The US has added China's biggest computer chip-maker SMIC to a list of "Chinese military companies", putting further pressure on the company.
The move by the Department of Defense means US investors are now barred from holding or trading shares in SMIC.
It said the Chinese government was using the expertise of "civilian entities", such as companies and universities, to modernise its military capabilities.
SMIC has denied any military links, BBC reported.
The company now falls under an executive order signed by President Donald Trump in November, which sought to prevent US capital from funding the modernisation of China's military.
SMIC has previously said some of its US suppliers have been issued with letters telling them they will be subject to new export restrictions.
This suggests the US Department of Commerce may add the company to its trade blacklist, known as the entity list, although it has not yet published such a decision.
If that happens, it could have a significant impact on chip production."Seeing as SMIC is dependent on sourcing from US companies in order to be able to manufacture silicon chips, this puts SMIC's business in the hands of the Department of Commerce, which can decide whether to issue licences on a case-by-case basis," said Richard Windsor, founder of research firm Radio Free Mobile.
