Sunak could follow Biden’s lead and ban UK investment in Chinese tech businesses

Sunak could follow Biden’s lead and ban UK investment in Chinese tech businesses

11 Aug    Finance News, News

Britain could follow America and block UK companies from investing in Chinese tech businesses, senior government figures said yesterday as they warned that Beijing represented a significant threat to the UK’s security.

President Biden this week proposed a ban on US investment in Chinese businesses developing advanced technology in areas that could be critical for the military or surveillance. This includes quantum computing, semiconductors and some artificial intelligence systems.

Washington accused China of exploiting US investment in order to produce sensitive technologies to modernise its military. “Such US investments are often accompanied by certain intangible benefits that help companies succeed, such as managerial assistance, investment and talent networks, and market access,” it added.

Senior UK government figures said Rishi Sunak was weighing up imposing similar restrictions on British firms but insisted any such decision to control outbound investment would be taken with caution. “We’re engaging closely with the US on its plans,” they said. “But we’re not going to rush to do this kind of thing because we’re very conscious of the huge benefits being able to invest in other countries around the world brings to the UK.”

Laws regarding inward investment are already in place to protect UK businesses from investment or takeovers by foreign entities that could be deemed a national security risk. The National Security and Investment Act gives the government powers to intervene in transactions to impose conditions or stop them going ahead altogether. Chinese investment accounted for nearly half of all the deals that were called in for review last year.

Biden’s announcement represents an escalation of the technology trade wars between Washington and Beijing and follows the US ban last year on the sale of high-tech chips and expertise to China. The proposal will “prohibit certain investments in entities that engage in specific activities related to these technology areas that pose the most acute national security risks, and require notification for other sensitive investments,” it said.

The Chinese commerce ministry said it reserved the right to take retaliatory measures. “We hope that the US side respects the laws of the market economy and the principle of fair competition, and refrains from artificially impeding global economic and trade exchanges and co-operation,” it said.

More and more Chinese companies have been added to the US “entity list”, which details the businesses that need government permission to buy US technology and goods. In retaliation, last month China restricted exports of two rare metals, gallium and germanium, which are crucial to the production of some types of semiconductor and electric vehicles.

The growing tensions between the two superpowers have implications for supply chains. Apple, for example, which has long manufactured products in China, has started looking at expanding into factories in other parts of the world such as India and Vietnam and cutting its reliance on Taiwan for its semiconductors.

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