Tighter US investment rules to help China: analysts

By Chen Qingqing and Chu Daye Source:Global Times Published: 2018/10/11 22:43:42

A ZTE building in Beijing on June 13 Photo: VCG

Tightened rules on investment in the US in so-called sensitive sectors, potentially targeting Chinese merger and acquisition deals (M&A), might have a silver lining in terms of boosting China's domestic capacity in such areas, experts said on Thursday.

The US government will tighten rules on foreign investment in critical industries under an interim regulation in November, the Treasury Department said on Wednesday. As a result, the Committee on Foreign Investment in the United States (CFIUS) will get enhanced power in its review of 27 sensitive sectors, potentially curbing Chinese investment.

According to Reuters, the 27 industries cover telecommunications and semiconductors as well as aircraft manufacturing (including engines and engine parts), aluminum production, computer storage devices, guided missiles and other military equipment.

Investments in these sectors must be reported to the CFIUS if the foreign investor's role would allow access to non-public information or afford power to nominate a board member or make other substantial decisions, the US Treasury said.

CFIUS has rejected several Chinese M&A deals in recent years in sensitive industries ranging from high-end semiconductors to real estate.

Tightened regulations on Chinese investment in these so-called sensitive areas will limit China's imports of US components and in turn accelerate the development of proprietary chips in China, an industry representative surnamed Liu told the Global Times on Thursday.

"Some major Chinese device and equipment providers such as Huawei and ZTE have already classified foreign component suppliers into US and non-US, and they are getting fully prepared," he said, noting that the ZTE crisis brought Chinese technology companies and domestic chipmakers much closer.

"Before, Chinese companies gave priority to foreign components. Now Chinese chipmakers will have more opportunities to put their products into the market," he said.

ZTE, which was seriously affected by a trade ban on core components by the US government this year and has a large business presence in the US, declined to comment on the new US policies.

Chinese hardware provider Huawei Technologies is one of the Chinese firms that have been striving to develop proprietary chips to reduce reliance on foreign suppliers.

After years of development in niche sectors such as cloud services, some particular chipsets designed for targeted artificial intelligence scenarios have become scarce and expensive, "which prompted us to develop our own chipsets," Xu Wenwei, Huawei's chief marketing officer, said during a press conference on Thursday in Shanghai.

"We need some chips for edge devices that have low power consumption, but only a few choices are available in the market," he said.


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