China’s trade council appeals to US for fair treatment
China’s international trade council has formally asked the United States to “carefully consider” rules that ban or restrict U.S. investments in China’s tech sector, state television reported on Friday. The council said the rules were vague, broad and damaging to the global industrial chain.
The China Council for the Promotion of International Trade (CCPIT), which is supervised by the Ministry of Commerce, said the order sets “vague and broad restrictions” on investors and transaction types, and does not differentiate between military and civilian purposes. “That not only gives rise to transaction risks and compliance cost…but also damages the highly inter-dependent global industrial chain,” the chamber added.
The CCPIT also said the rules violated the principles of market economy and fair competition, and urged the US to respect the legitimate rights and interests of Chinese enterprises and investors.
US imposes new restrictions on Chinese tech firms
The appeal came after U.S. President Joe Biden signed an executive order last month which prohibits or restricts investments in Chinese entities involved in semiconductors and microelectronics, quantum information technologies and certain artificial intelligence systems. The order was aimed at protecting national security and preventing U.S. capital from aiding China’s military.
The order expanded on a previous one issued by former President Donald Trump, which targeted Chinese companies with alleged ties to the Chinese military. The new order also gave more authority to the Treasury Department to enforce the rules and update the list of banned entities.
The order affected some of China’s leading tech firms, such as Huawei, SMIC, DJI and Hikvision, which have been accused by the US of posing national security threats or engaging in human rights abuses.
US financial firms seek clarity on the rules
The new rules have also caused confusion and uncertainty among US financial firms, which have been asked to meet a Sept 28 deadline to provide input on the proposed regulations. The firms have complained that the rules are too vague and put the onus of compliance on investors.
According to Reuters, some of the issues raised by the firms include:
- The lack of clear definitions of what constitutes a prohibited or restricted transaction, and what types of entities are covered by the order.
- The potential overlap or conflict with other existing sanctions or regulations on China, such as those imposed by the Commerce Department or the State Department.
- The difficulty of identifying and verifying the ownership and control structures of Chinese entities, especially those that are privately held or have complex corporate structures.
- The lack of guidance on how to handle existing investments or contracts that may be affected by the order, and whether there will be any exemptions or waivers for certain transactions or investors.
The rules are expected to be implemented sometime next year, but the exact timeline and details are still unclear.
