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UK Firms Questioned on Investments in Sensitive Chinese Sectors as Government Considers Trade Restrictions

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UK Considers Restrictions on Investments in Sensitive Chinese Sectors

The UK government has initiated a fact-finding survey to gauge British companies’ investments in a range of “sensitive” Chinese sectors. The move comes as the UK seeks to align itself with US President Joe Biden’s clampdown on trade with China. The survey, obtained by POLITICO, asks British firms if they have invested in 17 areas, including advanced materials, robotics, transport, energy, and artificial intelligence. The government also seeks to learn about investment in other countries like Australia, Canada, and the US.

The survey is part of the UK’s efforts to understand investment flows in sensitive sectors and assess national security risks. It follows Biden’s executive order to block and regulate investments by US firms in specific Chinese tech sectors. However, there are concerns that the UK government may cast the net too widely, potentially impacting the country’s prized microchips sector. Firms such as Arm, which licenses its chip designs to Chinese manufacturers, could be affected.

The UK is also considering aligning itself with the US on policies to prevent the transfer of “dual-use technology” to China. The government’s fact-finding exercise is a first step towards understanding UK business investment in its strategic rivals. Some experts argue that restrictions on investment are necessary amidst the escalating geopolitical rivalry with China. They claim that the Chinese Communist Party is using high-tech to boost its global supremacy ambitions.

The UK government has clarified that the survey is not a precursor to legislation but aims to strengthen the country’s economic security. However, businesses are concerned that the government’s broad policies may cause unintended difficulties for the industry. The UK has, in the past, introduced policies that were poorly targeted and caused problems for businesses. There is trepidation among some British firms that the government may cast the net too wide with restrictions.

While the UK’s outbound investment screening regime, outlined in the survey, mirrors the existing inbound investment screening regime set up by the National Security and Investment Act (NSIA), experts believe that a separate piece of legislation may still be required. They suggest that the UK could target a broader set of technologies in the future, which is jurisdiction-agnostic and does not focus on specific countries.

The UK government aims to strike a balance between aligning with the US on economic security concerns and fostering domestic investment to become a tech superpower. British firms are cautious but not panicking about potential restrictions. They recognize the need for economic security while understanding that things cannot return to the way they were.

The UK government is closely considering Biden’s measures, and officials are deliberating on how to respond effectively to national security risks posed by outward direct investment. The survey is a crucial step towards building a collective understanding of investment flows in sensitive sectors and informing future action. Both Chancellor Rishi Sunak and President Biden have prioritized economic security in UK-US cooperation.

More detail via POLITICO here… ( Image via POLITICO )

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