The Wall Street Journal has been reporting on the administration’s intentions to put new curbs on Chinese investments in the U.S. tech sector and on some exports of tech to China. Rule are expected to be announced in the coming days that will block firms with at least 25% Chinese ownership from buying companies involved in “industrially significant technology.” This is expected to ratchet up commercial tensions.
The actions are designed to help mitigate many of the unfair practices China leverages to dominate in key tech sectors, including those articulated in Beijing’s “Made in China 2025” report which is a plan to become a global leader in 10 broad areas of technology including information technology, aerospace, electric vehicles and biotechnology.
It is expected that before the rules go into effect U.S. industry will be given a chance to comment.
“The President has made clear his desire to protect American technology,” said Commerce Secretary Wilbur Ross, in a statement to The Wall Street Journal on Sunday. “All possibilities that would better protect American technology, including potential changes to export controls, are under review.”
This is opening a major new front in the U.S. and Chinese trade conflict.
Meanwhile, according to the South China Morning Post, China’s Central Bank has freed up $100 billion in bank funding to help their firms weather the storm. They are hunkering down and preparing for an economic struggle.
For additional context we recommend reading the special advisory published by the law firm Cooley titled:New Restrictions on Chinese Participation in US Technology Sector Anticipated This Week. Cooley reports that:
The enhancement of US export controls is expected to apply to US technology exports (e.g., hardware, software and technology) to China, Chinese companies and Chinese nationals. It is unclear, however, whether the enhanced controls will be implemented through existing regulations or imposed directly by the president under this IEEPA authority. Further, it is not known whether the controls will be applied to items (i.e., commodities, software and technology) that are currently controlled under the Commerce Control List or whether the US Government will identify new items for control.
To date, the Trump Administration has not released detailed descriptions of the specific restrictions contemplated. Companies operating in the technology sectors listed above will need to be prepared to assess the impact of these measures on current and future investments by Chinese investors and make changes to their export compliance policies and procedures in response to any newly announced restrictions.
For more on the overall status of the ongoing trade wars, World War T, see: World War T: What does it mean for your current decision-making?