By Joyce Yu
Philadelphia, PA–The focus of U.S.-China trade spat has shifted from tariff imposition to restrictions on Chinese investments. The U.S. Treasury Department was drafting curbs that would block firms with at least 25% Chinese ownership from buying U.S. companies with “industrially significant technology,” a government official said on Sunday.
This came following a previous statement by the White House that it will announce the details of the investment restrictions by June 30. Wall Street tumbled on Monday with the Dow and S&P 500 sinking more than 1.2% within first hour after market opened. Tech heavy Nasdaq lost 1.6% and the Philadelphia Semiconductor index dropped 2.3%. Chipmakers including Intel, Micron Technology and Nvidia were hit the most, while Boeing, Caterpillar and General Motors also fell by more than 1%. Boeing, Caterpillar and GM were also on track to post large monthly losses.
The U.S. Commerce Department and National Security Council were pondering to impose “enhanced” export controls to keep such technologies from being shipped to China, according to a separate Wall Street report. But it remains unclear exactly how the Trump administration will define what technology is “industrially significant.”
Some experts and recent media reports also say the Trump administration is likely to use an emergency law, which gives the president authority to take certain measures against another country during a “national emergency”, to impose the investment restrictions on Chinese companies, citing national security grounds.
The restrictions come at a time when investment from China in the United States has rapidly declining – a 90% drop in the first five months of 2018 compared with the same period a year earlier, according to a report by a research firm Rhodium Group. The reason for the sharp drop is due to tougher scrutiny of Chinese acquisitions by US regulators and China’s tighter control over its outbound investment.
The planned US restrictions on Chinese investments in “industrially significant technology” are part of the efforts by the American government in countering Beijing’s Made in China 2025 — a Chinese initiative to boost its industries like robotics, electric cars and aerospace with the aim of becoming a global leader in those areas. In addition to enforcing trade restrictions, U.S. has also ramped up controls over Chinese graduate students who pursue studies in US in fields like robotics, aviation and high-tech manufacturing by limiting their visas to one-year.
Against this backdrop, China has begun downplaying Made in China 2025, a senior western diplomat who declined to be identified told the Reuters. “They won’t stop doing it,” the diplomat said, referring to Made in China 2025. “The way they talk about it is changing.”
