U.S. President Donald Trump has issued an order banning American investment in Chinese firms allegedly linked to the Beijing military.
Trump claims China is exploiting US investors to finance the country's military development and modernization.
The ban is reported to be effective in January.
According to Reuters, the ban is likely to affect several Chinese firms listed on the stock exchange including China Telecom and Hikvision.
U.S. officials say the new directive has been under scrutiny for several months. The directive covers shareholdings directly or indirectly owned by 31 firms identified by the U.S. earlier this year.
US investors are given a period of one year to comply with the directive.
Trump, who recently lost the presidential election to his challenger, Joe Biden, will step down shortly after the directive takes effect.
Throughout his administration, Trump has sought to free the U.S. from economic ties with China.
Among the measures he has taken are to raise border taxes on billions of dollars worth of Chinese goods and impose restrictions on some Chinese technology companies.
Relations between the two countries are seen to be strained due to some unresolved issues such as coronavirus and Beijing's actions in Hong Kong.
Biden has not yet announced his strategy for China but during the election campaign, he promised to challenge the Chinese government on the same issues as Trump including trade and cyber theft.
