Chinese Tech Companies Facing Growing Foreign Investment Uncertainty, Lawyers Say
U.S. measures to expand foreign investment screening are having an increasingly chilling impact on Chinese companies’ willingness to invest in the U.S., said Jingyuan Shi, a media and technology lawyer with Simmons & Simmons. As the Biden administration continues to implement its China strategy, including its administration of the Committee on Foreign Investment in the U.S., some Chinese technology companies “are adopting a wait-and-see attitude,” especially amid the U.S.-China “trade tension atmosphere,” Shi said during a March 24 webinar hosted by the law firm.
That hesitancy is especially pronounced around foreign investments, Shi said, “given the tightening CFIUS reviews in recent years.” CFIUS’s jurisdiction was expanded last year to allow it to review transactions involving critical technologies, which was partly aimed at preventing China’s government from acquiring those technologies (see 2002110042). Even as U.S.-China investment falls (see 2009170017), lawmakers and experts have pushed for broader reviews and even heavier scrutiny on Chinese investors (see 2103120042 and 2012010043), “This has indeed impacted the international strategies of Chinese companies,” Shi said.
China is also facing increasing scrutiny from U.S. allies, including the United Kingdom, Germany and other European countries, which are moving quickly to expand their investment screening tools (see 2103180052). “That brings another concern around uncertainty in relation to foreign countries’ approval” of Chinese investments, Shi said. “That is another topic which our clients are closely looking at nowadays.”
Satyen Dhana, a Simmons & Simmons London-based trade lawyer, said the U.K.’s new investment bill is viewed as a “direct attempt by the U.K. government to clamp down on Chinese investments.” Dhana also said EU officials have reacted “strongly” to China’s decision to impose retaliatory sanctions on the EU earlier his week for joining with the U.S., Canada and the U.K. in sanctioning Chinese officials responsible for human rights violations in Xinjiang (see 2103220034). The Chinese retaliation could impact the EU’s ratification of its recently announced EU-China Comprehensive Agreement on Investment (see 2101250052), he said. Marie-Pierre Vedrenne, an EU Parliament member who leads discussions on the investment deal, said this week that it’s “unthinkable” the EU would ratify the agreement while its officials are sanctioned by China.
Although the Biden administration’s strategy toward China is still developing, it’s clear that officials are aiming for a multilateral approach and hoping to work closer with its European partners, Wiley Rein trade lawyer Alan Price said during the webinar. He pointed to this week’s coordinated sanctions against China as an example. “I think that you will continue to see those types of actions in the short term,” Price said. “Long term, we'll have to see how this evolves.”