S.2048 - PRC Military and Human Rights Capital Markets Sanctions Act of 2025 (119th Congress)
Summary
S.2048, the PRC Military and Human Rights Capital Markets Sanctions Act of 2025, aims to prohibit the purchase of certain securities from entities identified as supporting the Chinese military or violating human rights. The bill directs the President to compile a list of "covered entities" based on existing lists maintained by the Departments of Treasury, Defense, and Commerce. This list would include entities on the Specially Designated Nationals and Blocked Persons list, the Non-SDN Chinese Military-Industrial Complex Companies List, and those implicated in forced labor or human rights abuses.
Within 90 days of enactment, the President must create and publicize this consolidated list, including unique identifiers where possible. United States persons would then be prohibited from purchasing, selling, or holding securities issued by these covered entities. A divestment period is provided, with penalties for non-compliance.
The bill seeks to leverage financial pressure to deter human rights abuses and military expansion by the People's Republic of China.
Expected Effects
The primary effect of this bill would be to restrict investment flows from the United States into specific Chinese entities deemed problematic. This could impact the financial performance of those entities and potentially limit their ability to engage in activities that contribute to military expansion or human rights violations.
It may also lead to some disruption in financial markets as US investors divest from the targeted securities. The bill also creates a compliance burden for US financial institutions and investors who must monitor and adhere to the prohibitions.
Potential Benefits
- Addresses Human Rights Abuses: By targeting entities involved in human rights violations, the bill could help deter such abuses.
- Strengthens National Security: Limiting investment in Chinese military companies could enhance US national security.
- Promotes Ethical Investing: Encourages investors to consider the ethical implications of their investments.
- Enhances Transparency: The requirement for a publicly available list of covered entities increases transparency.
- Levels the Playing Field: Prevents US capital from inadvertently supporting entities that undermine US values and interests.
Potential Disadvantages
- Economic Impact: The bill could negatively impact US investors holding securities of covered entities.
- Compliance Costs: Financial institutions may face increased compliance costs to monitor and enforce the prohibitions.
- Retaliation: China could retaliate with similar restrictions on US investments.
- Enforcement Challenges: Identifying and tracking covered entities and their securities could be complex.
- Limited Scope: The bill's effectiveness may be limited if other countries do not adopt similar measures.
Most Disadvantaged Areas:
Constitutional Alignment
The bill appears to align with the US Constitution, particularly the powers granted to Congress to regulate commerce with foreign nations (Article I, Section 8, Clause 3) and to provide for the common defense (Article I, Section 8, Clause 1). The bill does not appear to infringe on individual liberties or rights protected by the Bill of Rights.
The bill's focus on national security and foreign policy falls within the purview of the Executive Branch, and the requirement for the President to compile and maintain the list of covered entities is consistent with the President's role in executing laws passed by Congress (Article II, Section 3).
However, the divestment requirements could potentially raise concerns related to the Takings Clause of the Fifth Amendment if they were to result in a significant loss of value for US investors without just compensation. However, this is unlikely to be a successful argument.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).