China Puts ‘National Security’ Rules on Overseas Investments
China has moved to crack down on investments overseas with broad “national security” regulations that took effect on Wednesday. The move comes amid a serious economic slowdown and a time of rising tech. . .
China has moved to crack down on investments overseas with broad “national security” regulations that took effect on Wednesday. The move comes amid a serious economic slowdown and a time of rising tech competition with the United States. The new rules, announced on June 1, provide authorities with a broad framework to influence flows of capital and personnel across China’s borders. ALSO SEE:Taiwan Raids Tech Firms Over Smuggling Nvidia Chips to ChinaBeijing regards fields such as artificial intelligence, computer chips and green technology as economically and strategically vital and has vowed to promote their domestic development. The new measures are intended to “enhance the quality and level of outward investment”, according to the provisions laid out by the State Council, China’s cabinet. However, some investors worry they will restrict the ability of China’s bustling and sprawling tech ecosystem to access global markets. Outbound investment should adhere to the “overall national security concept”, the regulations state, while aiming to “balance domestic and international considerations”. The new framework also authorises the government to conduct reviews of investments or transfers that could impact national security. Beijing often views cross-border transactions with suspicion, with its top economic planning bodystriking down in April an attempt by Facebook owner Meta to acquire AI startup Manus, which was created by a company founded in China but now based in Singapore. ‘Terrible for Europe’Under the new rules, existing curbs on cross-border transfers will extend beyond goods and data to include the export of services through sending technical experts abroad or carrying out training overseas. The US-China Economic and Security Review Commission said on social media this week that the move reinforces a trend it has tracked for months. The bipartisan commission warned in May that, “as is often the case for China’s national security-related laws, enforcement authorities have immense discretion to determine what constitutes a violation, creating further risk for foreign firms”. Beijing is looking to protect domestic AI prowess in its competition with Washington, but the new rules risk cutting off other parts of the world from Chinese investments, Alicia Garcia-Herrero, Asia-Pacific chief economist at Natixis, told AFP. “This is terrible for Europe, because if anybody were to believe that we would rely on China’s open-weight (AI) models, this is wrong – we can’t,” she said, adding that the continent also cannot depend on Chinese talent to develop its own models due to Beijing’s stringent cross-border curbs. With the US-China tech race showing no signs of stopping, Europe will need to seek strategic partnerships with other key players, including South Korea and Japan, “if they want to stand a chance of not becoming too dependent”, she said. Ethnic unity law also condemnedMeanwhile, another highly contentious Chinese law also went into force today. The new ethnic unity law came into effect in China on Wednesday, despite warnings from Taiwan, the United Nations and rights groups that it could threaten freedoms, especially for minorities. The Law on Promoting Ethnic Unity and Progress aims to forge a “shared” national identity among ethnic groups, for example, by strengthening the status of Mandarin as the official language. But overseas campaigners have argued that it will further degrade the rights of ethnic minorities, like Uyghurs and Tibetans, whom Beijing is frequently been accused of persecuting. They also point to a clause stating that people can be held liable for violating the law even when outside China, saying it gives the Chinese government more justification for targeting its opponents abroad. The law will require “political and ideological alignment with the Chinese Communist Party” and “further institutionalise… policies of forced assimilation”, Amnesty International’s deputy regional director Sarah Brooks said on Tuesday, AFP reported. “Chinese authorities have human rights obligations requiring them to protect minority communities and their cultures, but this law does the opposite,” Brooks said. Amnesty has warned that the legislation is pushing ethnic groups to “adopt a single, state-defined national identity dominated by Han Chinese culture”, referring to the nation’s ethnic majority. Beijing consistently denies that it engages in rights abuses against any ethnic group and maintains that they all benefit from its policies of internal security and economic development. Taiwan expressed “strong condemnation” of the law on Wednesday, saying it expanded “threats and intimidation against the people of our country and other nations”. “In the future, individuals from any country whose words or actions are not acceptable to China may become targets of the law or be pursued under it,” its foreign ministry said. UN says law should be scrappedThe law formalises long-standing policies to promote Mandarin as the language of education, official business and public spaces, and also contains provisions on social cohesion and preventing terrorism and separatism. Several ethnic groups in China, particularly in its border regions, have their own languages and have historically been permitted to