Outbound investment restrictions on Chinese tech coming soon, NYT -- China Boss update 2.10.23
Update
What happened.
‘The Biden administration is preparing new rules that would restrict U.S. dollars from flowing to China” amid “[g]rowing concerns about China’s military and economic ambitions,” New York Times reported on Thursday.
NYT:
For months, the Biden administration has been preparing curbs on the investments that U.S. firms can make in China, particularly in areas like advanced computing.
Those measures are now largely complete and could be issued within two months. The Treasury Department has been reaching out to other governments, including the European Union, to try to ensure that they do not rush in to provide similar financing to China after the United States cuts it off, according to people familiar with the discussions.
The Chinese spy balloon kerfuffle has only increased the sense of urgency to - as one lawmaker put it - “examine all interconnections between the Chinese and U.S. economy, specifically connections supporting China’s military and human rights abuses, and pursue options to eliminate U.S. capital flowing into those areas.”
Why it matters.
Financing of "sensitive areas" prohibited
The Times cited sources familiar with Biden's executive order who say it will likely "prohibit outright investments in some sensitive areas, like quantum computing, advanced semiconductors and certain artificial intelligence capabilities with military or surveillance applications." Although biotechnology had also been discussed, for now, it is excluded, they said.
There is, as one might imagine, a great deal of push back against the White House’s plans by some US businesses .
NYT:
Investment firms including Blackstone, KKR, Sequoia, Carlyle Group, Bain Capital, Silver Lake, General Atlantic and Warburg Pincus all have notable exposure to China. According to tracking by Rhodium Group, a research firm with a focus on China, U.S. investors have been carrying out about 3,000 transactions per year in China, including both foreign direct investment and venture capital deals, with about 500 of those valued at more than $1 million.
Bill Ford, the chief executive of General Atlantic, an investment firm, has expressed his views about possible regulation directly with Commerce Secretary Gina Raimondo, a person familiar with the matter said.
General Atlantic says it has invested nearly $7 billion in China since 2000 with more than 34 portfolio companies in the country. One of its highest-profile investments there, ByteDance, the parent company of TikTok, has found itself in the cross hairs of the debate over how to manage U.S.-Chinese financial ties.
But, both, republican and democrats are united on the issue, and Congress, recently, “warned the White House that if the administration did not move ahead with investment restrictions,” it would do so.
Claire Chu, a senior China analyst at defense intelligence firm Janes, told the Times that “[s]upport has been building for the government to take more oversight of these kinds of deals” and that it wasn’t “so much a matter of whether this will happen as when.”
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