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

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.