Outbound on the outs
It's getting harder for US firms to invest in China.
On Wednesday, US President Joe Biden issued an executive order that proposes restrictions on US investment in China’s tech sector, specifically chips, quantum information, and AI.
- The proposal won't be finalized until next year, so we don't know for sure what shape it will take.
- We expect it will be a mix of outright prohibitions into certain areas and requirements that investors notify the Treasury in advance of certain investments.
The good news: The rules won’t apply to already existing investments.
The order appears narrower than expected. But that doesn't mean Beijing is happy about it.
According to a statement from the Ministry of Commerce:
- “The US … is pursuing decoupling in the investment sector…and seriously disrupting global supply chain security. ”
- “China is deeply concerned about this and reserves the right to take measures in response.”
Get smart: Beijing couldn't care less about US venture capital money. Chinese tech companies can always raise the money somewhere else.
- What concerns Beijing is that Washington may block those investments – such as joint ventures and R&D centers – that also come with technology know-how.
The big picture: This executive order will further convince Beijing that Washington has no interest in improving the bilateral relationship.