China-EU tech links can mend tech world’s split

By Xiao Xin Source:Global Times Published: 2019/4/17 19:08:41

Illustration: Luo Xuan/GT

Closer tech links between China and Europe, a trend that's already catching on, could be the smartest way to mend the tech world which has been split apart by the unruly US government.

It has so far proven fairly hard to convince the US government to stop erecting excessive barriers for foreign investment in US technology, especially Chinese investments in US tech. This would certainly cut off the link between US technology and global technological advancement.

Nonetheless, the tech world, minus US companies, wouldn't simply cave in to tougher scrutiny of tech deals applied by the US administration. If one finds one of the most-favored paths blocked, there would normally be two solutions - either clear the roadblock or take another road. Apparently, tech dealmakers in China, increasingly a bustling hub for science and technology innovation, have opted for the second solution.

While a majority of China's outbound tech investments announced in the first quarter still flowed to North America and Asia-Pacific, European targets saw a marked increase in popularity, per a new report from London-based technology advisory and investment firm GP Bullhound.

As measured by deal volumes, Chinese tech investments in Europe jumped 25 percent in the first quarter compared with the previous quarter, while deals by Chinese tech investors in the US shrank by 13 percent, continuing a downward trend. Chinese tech investments in the Asia-Pacific region cooled down during the quarter - falling by 53 percent - from a surge over the previous quarter.

In value terms, outbound tech deals across Asia into North America plunged by 47 percent on a quarterly basis to $2.5 billion in the first quarter, while Asian deals in Europe soared 57 percent over the quarter to $3 billion, according to the report, citing the Committee on Foreign Investment in the US (CFIUS) as a major hurdle.

The numbers speak compellingly about a man-induced shift in tech transactions. A striking example is the acquisition of London-headquartered payments company WorldFirst by Alibaba's Ant Financial earlier this year following the US move last year to block the sale of MoneyGram to Ant Financial on national security grounds. In a sign of the US' rise as a deterring power, WorldFirst abruptly shut down its US operations to enable the deal.

With the Foreign Investment Risk Review Modernization Act, an ambitious CFIUS reform, signed into law in August 2018, CFIUS' workload, as well as its authority to mandate reviews or unilaterally take action, has been expanded. A stronger CFIUS as such will likely result in a hollowing out of foreign technology investment in the US, a lose-lose scenario for the global technology world at large. Over the longer term, its resulting closer tech links between other countries deterred by potential regulatory hurdles will end up eroding American tech prowess.

Now that Chinese tech power, arguably smart money, has appeared to be increasingly favoring Europe, the tech innovation boat with both China and Europe aboard can be banked on to restore investor confidence in the global technology market.

To ensure a safe and successful voyage, both sides should go faster in clinching a bilateral investment deal.

"The two sides commit to achieve in the course of 2019 the decisive progress required, notably with regard to the liberalization commitments, for the conclusion of an ambitious China-EU Comprehensive Investment Agreement in 2020," read the joint statement issued after the recently concluded 21st China-EU Summit in Brussels.

With trade war clouds still lingering, especially as Europe risks being the next theater of the trade war for the US administration, it would be a wise move if China and Europe could quicken the pace of finalizing a bilateral investment deal. A quicker move will certainly give both an advantage, ensuring the benefits of both Chinese and European businesses, in the tech world in particular.

If that is the case, CFIUS might lose its deterrent value, thereby reducing the undue influence of politics on the global technology landscape. Also worth noting is that the EU, which began screening foreign direct investment into the bloc this month under a new framework, ought not to follow CFIUS' steps. What best suits the continent is a continuation of the smartest approach to tech world salvation, a belief held by China as well.

The author is a reporter with the Global Times.

blog comments powered by Disqus