Section 1 Short title
This Act may be cited as the “Divesting from Communist China’s Military Act of 2026”.
Divesting from Communist China’s Military Act of 2026
A BILL
To require the Secretary of the Treasury to include any entity identified as a Chinese military company on the Non-SDN Chinese Military-Industrial Complex Companies List.
Sec. 2 Findings
Congress makes the following findings:
In Executive Order 13959 (50 U.S.C. 1701 note; relating to addressing the threat from securities investments that finance Communist Chinese Military Companies), President Donald J. Trump described the People’s Republic of China’s military-industrial complex by specifically citing the military-civil fusion strategy of the Government of the People's Republic of China, in which that Government “is increasingly exploiting United States capital to resource and to enable the development and modernization of its military, intelligence, and other security apparatuses … [k]ey to the development of the PRC’s military, intelligence, and other security apparatuses is the country’s large, ostensibly private economy”.
In Executive Order 14032 (50 U.S.C. 1701 note; relating to addressing the threat from securities investments that finance certain companies of the People’s Republic of China), President Joseph R. Biden reasserted those concerns and further found that the use of Chinese surveillance technology outside the People's Republic of China and the development or use of Chinese surveillance technology to facilitate repression or serious human rights abuse constitute unusual and extraordinary threats, expanding the scope of the national emergency declared in Executive Order 13959.
Section 1260H(g) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (Public Law 116–283; 10 U.S.C. 113 note) defines a “Chinese military company” as “an entity that is—
“(i)
“(I) directly or indirectly owned by, controlled by, or beneficially owned by, affiliated with, or in an official or unofficial capacity acting as an agent of or on behalf of, the People’s Liberation Army, Chinese military and paramilitary elements, security forces, police, law enforcement, border control, the People’s Armed Police, the Ministry of State Security (MSS), or any other organization subordinate to the Central Military Commission of the Chinese Communist Party, the Chinese Ministry of Industry and Information Technology (MIIT), the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC), or the State Administration of Science, Technology, and Industry for National Defense (SASTIND); or
“(II) identified as a military-civil fusion contributor to the Chinese defense industrial base; and
“(ii) engaged in providing commercial services, manufacturing, producing, or exporting”
The functions and objectives of Chinese military companies and contributors to the Chinese military-industrial complex are substantially similar and warrant a commensurate level of treatment under United States statutes and regulations.
Section 805 of the National Defense Authorization Act for Fiscal Year 2024 (Public Law 118–31; 10 U.S.C. 4651 note prec.) imposed restrictions on purchases by the Department of Defense of goods and services produced or developed by Chinese military companies identified under section 1260H(g) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 and entities subject to the control of such companies. Beginning June 30, 2026, the Department of Defense will be prohibited from executing new contracts with such companies and entities, and starting June 30, 2027, the Department of Defense will be prohibited from purchasing end products or services produced or developed by such companies and entities indirectly through third parties.
As the Department of Defense prepares to implement the procurement restrictions described in paragraph (5), it is still possible for companies and entities described in that paragraph to raise capital by selling securities to investors that trade on United States exchanges.
In harmonizing enforcement approaches across sanctions regimes of the United States Government, Congress can assist the President to ensure consistent treatment of entities posing national security risks, thereby enhancing the effectiveness of United States sanctions and investment restrictions.
Sec. 3 Inclusion of Chinese military companies on Non-SDN Chinese Military-Industrial Complex Companies List
In general— Not later than 90 days after the Secretary of Defense identifies an entity as a Chinese military company operating directly or indirectly in the United States under section 1260H of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (Public Law 116–283; 10 U.S.C. 113 note), the Secretary of the Treasury shall include that entity on the Non-SDN Chinese Military-Industrial Complex Companies List (commonly known as the “NS–CMIC List”) if the entity is not already included on the NS–CMIC List.
Effect of inclusion—
In general— Except as provided by paragraph (2), not later than 60 days after the inclusion of an entity on the NS–CMIC List under subsection (a), the prohibitions set forth in Executive Order 13959 shall apply with respect to the entity.
Divestment period— A United States person may, during the one-year period beginning on the date on which an entity is included on the NS–CMIC List under subsection (a), purchase or sell publicly traded securities issued by the entity solely for the purpose of divesting, in whole or in part, such securities.
Definitions— In this section:
Appropriate congressional committees— The term appropriate congressional committees means—
the Committee on Banking, Housing, and Urban Affairs of the Senate; and
the Committee on Financial Services of the House of Representatives.
Executive Order 13959— The term Executive Order 13959 means Executive Order 13959 (50 U.S.C. 1701 note; relating to addressing the threat from securities investments that finance Communist Chinese Military Companies), as amended by Executive Order 14032 (50 U.S.C. 1701 note; relating to addressing the threat from securities investments that finance certain companies of the People’s Republic of China).
Non-sdn Chinese Military-Industrial Complex Companies List; NS–CMIC List— The terms Non-SDN Chinese Military-Industrial Complex Companies List and NS–CMIC List mean the list maintained by the Office of Foreign Assets Control of the Department of the Treasury under Executive Order 13959 or any successor order.
Publicly traded security— The term publicly traded security includes—
any security (as defined in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a))) denominated in any currency that trades on a securities exchange, or through the method of trading that is commonly referred to as “over-the-counter”, in any jurisdiction; and
any security that is derivative of or designed to provide investment exposure to a security described in subparagraph (A).
United states person— The term United States person means—
any United States citizen or an alien lawfully admitted for permanent residence to the United States;
an entity organized under the laws of the United States or of any jurisdiction within the United States (including any foreign branch of such an entity); or
any person in the United States.