As European officials return from their summer vacations, the latest US attempt to limit investment in China will be scorching a hole in their inboxes.
Investment from China will be curb as deadline is approaching (Photo: Experian)
According to South China Morning Post, as deadline is approaching, some early returnees in Brussels are already going over last week’s executive order with a fine-tooth comb, aware of the difficult task the European Commission has in putting together its own outbound investment screening program by the end of the year.
Although there is no clear approach to imitate US President Joe Biden’s plan as deadline is approaching, senior officials are relieved that it is “much narrower” than expected. Earlier legislative proposals were viewed as more hawkish, and there is hope that this one will be defined more before going into effect. According to experts, if Biden’s proposal of prohibiting venture capital and private equity as deadline is approaching from flowing into China’s semiconductor, quantum computing, and artificial intelligence sectors is to succeed, partners must be on board – otherwise, prohibited dollars could theoretically be replaced with euros.
Emily Benson, a trade and technology expert at the Centre for Strategic and International Studies, cited as an example of the difficulty last year’s export embargo on cutting-edge semiconductors to China, which the Netherlands was coerced into complying with. “I think there’s a broad recognition, especially with hard lessons learned. That all of these trade and investment controls are naturally much more effective when they’re multilateral,” she said.
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As deadline is approaching, for European capitals skeptical of the US’s claims of pursuing a “small yard, high fence” approach to China, the narrow policy may be viewed as a carrot, similar to its use of the trendy EU term “de-risking” in place of “decoupling.”
According to Yahoo Finance, for years, Washington has urged the EU to limit investments in China’s high-tech sectors, believing that they will ultimately flow to the military complex, risking Western lead in critical industrial areas. Last year, at the request of the United States, exploratory conversations were held in meetings of the Trade and Technology Council. On the margins in Paris, EU officials downplayed the significance, claiming that there was no imminent plan to screen China-bound assets.
During a March visit to Washington, European Commission chief Ursula von der Leyen issued a joint statement with Biden that signaled a hardening of the bloc’s stance on Chinese investments as deadline is approaching.
Von der Leyen stated at the end of that month in a speech on China, “we are currently reflecting on whether and how – Europe should develop a targeted instrument on outbound investment.” Her trade team was given less than three months to put out a proposal, leaving them racing to understand complex technical concerns like tracking capital into the opaque Chinese system, which one official described as a “black box.”
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