Technology curbs on Chinese partners may hurt US firms’ global competitiveness
US lawmakers are reportedly working on legislation to tighten oversight of technology transfers, a seemingly overprotective move that could undermine the global competitiveness of US companies by excluding Chinese partners from their global value chains.
The Senate and House are preparing a bill to expand the scope of deals reviewable by the Committee on Foreign Investment in the US (CFIUS) to more effectively prevent the transfer of sensitive technology to rival countries, The Wall Street Journal reported on Monday.
Under the bill, known as the Foreign Investment Risk Review Modernization Act, the CFIUS would have wider power to block transactions involving minority investments and joint ventures as well as deals involving “emerging technologies.” As the CFIUS has often targeted deals involving Chinese companies in recent years, the pending legislation probably points to more intense scrutiny of Chinese deals by US regulators. While it remains unclear how the CFIUS would determine the so-called emerging technologies, it is clear that US companies would become less motivated to work with Chinese companies due to concerns over potential regulatory restrictions.
Such concerns would cause US companies to miss out on market opportunities and disrupt their global value chains.
In this sense, the proposed CFIUS legislation is actually meant to exclude Chinese manufacturers from US businesses’ global value chains.
It is true that there are many worldfamous high-technology products that originated in the US, but Chinese manufacturing has played an important role in many of these products. As a world manufacturing power, China, with its incomparable capabilities in mass manufacturing and cost controls, has seen a steady rise in its position in the value chain of the global manufacturing industry.
Take the iPhone as an example. At the moment, it is hard to tell whether its manufacturing involves any sensitive technology that would be subject to the expanded CFIUS review. If there was such a risk and Apple had to exclude Chinese manufacturers from the production chain, where could it find alternatives to Chinese companies? That would be a step backward for all similar US multinationals on the global value chain. As for the Chinese side, since the political headwinds in the US don’t bode well for future production cooperation between China and the US, it is highly recommended that Chinese companies should turn to other countries such as South Korea, Japan and Germany for new partners or alternatives to US companies for the purpose of value chain restructuring.