Global Reach and Challenges across the Pacific

Abstract

Conflict is on the horizon between China and the United States. Leading-edge US tech companies related to artificial intelligence sectors are going to be subject to more limitations as well as restrictions on Chinese multinational firms. Other sectors are likely to follow though no final US legislation is enacted. Equally the same can be said of China. The climate for direct foreign investment linkages between US and Chinese multinationals will face far more scrutiny by both the United States and China. This might not bode well for Asia-Pacific corporate linkages. Made in America is a new mantra that President Trump utters, demanding that many products from Harley-Davidson motorcycles to many goods available on the shelf at Wal-Mart be manufactured here. The Chinese have their own slogans – Made in China 2025 is uttered with equal vigor and determination by the Chinese leadership, suggesting that many sectors from robots to aerospace to others should be manufactured in the country. They deem these to be industries important to China’s new place in the global economy. President Trump also believes that a healthy manufacturing industry in various sectors should be carried out within the borders of the United States. As such, the President keeps suggesting that American companies should stay closer to home. Moreover, there is a sentiment toward further China-specific restrictions implemented by the Committee on Foreign Investment in the United States (CFIUS). This interagency is being asked to review all in-bound foreign investment, particularly from China, and the President also asked the Department of Commerce to review all US export controls. America’s inward investment restrictions and our export rules, regulations, and controls are also being increased by the Foreign Investment Risk Review Modernization Act (FIRRMA), a bipartisan law that could come in the next few months. The increasing scope of review by CFIUS will expand and strengthen and limit the controls on the export of US sensitive and high-tech industries. The United States House of Representatives has already moved in that direction. Chinese state-owned oil companies are going to be facing further scrutiny and are likely to be diminishing. If China wishes to improve its economic gross domestic product (GDP) prospects, it will further push the state-owned companies and other private firms in China to look a little more inward and focus on small businesses. Referring to CFIUS activities, of the 387 transactions reviewed by that agency focusing on Chinese inward investment to the US, some have been blocked and coupled with Chinese capital controls on Chinese money to the US. The scrutiny by that agency, as well as FIRRMA, is likely to increase. Echoes of the past are at play here. Historically, the United States Congress and CFIUS responded to the Organization of Petroleum Exporting Countries’ (OPEC) investments and Japanese investments by attempting to limit foreign, Japanese, and OPEC firms from buying into American corporations in many sectors, including the US semiconductor industry. Now the focus on China is at play. Moreover, the US Congress is demanding that CFIUS review US transfer of intellectual properties and other licensing and joint venture arrangements between US corporations and potential Chinese buyers. JOURNAL OF ASIA-PACIFIC BUSINESS 2019, VOL. 20, NO. 4, 257–259 https://doi.org/10.1080/10599231.2019.1684167