The Trump administration faces further legal obstacles in its ongoing effort to ban Chinese video-sharing app Tiktok. In his final days in the White House, the US president is seeking a tough-on-China technology legacy, including blacklisting Chinaโ€™s largest chipmaker. Meanwhile, a bill passed by the US House of Representatives earlier this month could potentially accelerate the pace at which Chinese tech firms return home to list.

Tiktok untouched

On Monday, US District Judge Carl Nichols in Washington fully blocked the Trump administrationโ€™s move to ban Tiktok in the US,ย NPRย reported.

  • Nichols found that Trump โ€œoverstepped his authorityโ€ in using his emergency economic powers to try to block transactions between Tiktok and US companies.ย 
  • Tiktok’s lawyers had demonstrated that Trump government officialsโ€™ โ€œfailure to adequately consider an obvious and reasonable alternative before banning TikTokโ€ showed that the decision to ban the app was โ€œarbitrary and capricious,โ€ Nichols wrote in the ruling.
  • The ruling blocks a Trump executive order issued on August 14 which would outlaw US transactions with Tiktok. The ban is set to take effect on Dec. 12.ย 
  • On Oct. 30, a federal judge in Pennsylvaniaย blockedย the decision after Tiktok users challenged it in court.
  • Trump administration had set a Dec. 4 deadline for Tiktok parent Bytedance to either sell or spin off the appโ€™s business in the US. The government said that day that it would not extend or enforce the deadline. Trump said previously that he hadย approvedย โ€œin conceptโ€ a deal in which American companies Oracle and Walmart would create a US-based company, Tiktok Global, to take over the app’s US operations. But the deal is subject to Beijingโ€™s approval, which hasnโ€™t yet said a word about it.

Tough-on-China tech legacy

The Trump administration on Thursday added Shanghai-based Semiconductor Manufacturing International Corp. (SMIC), Chinaโ€™s largest chipmaker, to a blacklist that could cut it off from American investment, Reutersย reported. Foreign policy and political analysts said that Trump wants to leave a โ€œtough-on-Chinaโ€ legacy that cannot be reversed by his successor, Joe Biden.

  • The US Department of Defense on Thursday added SMIC and state-owned oil giant China National Offshore Oil Corp. (CNOOC) to a list of entities designated as owned or controlled by the Chinese military.ย 
  • While the list, mandated by a 1999 law requiring the defense department to compile a list of Chinese military-controlled companies, did not trigger any penalties, a recent executive order issued by Trump will bar US investors from buying shares of the blacklisted firms starting late next year.

US bill to drive Chinese tech firms home

A bill passed by the US House of Representatives last week is likely to accelerate US-listed Chinese tech firmsโ€™ pace going home. The bill will bar Chinese companies from US exchanges if they donโ€™t fully comply with American auditing rules,ย Reutersย reported.

  • The potential that US auditors will be able to inspect Chinese companiesโ€™ audit documents has already led some Chinese tech firms to delist from US stock exchanges or dual-list their shares in Hong Kong.ย 
  • So far, companies like online media firmย Sinaย and online travel agencyย Ctrip have decided to delist from US markets, while e-commerce firmย JD.comย and gaming giantย Neteaseย have debuted secondary listings in Hong Kong.
  • โ€œThe Holding Foreign Companies Accountable Actโ€ bars securities of foreign firms from being listed on any US stock exchanges if they have failed to comply with the US Public Accounting Oversight Boardโ€™s audits for three years in a row, according to Reuters.
  • The act would also require US-listed companies to disclose whether they are owned or controlled by a foreign government.
  • Chinese companies are likely to shrug off the bill because they have alternative capital-raising venues at home, theย SCMPย cited analysts as saying on Dec. 3.ย 
  • The Hong Kong exchange, another popular destination for Chinese tech firms seeking to list overseas, is keen to attract tech firms with corporate shareholding structuresย allowingย shares with extra voting rights, according to the SCMP.
  • In mainland China, regulators areย permittingย companies that are not yet profitable to list, overhauling previous strict listing thresholds and potentially luring more tech firms to list at home.
  • The audit bill was unanimously passed by the US Senate in May. The White House said last Wednesday that President Trump is expected to sign the bill into law.

Writing about semiconductors and telecommunications.