Japan and South Korea are worried about being implicated, and the United States has set restrictions on investment in China
"President Biden's technology investment restrictions on China may further complicate US China relations, potentially affecting diplomacy, technology, investment, and global trade," commented the Indian newspaper Politician on the 13th. In fact, more countries are concerned about the executive order signed by US President Biden on the 9th to restrict US entities from investing in China's three emerging fields. Multiple media outlets from the UK, South Korea, Japan, Germany and other countries have reported that the United States may force its allies to comply with its restrictions on China and increase its sanctions against China. Multinational companies affected by restrictions have stated that if restrictions spill over, their interests will be hit. The CEO of Siemens, a German company that had to terminate some cooperation with Chinese companies due to pressure from the United States, said he hopes the tension between the US and China will not escalate.
Japanese media: Japan faces difficult choices
"The US restrictions on China usher in a new situation, and Japan is facing a difficult choice." The Nihon Keizai Shimbun published an article on this topic on the 11th, saying that the US restrictions on China have entered a new situation. The US government announced on the 9th that it will widely implement a new system prohibiting investment in China in cutting-edge fields such as semiconductors, artificial intelligence, and quantum technology. In addition to talent and goods, the US restrictions on China will also officially expand to the field of direct investment. The report states that the Japanese government is not indifferent either. The United States is demanding that allied and friendly countries take the same measures, and the US government has stated that "the EU, Germany, and the UK are already considering it.". Japan, which has close economic relations with China, will make difficult judgments.
The United States has clearly expressed its hope that its allies can cooperate with its high-tech investment restrictions on China, and stated that the more countries participate, the more obvious the effect. South Korea's Asia Economy reported on the 13th that it is expected that the United States will demand South Korea to participate in restrictions on China at the South Korea US Japan summit held at Camp David in Maryland on the 18th. Previously, the United States had requested cooperation from members of the G7.
The British Broadcasting Corporation stated that British Prime Minister Sunak had stated in May that the UK government would consider restricting outward investment. Robert Goldner, the head of government affairs at London based international law firm Hawking Road and former cabinet office in the UK, said that following the US ban implies Sunak's ambition for the UK to develop AI technology. The UK government is happy to see funds flow to the UK, especially in the field of artificial intelligence.
The Financial Times recently reported that the White House has been "encouraging" allies to adopt similar restrictions on China. In response, the European Commission stated that it is in close contact with the White House but will not immediately follow up. According to reports, Brussels announced in June this year that it would establish regulations to restrict foreign investment by the end of the year. However, Germany, France, and other member states attempted to curb this trend, pointing out that the connection between the European economy and the Chinese economy is closer than that with the United States.
So far, the German federal government has not reached a common position on investment regulation. The German Business Daily reported that this topic is very sensitive. German Deputy Prime Minister and Minister of Economy and Climate Protection, Habeck, supports regulating foreign investment, but officials from the German Federal Government's Social Democratic Party and Liberal Democratic Party remain cautious.
"Shrimp in Whales"
Melanie Vogerbach, a foreign trade expert at the German Chamber of Commerce, recently told Reuters that German companies are paying attention to the latest US outward investment restrictions. Vogel Bach believes that the current export control regulations for foreign transactions are too broad, and German companies are concerned that so-called "outward investment screening" may lead to excessive regulation. Therefore, Vogel Bach stated that the European Union should avoid implementing outward investment reviews and not restrict the free flow of capital, but should closely coordinate with the United States to prevent its restrictions from having a negative impact on the European economy.
The Nomura Institute of Comprehensive Research analyzed that the Japanese economy will be hit by the US restrictions on China. According to the Japan Semiconductor Equipment Association, the export value of semiconductor manufacturing equipment from Japan to China in the 2021 fiscal year is estimated to be approximately 992.4 billion yen, accounting for 29% of the global share. However, the move by the United States to impose sanctions on mid to low-end equipment and investment in China will have a heavy impact on Japanese manufacturers. If the US government strengthens sanctions against China in other areas in the future, Japan will need to step on the brakes on the US strategy towards China.
"If China starts to counter US sanctions, South Korea may be implicated as a 'shrimp in the whale'." The Korean National News reported on the 11th that China may retaliate against various US sanctions against China. Some analysts believe that Korean companies may suffer in the midst of the rift between China and the United States. Cui Yuanxi, Deputy Researcher at the Economic Security Strategy Office of the Korea Institute of Foreign Economic Policy, believes that in order to avoid irreparable losses caused by US restrictions on China to Korean enterprises, the South Korean government should establish communication channels, actively engage in policy communication with the Chinese government, participate in resolving US China conflicts through multilateral mechanisms, and it is necessary to adhere to a non exclusive foreign strategy in the long term.
According to an analysis by Lee Wanghui, a professor of political diplomacy at Asia University in South Korea, if the US government pressures South Korea to adopt a similar stance, Korean semiconductor companies with huge investments in China may suffer serious losses, and the international competitiveness of Samsung Electronics and SK Hynix will decline. If South Korean companies interrupt their investment in China's semiconductor production facilities, the South Korean economy will face the "triple suffering" of sluggish exports, trade deficits, and economic downturn.
"American companies are not fully supportive"
The Politician reported that the recent restrictions on China's technology investment by the United States may cause tension in US China relations, but analysts believe that the restrictions will not change the overall trajectory of China's recovery. China has a constantly developing domestic investment ecosystem, and there are also investors from outside the United States who are interested in providing funding for Chinese enterprises.
Paul Danzman, an international research professor at Indiana University in the United States, believes that although the United States is making its restrictive measures more targeted, the nature of some related technologies is unclear, which may increase business costs, isolate the United States from technological progress, and ultimately harm its interests.
Due to concerns about sales losses caused by sanctions, CEOs of Intel, Qualcomm, and Nvidia went to Washington last month to lobby in an attempt to persuade the Biden administration to postpone or reduce restrictions. Sources have revealed that the Biden administration's originally planned investment restrictions also included investment in the electric vehicle industry. Meikler, a partner at Cherry Lane Investment Company in New Jersey, believes that the technology war between the United States and China will have a significant negative impact, and the US government seems to be less eager to provoke China too much.
According to The Asian Economy, American companies are currently not fully supportive of the Biden administration's restrictions on China. Silicon Valley and Wall Street have always been friendly towards China, but if investment restrictions are extended to other emerging industries such as biology and batteries, it is not ruled out that their future investment strategies in China may change.
