Implications of Potential UK Regulations on Investment in China After US Clampdown

credit: theguardian

UK (Parliament Politic Magazine) – The British government is contemplating the implementation of stricter regulations regarding investment in China following the recent announcement by the US president, which aims to limit the flow of funds and expertise into sensitive technologies within the country.

On Wednesday, Joe Biden signed an executive order granting authority to the US treasury secretary to potentially prohibit or restrict investments by US entities in Chinese companies operating in three specific sectors: semiconductors and microelectronics, quantum information technologies, and certain artificial intelligence systems.

UK To Evaluate Potential National Security Risks

The US government has stated that these measures are intended to address national security concerns. In response, China expressed grave concern over the decision.

In light of these developments, Rishi Sunak, the British Chancellor of the Exchequer, is considering adopting a similar approach to President Biden by imposing restrictions on outbound investments into China. Sunak is currently engaging in discussions with businesses regarding this matter. 

A spokesperson for the British government stated on Thursday that the executive order provides much-needed clarity regarding the US approach. They emphasized that the UK will carefully consider these new measures as they continue to evaluate potential national security risks associated with certain investments.

The European Commission has also expressed its intention to thoroughly examine the US decision and has already initiated a review of its own approach to outward foreign investment.

In a speech delivered in March, Ursula von der Leyen highlighted the need for the European Commission to reassess its investment agreements with China due to the explicit merging of its military and commercial sectors.

UK And EU Not Expected To Align With US Stance 

According to sources, neither the UK nor the EU are expected to immediately align with the US stance. These measures from the US come at a time of increasing tension in economic and defense policies between its allies and China.

The Biden administration currently possesses the authority to scrutinize incoming investments through the Committee on Foreign Investments in the United States (CFIUS). However, it lacks the same level of oversight when it comes to investments made by US-based companies and citizens in foreign countries.

Kimberly Donovan, a former senior US financial crime official and current director at the Atlantic Council thinktank, emphasized the need to bridge this gap in understanding. She stated, “The objective of implementing an outbound investment screening program is to address this issue.”

New Restrictions To Impose Restrictions On The Transfer Of Property To China 

In addition, these new regulations will impose restrictions on the transfer of intellectual property to China in conjunction with investment agreements. Donovan further noted that the US government would require additional resources to effectively handle the influx of reports and inquiries from businesses.

By enhancing its outbound investment screening program, the Biden administration aims to ensure a comprehensive and balanced approach to investment oversight. This initiative not only seeks to safeguard national interests but also promotes fair and secure economic relationships with foreign nations.

Biden’s recent decision, which received a relatively subdued response from the stock market, comes at a time when concerns about the Chinese economy are on the rise. This unease was further fueled by the release of official figures indicating that China has entered a period of deflation for the first time in over two years, with prices experiencing a 0.3% year-on-year decline in July.  

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United Kingdom Making Efforts To Mend Their Relationship With China

Both the United Kingdom and the United States have made efforts to mend their relationships with China, which had soured in recent years. However, economic and security concerns have transformed this process into a tit-for-tat trade and investment battle, particularly in sectors like electric vehicles and advanced computing developments.

The UK’s foreign secretary, James Cleverly, outlined Britain’s new strategy in April, emphasizing the need to safeguard national security by addressing potential threats from China while also pursuing opportunities in trade, investment, and the climate crisis.

Recently, a high-ranking executive at HSBC issued an apology for characterizing the UK government as “weak” for succumbing to US pressure to adopt a confrontational approach towards conducting business with China.

Sir Sherard Cowper-Coles, the bank’s head of public affairs and a former British diplomat, expressed regret for expressing his personal opinions on Britain’s policy towards Beijing during a private event.

Beth Malcolm

Beth Malcolm is Scottish based Journalist at Heriot-Watt University studying French and British Sign Language. She is originally from the north west of England but is living in Edinburgh to complete her studies.