In a sudden turn of events, Congressional negotiators are reportedly dropping their push to regulate U.S. investments in Chinese technology through the yearly defense policy bill. The proposed measure, which would compel firms to disclose certain investments in China and other countries of interest, has met with resistance. The key figure standing against the amendment is House Financial Services Chairman Patrick McHenry, effectively blocking its progress.
Proposal Meant to Reinforce Biden's Executive Order
The proposed amendment was designed to bolster President Joe Biden's executive order, which seeks to limit investments in high-tech sectors of China, the world's second-largest economy. However, the specifics of these discussions have only surfaced through individuals involved, with no formal announcement made to date.
China's Stance on Global Supply Chains
Meanwhile, China, headed by Premier Li Qiang, asserts its opposition to protectionism, expressing a desire to fortify supply chains with all nations. This stance comes amidst calls from the United States and the European Union for a reduction in dependency on China, 'de-risking' their supply chains, and attempts to cut off Chinese enterprises from certain advanced semiconductors.
Shift in Global Investment
Recent geopolitical tensions, including Russia's conflict in Ukraine and apprehensions over a potential Chinese invasion of Taiwan, have prompted a growing number of foreign businesses to reconsider expanding their supply chains in China. Instead, investment is being channeled towards nations like India, Mexico, and Vietnam, which maintain more favorable relations with the United States. This strategy, known as China-plus-one, has seen the value of announced U.S. and European greenfield investment in China plummet to less than $20 billion last year, from a peak of $120 billion in 2018, according to Rhodium Group. Simultaneously, investment into India has soared by approximately $65 billion or 400% between 2021 and 2022.
Despite this decline, China continues to be an attractive option. A survey conducted by HSBC bank at the China International Import Expo (CIIE) earlier this month revealed that 45% of firms expect to expand their supply chain in China over the next year.