Ministry: US control on investment a 'decoupling' move

By Zhong Nan | chinadaily.com.cn | Updated: 2023-08-17 23:53

China has engaged in dialogue with businesses to evaluate the tangible implications of the United States executive order restricting high-tech, US-based investment going to China, and the Chinese government will take necessary measures based on the findings of this assessment, the Ministry of Commerce said on Thursday.

Signed by US President Joe Biden in early August, the order authorizes the US Treasury Department to regulate the flow of US investment and expertise into three sectors in China — semiconductors and microelectronics, quantum computing and artificial intelligence.

Addressing a regular news conference in Beijing, Commerce Ministry spokeswoman Shu Jueting said the US executive order authorizing investment restrictions toward China is counterproductive and can have detrimental effects.   

Chen Wenling, chief economist at the China Center for International Economic Exchanges in Beijing, said the US should stop its "decoupling" and "de-risking" approach with regard to the high-tech sector, because such an approach endangers the integrity of the global industrial chain.  While initially directed at China, this policy could potentially have far-reaching repercussions on the global stage, Chen said.

China-US trade amounted to 2.64 trillion yuan ($364 billion) in the first seven months of 2023, down 9.6 percent year-on-year. The volume accounts for 11.2 percent of China's total foreign trade, making the US the third-largest trading partner of China, following the Association of Southeast Asian Nations and the European Union, data from the General Administration of Customs showed.

   "Mergers and acquisitions aimed at acquiring technology and intellectual property rights are ordinary business cooperation practices," she said, adding that mandatory technology transfers are in violation of China's Foreign Investment Law and run counter to the nation's economic principles. Shu urged the US to treat Chinese companies fairly and justly, providing them with equal opportunities for their trade and investment cooperation activities in its market.

In light of China recently implementing export restrictions on industrial products and materials containing gallium and germanium （镓gā和锗zhé）, Shu said the country's export controls are cautious and moderate, with the goal to effectively safeguard national security and fulfill international obligations.

KEY TAKEAWAYS

• A merger occurs when two separate entities combine forces to create a new, joint organization.

• An acquisition refers to the takeover of one entity by another.

• The two terms have become increasingly blended and used in conjunction with one another.

Globalization & ethics 

The increasing phenomenon of globalization (an integrated global economy consisting of free trade, capital flows, and cheaper foreign labor markets)70 also pressures global firms facing international risks to rely on governments, NGOs (nongovernmental organizations), the UN (United Nations), and other business and stakeholder alliances and relationships to help meet nonmarket threats. For example, the ten principles of the UN Global Compact serve as guidelines for international firms doing business in LDCs (least developed countries), and abroad, businesses should (1) support and respect the protection of internationally proclaimed human rights, (2) ensure that they are not complicit in human rights abuses, (3) uphold the freedom of association and the effective recognition of the right to collective bargaining, (4) eliminate of all forms of forced and compulsory labor, (5) abolish child labor, (6) eliminate the discrimination of employment and occupation, (7) support a precautionary approach to environmental challenges, (8) promote greater environmental responsibility through initiatives, (9) encourage the development and diffusion of environmentally friendly technologies, and (10) work against corruption, including extortion and bribery.

* A decade ago about 9,000 protectionist measures were in place worldwide, reckons Global Trade Alert, a charity. Today there are around 35,000.

* Duplicating production reduces specialisation, raising costs and hitting economic growth. Some analysts expect the price of a chip produced in Texas to be 30% higher than one made in Taiwan.

* The potential for the manufacturing obsession to backfire is enormous. The state of New York spent nearly $1bn building a solarpanel factory which Tesla pays $1 a year to rent. The idea was to create a manufacturing hub but the project has returned only 54 cents in benefits  per dollar spent; according to the Wall Street Journal, the only new nearby business is a coffee shop.

* European leaders think they must match America or face catastrophic deindustrialisation. They have forgotten the logic of comparative advantage, which guarantees that countries will always have something to export, no matter how many cheques foreign governments write or how productive their trading partners become. Denmark has no car industry to speak of, but GDP per person is 11% higher than in Germany. Even the benefits to workers are overstated, because manufacturing jobs no longer pay a premium over comparable service work.