The company has no relationship with the Chinese military and does not manufacture for any military end-users or end-uses."
The DOD, the Chinese embassy in Washington and CNOOC did not immediately respond to requests for comment.
SMIC, which relies heavily on items from US suppliers, was already in Washington's crosshairs. In September, the US Commerce Department informed some firms that they need to obtain a licence before supplying goods and services to SMIC after concluding there was an "unacceptable risk" that equipment supplied to it could be used for military purposes.
The upcoming move, coupled with similar policies, is seen as seeking to cement outgoing Republican President Donald Trump's tough-on-China legacy and to box incoming Democrat Biden into hardline positions on Beijing amid bipartisan anti-China sentiment in Congress. The Biden campaign declined to comment.
The list is part of a broader effort by Washington to target alleged moves by Beijing to enlist corporations to harness emerging civilian technologies for military purposes.
There was also a report last week that the Trump administration is close to declaring that 89 Chinese aerospace and other companies have military ties, restricting them from buying a range of US goods and technology.
The list of "Communist Chinese Military Companies" was mandated by a 1999 law requiring the Pentagon to compile a catalog of companies "owned or controlled" by the People's Liberation Army, but DOD only complied in 2020. Giants like Hikvision, China Telecom and China Mobile were added earlier this year.
This month, the White House published an executive order, first reported by Reuters, that sought to give teeth to the list by prohibiting US investors from buying securities of the blacklisted companies from November 2021.
The directive is unlikely to deal the firms a serious blow, experts said, due to its limited scope, uncertainty about the stance of the Biden administration and already-scant holdings by US funds.
Still, combined with other measures, it deepens a rift between Washington and Beijing, already at loggerheads over the China's handling of the coronavirus and its crackdown on Hong Kong.
Congress and the administration have sought increasingly to curb the US market access of Chinese companies that do not comply with rules faced by American rivals, even if that means antagonising Wall Street.