Biden Blocks Chinese Investment in the US... Strengthening Foreign Investment Review, Spillover Expected in Korea Too

[Image source=AP Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The Biden administration in the United States is strengthening foreign investment reviews to prevent countries engaged in hegemonic competition, such as China, from acquiring American companies that possess cutting-edge technologies like semiconductors and artificial intelligence (AI). The administration aims to thoroughly examine the impact on national security and advanced technology supply chains. This move is interpreted as a blatant effort to check adversarial countries, including China, from gaining access to U.S. advanced technologies. The impact on Korean companies' investments in the U.S. is also drawing attention.

According to the White House, on the 15th (local time), President Biden signed an executive order to strictly oversee foreign investments from a national security perspective to protect supply chains and core technologies. Going forward, the Committee on Foreign Investment in the United States (CFIUS) will be instructed to consider five factors when evaluating the impact of foreign investments on national security: critical supply chains, advanced technologies, investment trends, cybersecurity, and the privacy of Americans.

CFIUS, established during the Ford administration in 1975, is an agency that reviews mergers and acquisitions (M&A) and investment cases by foreign companies that may be against U.S. national interests and decides on their feasibility. Local media reported that during the Trump administration, CFIUS played a role in blocking China’s attempts to acquire U.S. companies to secure advanced technologies. Recently, even minority stake acquisitions involving core technologies or facilities have been subject to stricter review standards.

This executive order is effectively targeted at China. However, to avoid controversy over violating World Trade Organization (WTO) rules, the measures do not specifically single out transactions with China. As the review of all transactions subject to CFIUS scrutiny is strengthened, broad repercussions are expected for foreign companies planning investments in the U.S., including those from Korea. Although no new obligations have yet been added, the fact that CFIUS will conduct more thorough examinations may pose a burden for companies preparing for reviews. There is also speculation that when CFIUS reviews Korean companies’ acquisitions of U.S. firms, it will closely examine the Korean companies’ business in China and their relations with China.

According to the annual report published by CFIUS, among the 184 core technology transactions reviewed last year by country, Germany (16 cases), the United Kingdom (16 cases), Japan (15 cases), and Korea (13 cases) ranked fourth. The U.S. has designated countries belonging to the 'Five Eyes' alliance?such as the United Kingdom, Australia, Canada, and New Zealand?as 'excepted countries,' exempting them from some regulations, but Korea is not designated as an excepted country.

Earlier, the White House announced plans to invest $2 billion to expand domestic production in the biotechnology (bio) sector, following semiconductors and electric vehicles. This is also an extension of the overt exclusion of China observed in the semiconductor and electric vehicle battery sectors. The importance of the bio industry has increased significantly due to the COVID-19 pandemic.

Legislation to check China is also ongoing in the U.S. Congress. The Senate Foreign Relations Committee passed the '2022 Taiwan Policy Act' yesterday, which defines Taiwan’s defense as a vital U.S. national security interest and designates Taiwan as a major non-NATO ally of the United States, sending the bill to the full Senate. This marks a departure from the U.S. policy of 'strategic ambiguity' toward Taiwan, deciding to treat Taiwan as an ally. China has opposed the bill, claiming it overturns the existing U.S. policy that recognized 'One China.'

This content was produced with the assistance of AI translation services.