use them alongside Mandarin in schools. Beijing has also justified sweeping campaigns in areas with large minority populations as legitimate efforts to prevent the spread of terrorism and extremism. A senior Chinese judicial official defended the law last week, saying it would target “illegal acts” that “undermine ethnic unity and progress or incite ethnic separatism”. Hu Weilie said the clause allowing overseas enforcement was “legitimate, lawful (and) necessary”. But UN rights chief Volker Turk has called for the law to be repealed, saying it risks “deepening restrictions on freedoms of language, education, practice of religion, culture, expression and assembly”. Uyghur and Tibetan advocates have urged countries to push China to strike it down, saying it aims to erase minority communities. Taiwan’s Mainland Affairs Council (MAC) said Taiwanese people already faced high risks travelling to China and warned Beijing now had “yet another law to fabricate charges”. “A closer examination reveals that the law is riddled with highly ambiguous legal concepts that leave room for subjective interpretation – a consistent characteristic of the CCP’s legal system,” the MAC said in a statement, attributing the remarks to Deputy Minister Liang Wen-chieh. The MAC said Beijing will use the law “as a legal basis to further suppress and persecute human rights in Xinjiang and Tibet, or to expand its threats against voices internationally that support or are friendly towards Taiwan”. Asian markets mixedAsian stock markets made some gains after Wall Street’s three main indices ended Tuesday on a strong note, with the Dow at another record and the tech-heavy Nasdaq chalking up its best quarter in six years. The Nikkei in Tokyo rose by 0. 6%, while the Shanghai Composite advanced by 0. 44% and the Sensex in Mumbai advanced by 0. 6%. However, Hang Seng in Hong Kong fell by 0. 63% and the ASX in Sydney was down by a similar amount. European stock markets mostly dropped on Wednesday, ahead of a speech by the new head of the Federal Reserve, Kevin Warsh, that could indicate the timing of likely US interest-rate rises. “Wall Street also looks set for a more subdued session, with futures pointing to declines for both the S&P 500 and the Nasdaq after yesterday’s strong gains,” Susannah Streeter, chief investment strategist at Wealth Club, noted. “After the recent rally, investors are catching a breath, with profit-taking looking likely as attention turns back to the outlook for US interest rates. ”Fruitful first halfStock markets globally enjoyed a largely fruitful first half of the year thanks to a surge in tech stocks on the AI boom, but ructions in the sector over the past few weeks have raisedconcerns that a bubble has formed. While markets have endured such issues in the past, and bounced back to scale more heights, there is talk that the latest pullback might be more lasting. That puts Thursday’s US non-farm payrolls figures for June in focus, with a strong reading likely to ramp up expectations and deal a fresh blow to stocks, while a below-forecast reading could provide a boost. “While AI remains a long-term structural growth theme, investors are becoming increasingly focused on valuations and whether the enormous investment in AI infrastructure will translate into earnings growth quickly enough to justify current share prices,” noted Fiona Cincotta, analyst at City Index traders. “At the same time, a more hawkish Federal Reserve has weighed on high growth stocks. ”She said markets were eyeing a 60% chance of Fed hiking rates by a quarter point in September as inflation stays high, with some predicting three increases before January. The dollar continued to benefit from talk of rate hikes, keeping the yen stuck around 40-year lows versus the US currency. Warsh is lined up to give a speech later today at a bankers’ conference in Portugal, which could provide fresh insight into the bank’s thinking after it took a hawkish turn last month. Eurozone inflation, meanwhile, slowed in June after spiking as the Iran war sent energy prices sky-high, data showed, boosting chances of the European Central Bank keeping interest rates on hold. Consumer prices in the 21-nation single currency area rose 2. 8% compared with the same month a year earlier, down from 3. 2% in May, said EU statistics agency Eurostat. Elsewhere, oil prices dropped despite US-Iran concerns after the pair exchanged fresh fire. Key figures around 1045 GMTTokyo – Nikkei 225: UP 0. 6% at 70,474. 96 (close). Shanghai – Composite: UP 0. 4% at 4,112. 45 (close). Hong Kong – Hang Seng Index: Closed for a holiday. New York – Dow: UP 0. 3% at 52,319. 20 (close). Dollar/yen: UP at 162. 69 yen from 162. 59 yen on Tuesday. London – FTSE 100: DOWN 0. 4% at 10,456. 87 points. Paris – CAC 40: DOWN 0. 6% at 8,353. 36. Frankfurt – DAX: UP 0. 3% at 25,066. 40. Brent North Sea Crude: DOWN 1. 0% at $72. 31 a barrel. West Texas Intermediate: DOWN 1. 0% at $68. 84 a barrel. Agence France-Presse with additional input and editing by Jim PollardALSO SEE:Tech Rules Needed So World Doesn’t Lose Control of AI: ChinaYen Sinks to 40-Year Low Amid Deepening Row With ChinaKospi, Nikkei, Hang Seng Sink as Tech Doubts Rock Asia AgainVast Amount of Rare Metals Found Off Remote Japanese IsleChina Curbs Rare Earth Exports to Defence Firms, ChipmakersChina’s Spat With Japan Derails Bid to Join CPTPP Trade BlocLessons From Japan on Tackling China’s Rare Earth DominanceJim PollardJim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years. You Might also Like