Harming the interests of the business community and disrupting the industrial and supply chains - Questions and concerns raised by the US Foreign Investment Review Executive Order Semiconductors | China | United States

Beijing, August 10th (Xinhua) - Harming the interests of the business community and disrupting the industrial and supply chains - Questions and concerns raised by the US Foreign Investment Review Executive Order

Xinhua News Agency reporter Yu Maofeng and Miao Peiyuan

On the 9th, the US government issued an administrative order to review foreign investment, restricting US investment in China's high-tech sector. International observers believe that the actions of the United States violate the principles of market economy and fair competition, disrupt the international economic and trade order, seriously disrupt the stability of global industrial and supply chains, and will harm the interests of China, the United States, and even the world business community.

The US government's executive order for foreign investment review has been brewing for a long time and has long raised concerns among American business people. The American Semiconductor Industry Association issued a statement in July stating that the relevant restrictive measures will weaken the competitiveness of the US semiconductor industry, disrupt the supply chain, and cause serious market uncertainty.

This is the White House shot on August 4, 2022 in Washington, USA.

The CEOs of Intel, Qualcomm, and Nvidia, three chip giants, met with senior US government officials last month to oppose further restrictions on China. These companies are concerned that the new restrictions will sever their connection with China, the largest market, damage their R&D investment capabilities, and ultimately weaken the dominant position of the United States in the chip industry.

Nvidia CEO Huang Renxun stated that the Chinese market is irreplaceable and exiting the Chinese market is not a feasible option. Nvidia's Chief Financial Officer, Colette Kress, also stated that the US restrictions on China will permanently deprive the US semiconductor industry of opportunities.

According to data from the Semiconductor Industry Association of America, China's semiconductor procurement volume last year was about 180 billion US dollars, accounting for more than one-third of the global total, making it the largest single market in the world. 36% of sales for American semiconductor companies come from the Chinese market.

Last October, the United States upgraded its export control measures against China in areas such as semiconductor manufacturing, leading to a decline in exports of American semiconductors and semiconductor manufacturing equipment to China. US semiconductor equipment manufacturers Fanlin Group, Kolei Corporation, and Applied Materials Corporation predict that their 2023 sales may decrease by $600 million to $2.5 billion respectively due to related export restrictions.

Luca David Oppomola, a senior researcher at the Peterson Institute for International Economics in the United States, believes that restricting trade and investment with China by the United States is "dangerous.". The restrictive measures have increased the difficulty for American companies to enter the Chinese market, making it difficult for American companies to gain a deep understanding of the Chinese market or gain experience in operating in the Chinese market, which will affect the competitiveness and growth prospects of American companies.

Data shows that the return on foreign direct investment in China has reached 9.1% in the past five years. As of now, more than 70000 American companies have invested and started businesses in China, with nearly 90% of their businesses in China achieving profitability.

A large medical device exhibited by GE at the CIIE booth, captured on November 2, 2022.

Tibo de Namiel, an assistant researcher at the Center for Strategic and International Studies in the United States, and others, wrote that the United States continues to confuse national security and economic policy, and reviewing outward investment will create a "cold cicada effect" on potential investors.

South Korean congressman and former Samsung executive Liang Xiangzi recently stated in an interview with the Financial Times that measures to restrict China's acquisition or production of advanced chips may harm the relationship between the United States and its Asian allies. Liang Xiangzi also said that the more the United States sanctions China, the more China will strive to accelerate technological progress. The United States should abandon its current attempt to gain private benefits by shaking and disrupting the global value chain.

The Economist published an article by Chris Miller, an associate professor at Tufts University in the United States, pointing out that under the guise of "risk reduction," the United States continues to introduce technology and investment restrictions against China, while also engaging in high-level dialogue with China and hoping to maintain trade relations. "This approach cannot be effective.".

Some analysts believe that the US restrictions will only force Chinese technology companies to strengthen independent innovation. Victor Shi, Associate Professor of Political Science at the University of California, San Diego, told Xinhua News Agency that the US restrictions will promote the development and growth of domestic semiconductor companies in China, as Chinese companies will switch to purchasing domestic chips, allowing local companies to gain greater market share.