Trade War Watch: U.S. Preparing to Limit Chinese Investment

Matt Posky
by Matt Posky

The Trump administration is planning to impose incredibly restrictive investment limits against China. While the barriers could be argued as fair, considering China has some pretty serious restrictions of its own, the timing isn’t great. Treasury Secretary Steven Mnuchin pursued a less confrontational approach toward China after the nation showed some lenience in earlier promises to open its automotive and tech sectors through reduced tariffs, eventually eliminating state-mandated joint partnerships.

This move will no doubt make his job a lot more complicated.

It seems that the limits would restrict certain Chinese companies from investing in U.S. technology firms and block additional tech-related exports to Beijing. Among the industries most affect are robotics, aerospace, and automobiles — which have been labelled by the administration as a threat to economic and national security.

Mnuchin denied the measures would be aimed at China specifically, but the Nikkei Asian Review and most other outlets see the move as a blockade to President Xi Jinping’s “Made in China 2025” initiative. The program is intended help make the People’s Republic towards the global leader of all high-tech industries and expand its influence across the globe.

Officially, very little has been said on the Trump administration’s trade proposals. However, insiders claim the measures are set to include rules that would bar firms with at least 25 percent Chinese ownership from buying companies involved in any technology deemed important by the White House. There are also rumors that the White House will forbid tech exports to China of a similar nature.

It’s unclear how this would affect automotive exports into the country, though many have accused China of being incredibly lax in terms of intellectual property. The car industry has dealt with this issue for quite some time. Trump has been careful in wording the accusations against China, but others have not.

“The goals of Chinese policy are easily summarized: they wish to extract technologies from Western companies; use subsidies and nontariff barriers to competition to build national champions; and then create a protected domestic market for these champions to give them an advantage as they venture out in the world,” James Andrew Lewis, a senior vice president at the Center for Strategic and International Studies in Washington, said roughly a year ago.

He faulted Western companies for chasing the short-term dollar, or laying down in order to gain immediate entry into the Chinese market. His assertion is that the only way to beat China is to accelerate industry and technological achievements through new IPs, while also hoping China will eventually adopt U.S. trade norms.

That doesn’t appear to be the route we’re going. On May 29th, President Trump said “to protect our national security, the United States will implement specific investment restrictions and enhanced export controls for Chinese persons and entities related to the acquisition of industrially significant technology.”

While China hasn’t weighed in on the current U.S. proposals as of yet, the country’s leadership has previously said it will retaliate with measures of “the same scale and intensity.”

Hopefully, you weren’t expecting to drive a Chinese-built electric car anytime soon. We get the feeling it might be a while before you have the opportunity.

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • John John on Jun 26, 2018

    China as a goverment or with proxies, has a history of going into countries investing or buying high tech or manufacturing companies, then licensing, stealing or moving does companies back to China within 5-10 years after their initial move. We in the West, and by "We", I mean business entity's are only interested in the next 1/4 or maybe this year, China has 5,10,25 and 50 year plans.

    • See 2 previous
    • Big Al from Oz Big Al from Oz on Jun 27, 2018

      @"scarey" That was last night.

  • Big Al from Oz Big Al from Oz on Jun 27, 2018

    TTAC attempts with these trade related articles to stir the pot has identified some great insight into the American mind. The fears many display in their TTAC comments suggest some are downright petrified of the current global transition in geopolitics and technology impacting jobs. I empathise with many in the US grappling with the lack of security they feel as the US isn't so dominantly number one. The rest of us globally are encountering similar challenges, except the dominance. I think the pressure and realisation the US is very challenged at the moment and how the US responds to these challenges is very telling of the self decline the US is facing and how it will manage in the future. "After Trump" is in prision or sent into "exile" in Russia the US will become a better nation. Trump is accelerating the decline of American Exceptionalism. The biggest issue in the future will be the atonement required by the US to rebuild relationships and trust with friends and even foes. Trump in four years will set the US back well over a decade. Remember it will take time to rebuild the great US government departments and institutions he has gutted. China's rise is still immature in many ways and there is still time to remove Trump so the free world can tackle the Chinese. America can not succeed on its own and never was able to. This is one part of history ignored by many Americans. You need us or you have little.

    • Sub-600 Sub-600 on Jun 27, 2018

      BAFO, you’re inebriated. I hope you’re at the hotel lounge and not emptying the minibar in your room, that's how hotels rip you off.

  • ED I don't know what GM is thinking.I have a 2020 one nice vehicle.Got rid of Camaro and was going to buy one.Probably won't buy another GM product.Get rid of all the head honchos at GM.This company is a bunch of cheapskates building junk that no one wants.
  • Lostjr Sedans have been made less practical, with low rooflines and steeply raked A pillars. It makes them harder to get in and out of. Probably harder to put a kid in a child seat. Sedans used to be more family oriented.
  • Bob Funny how Oldsmobile was offering a GPS system to help if you were lost, yet GM as a company was very lost. Not really sure that they are not still lost. They make hideous looking trucks, Cadillac is a crappy Chevy pretending to be fancy. To be honest, I would never step in a GM show room now or ever. Boring, cheap ugly and bad resale why bother. I get enough of GM when i rent on trips from airports. I have to say, does anybody at GM ever drive what everyone else drives? Do they ever then look at what crap they put out in style fit and finish? Come on, for real, do they? Cadillac updated slogan should be " sub standard of the 3rd world", or " almost as good as Tata motors". Enough said.
  • Sam Jacobs I want a sedan. When a buy a car or even rent one, I don’t want to ride up high. I don’t want a 5-door. I want a trunk to keep my stuff out of sight. It’s quieter, cars handle better, I don’t need to be at the same height as a truck. I have a 2022 Subaru Legacy Touring XT, best car ever, equipped as a luxury sedan, so quick and quiet. I don’t understand automakers’ decisions to take away sedans or simply stop updating them — giving up the competition. The Camry and Accord should not be our only choices. Impala and Fusion were beautiful when they were axed.
  • Spamvw I think you need to remember WHY the big 2 and 1/2 got out of the car business. Without going political, the CAFE standards signed into law meant unless you had a higher gas mileage fleet, you couldn't meet the standards.The Irony is that, the law made sedans so small with low roof lines, that normal people migrated to SUV's and Trucks. Now we get worse mileage than before.