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Trade war

US set to curb Chinese investment and tech exports to China

New measures being planned to hinder Xi's 'Made in China 2025' policy

The move by the U.S. may add extra heat to already elevated tensions between Washington and Beijing.   ¬© Reuters

WAHINGTON/TOKYO -- The U.S. government is planning to cap investments by Chinese companies in U.S. technology firms, and to block important technology exports to China. The new measures, coming on the heels of announced tariffs on Chinese goods, will likely escalate tensions between Washington and Beijing.

The initiatives, first reported by The Wall Street Journal on Sunday, are scheduled to be announced later this week. The U.S. Department of the Treasury is orchestrating rules to block companies with at least 25% Chinese ownership from buying U.S. companies that contain what the White House terms "industrially significant technology."

Treasury Secretary Steven Mnuchin is expected to suggest administering the emergency law through an inter-agency government panel Committee on Foreign Investments in the U.S., or CFIUS, according to Bloomberg.

The exact percentage of Chinese ownership is still being discussed, and may end up lower than 25%. The treasury is looking for ways to block Chinese ownership below that mark if the administration finds that China could obtain the technology through licensing agreements or other measures.

Meanwhile, the National Security Council and the Department of Commerce are getting ready to impose enhanced export controls to stop important technologies from being exported to China.

The administration of U.S. President Donald Trump would continue using the national security rationale to justify the equity restrictions and export controls. "We've got trillions of dollars seeking our crown jewels of our technology," said White House trade advisor Peter Navarro. "There has to be a defense against that."

"The President has made clear his desire to protect American technology," Commerce Secretary Wilbur Ross told The Wall Street Journal in a statement on Sunday.

U.S. companies that could be negatively impacted by the new rules would be given a chance to voice their concerns.

China wants to become a global leader in 10 broad areas of technology under President Xi Jinping's "Made in China 2025" initiative. These include information technology, aerospace, electric vehicles and biotechnology.  Trump's new policy would clearly target Xi's goal.

On Sunday, the South China Morning Post reported that China has no plans yet to target U.S. companies operating in the country amid rising trade tensions, as it would go against Beijing's goal to attract foreign investment. China's reaction to the U.S. plans to curb Chinese investment remains unseen.

The Trump administration announced a new 25% tariff on $50 billion worth of Chinese goods on June 15. Three days later, Trump directed U.S. Trade Representative Robert Lighthizer to identify another $200 billion worth of Chinese exports to be considered for tariffs of 10%.

China has said it will retaliate with measures of "the same scale and intensity."

Restrictions on Chinese investments are seen as the second salvo in the offensive against China following the previously announced tariffs.

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