US Investments in China’s Hi-tech Sectors May be Banned

BEIJING, May 8 (TMTPOST) —— U.S. President Joe Biden plans to sign an executive order around the G7 Hiroshima summit to be held soon in order to restrict U.S. companies from investing in some high-tech industries in China, according to CCTV citing Bloomberg’s earlier report.

Among these industries, artificial intelligence, semiconductors, and quantum technology may face a total ban on U.S. investments.

Reports indicate that the executive order will focus on restricting U.S. companies from investing in key areas of the Chinese economy, including venture capital, private equity, and certain forms of technology transfer and joint ventures. Certain types of investments will be banned outright, while other types of investments will require companies to notify the U.S. government. Measures to be taken have been discussed for nearly 2 years and the U.S. government plans to take moves around the G7 summit to be held from May 19 to May 21. The release of the executive order comes as the U.S. looks to gain the support of G7 allies to contain China. Biden plans to form alliances with other countries and regions in a number of fields and may cooperate with major European chip-producing countries and South Korea in terms of semiconductor alliances.

According to the Securities Times, a macroeconomics analysis released by Guotai Junan Securities believes that the launch of the U.S. foreign investment review mechanism has a limited impact on China for now, but is expected to have a potentially large long-term impact  due to the expanded scope of the review, alliances, and continuous review. The stock of U.S. investments in China has fluctuated in recent years, and the incremental scale has been significantly reduced, and its investment in China is dominated by the traditional manufacturing industry, with a relatively low proportion in the new economy. While the current outbound U.S. investment review mechanism is focusing on emerging areas such as advanced semiconductors, artificial intelligence, quantum computing, etc. Considering a small amount of investments in these areas, the review will not have too big an impact in the short term.

Guotai Junan Securities also pointed out that the outbound U.S. investment review mechanism also further catalyzes more of China’s industrial policies to be released, including policies related to science and technology innovation refinancing, making it easier for listed companies to finance. China’s economy is obviously shifting to high-quality development. A number of meetings and industrial policies anchored in high-end manufacturing, digital economy and green economy, and other fields. Subsequent to the launch of the U.S. foreign investment review mechanism, China is likely to release more industrial policies in the corresponding areas, including advanced semiconductors, artificial intelligence, quantum computing, and other areas that may be touched in the future, such as science and technology innovation refinancing, improving the convenience of financing for listed companies, and further strengthening import substitution.

According to an industry source, China is expected to release certain incentive policies and set up a special investment fund for the entire semiconductor industry in the second quarter of this year.

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