Science & Technology

China Considers Countermeasures After US Intention to Curb Outbound Tech Investment

The Chinese Ministry of Commerce made harsh statements to the United States after it became known that Washington plans to impose restrictions on investments in the high-tech sector intended for Beijing.

China Considers Countermeasures After US Intention to Curb Outbound Tech Investment

The authorities of the Asian country, commenting on the intentions of the US leadership, stated their right to retaliate. A statement of the relevant content was made last Monday, June 24.

Last week, the US Treasury Department announced its intentions to set rules for local individuals and companies that invest in the Chinese technology sector. The expected measures will affect such segments of the mentioned sector as artificial intelligence, semiconductors, and quantum information technologies.

The rules, which are currently being discussed by lawmakers in Washington, will be the next point in a kind of escalation of the complex trade relationship between the United States and China. The new measures also further exacerbate US restrictions on the Asian country. In this case, it implies constraints on the supply of advanced chips and equipment necessary for the production of microcircuits in China.

Beijing has repeatedly accused Washington of practicing politically motivated actions aimed at curbing the economic and technological potential of the Asian country. The leadership of the United States explains its relevant decisions for reasons of national security. In Washington, lawmakers hold the view that China can use advanced technology to strengthen its military capabilities.

The Asian country’s Ministry of Commerce on Monday expressed serious concern and strongly protested the intentions of the United States aimed at restricting investment. In this context, a statement was made that Washington should respect the rules of a market economy and the principle of fair competition. The Chinese authorities urge the United States to stop politicizing trade and commerce issues and refuse to turn measures of action in the framework of these issues into the type of weapons.

Beijing is calling on Washington to improve economic relations with the Asian country. The Chinese authorities also note that it is necessary to abolish restrictive rules.

The Ministry of Commerce of the Asian country says that following the rule by the United States is a factor of pressure on the normal development of China’s industry. In this case, there is also an impact on the possibilities of interaction between companies on both sides. Moreover, Beijing notes that Washington’s policy of restrictions violates the security and stability of global supply chains.

The US Treasury Department announced on its website that there will be draft rules to carry out the executive order dated August 9. The mentioned order implies the restriction of investments by the United States in certain national security technologies and products in countries of concern. In this case, mainland China, Hong Kong, and Macau are mentioned, which either use or have the opportunity to use financial injections from the US.

The rules proposed last week include a prohibition on certain transactions involving several technologies and products that pose a particularly acute threat to the national security of the United States. In some cases, such transactions may be allowed, but on condition that the Treasury is notified in advance about these operations.

The Treasury statement notes that the President of the United States, Joe Biden, is taking actions aimed at preventing the use of foreign investments by interested countries intending to develop sensitive technologies or products critical to the next generation of military, intelligence, surveillance, or cyber-enabled capabilities that pose a threat to national security.

The Treasury Department of the United States invites the public to comment on the draft rules by August 4. After that, binding regulations will be adopted.

Andy Xie, an independent economist based in Shanghai, expresses doubts that Beijing’s statements imply specific retaliatory measures against Washington. The expert says that in this case, certain actions may contradict China’s program to keep world trade as open as possible. Andy Xie notes in this context that the Asian country invests relatively little in the technology sector of the United States, which is why its response actions would not be effective and would not generate significant results. Also, according to the expert, Beijing always makes certain statements when Washington announces decisions related to the practice of restrictions.

The trade war between China and the United States broke out in 2018. This process caused tariffs to be imposed on goods from the Asian country worth about $550 billion and US products worth $185 billion. The United States government has also restricted the activities of numerous Chinese companies within its borders and asked enterprises worldwide to limit business in the Asian country. So far, this state of affairs is on a trajectory of further scaling of bans and shows no signs of significant change in the foreseeable future.

US Treasury Secretary Janet Yellen said last year that planned outbound investment controls will be narrowly focused and complement existing export monitoring measures. In October 2022, Washington imposed restrictions on the sale of advanced chips and next-generation technologies to the Asian country, which increased the escalation in tension of relations between the United States and China.

As we have reported earlier, China Creates $47.5 Billion Chip Fund.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.