Chinese technology investment in United States: Donald Trump's next target

President Trump plans to ratchet commercial tensions higher by barring many Chinese companies from investing in US technology firms, and by blocking additional technology exports to Beijing.

Published: 25th June 2018 05:36 PM  |   Last Updated: 25th June 2018 05:49 PM   |  A+A-

US President Donald Trump and Chinese President Xi Jinping. (Photo | AP)


WASHINGTON: President Donald Trump is set to announce new measures this week to target growing Chinese investment in key technologies in the US, according to media reports, which could further escalate the trade war between the world's two largest economies.

The measures are part of the same broad US move to confront Beijing over its unfair trade practices as the tariffs on USD 50 billion of Chinese goods that the Trump administration detailed earlier this month, the reports said.

China has vowed to strike back in equal measure against the tariffs, the first wave of which are due to take effect July 6.

President Trump plans to ratchet commercial tensions higher by barring many Chinese companies from investing in US technology firms, and by blocking additional technology exports to Beijing, The Wall Street Journal reported, quoting people familiar with administration's plans.

The twin initiatives, set to be announced by the end of the week, are designed to prevent Beijing from moving ahead with plans outlined in its 'Made in China 2025' report to become a global leader in 10 broad areas of technology, including information technology, aerospace, electric vehicles and biotechnology, it said.

The Treasury Department is crafting rules that would block firms with at least 25 per cent Chinese ownership from buying companies involved in what the White House calls "industrially significant technology." The ceiling may end up lower than that, according to people familiar with discussions finalising the plans, the report said.

The White House has said previously that details of the investment restrictions, as well as "enhanced export controls" limiting Chinese acquisition of US technology, will be announced by June 30.

The possible restrictions of Chinese investments in the US come at a time of rapidly declining Chinese investment in the US.

It plunged more than 90 per cent in the first five months of 2018 compared with the same period a year earlier, CNN quoted a report last week by Rhodium Group, a research firm that tracks Chinese foreign investment.

Rhodium linked the sharp drop to tougher scrutiny of Chinese acquisitions by US regulators and China's own restrictions on outbound investment.

Under the Trump administration, Chinese-backed deals have come under more aggressive scrutiny from the Committee on Foreign Investment in the United States (CFIUS), an inter-agency panel chaired by the Treasury Department.

The committee vets certain deals that could give a foreign investor control of a US business for national security risks.

Chinese investments in the US tech startups had totaled USD 2.3 billion in 2014, according to the economic research firm CB Insights.

Such investments zoomed to USD 9.9 billion in 2015 but witnessed a dip in 2016, the Politico magazine reported last month.

But analysts say China's appetite to buy US firms and technology is still strong.

In 2017, there were 165 Chinese-backed deals closed with American startups, only 12 per cent less than the 2015 peak, the report said.

Last week, the US Senate defied President Donald Trump by voting to overrule his administration's deal with Chinese telecom firm ZTE and reimpose a ban on hi-tech chip sales to the company.

The White House and Congress have been at odds over the ZTE, which makes smartphones and is China's second largest manufacturer of telecom equipment.

ZTE was on life support since Washington said it had banned US companies from selling crucial hardware and software components to the Chinese firm for seven years.

US officials imposed the ban because of what they said were false statements by the firm over actions it claimed to have taken regarding the illegal sale of goods to Iran and North Korea.

ZTE pleaded guilty to those charges in March last year and was hit with whopping fine of USD 1.2 billion.

Earlier this month the Trump administration gave ZTE a lifeline by easing the sanctions in exchange for a further USD 1.4 billion penalty. Several US lawmakers have criticised the Trump administration's deal to save ZTE.

They were unhappy that the company, which they see as a national security issue, was being used as a bargaining chip in complicated trade negotiations with China.


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