UK Considers Restrictions on Chinese Tech Investments, Sparking Fears for Microchips Sector
The UK government is contemplating imposing restrictions on Chinese tech investments in a move that aligns with the US’s recent clampdown on trade with China. The British firms have been asked about their investments in various sensitive Chinese sectors as part of an effort to understand investment flows. The survey covers 17 areas including advanced materials, robotics, energy, transport, and more. While the survey also encompasses investments in other countries, the focus is on understanding UK business investment in strategic rivals.
The survey comes in the wake of US President Joe Biden’s executive order that imposes national security curbs on investment in specific Chinese tech sectors. British Prime Minister Rishi Sunak, who is under pressure to adopt a tougher stance against China, must carefully consider the impact of potential curbs on the UK economy, particularly its microchips sector.
The UK Department for Business and Trade (DBT) assures that the survey is aimed at advising the government on how to effectively respond to national security risks posed by outward direct investment. Officials have indicated that investment into China’s semiconductor, artificial intelligence, and quantum computing technology will be restricted, which could potentially impact firms like Arm, a prominent British semiconductor player.
Experts believe that restrictions on outbound investments are necessary given the intense geopolitical rivalry and concerns over the Chinese Communist Party’s (CCP) global ambitions. The CCP’s weaponization of high-tech has raised red flags among policymakers and industry leaders alike. However, there are concerns that the UK government might cast the net too wide, negatively impacting businesses.
The UK’s effort to survey outbound investment is not a precursor to legislation, but it highlights the country’s priority to strengthen economic security. The survey is intended to gather information and develop a better understanding rather than immediately implementing new rules. However, the UK already has the National Security and Investment Act (NSIA) in place, which empowers the government to screen investments on national security grounds. Further amendments to the NSIA or the introduction of new legislation may be required to effectively screen outward investment.
While the UK aims to align with the US on national security and investment screening, it is important to note that the UK’s strategy may differ from Biden’s approach. The technologies considered national security concerns and the supply chain risks faced by the UK may not be identical to those of the US. Therefore, the UK must adopt measures that reflect its specific challenges and risks.
Overall, the UK government’s survey indicates a sensible and proportionate starting point for understanding investment flows. British firms are not panicking but are approaching the situation with trepidation. Balancing economic security and fostering domestic investment will be crucial for the UK government moving forward. As the survey results and policy decisions unfold, it will be interesting to see how the UK shapes its approach and fine-tunes its outbound investment screening mechanism.
