Source: Sputnik News Published: 2019-1-25
Former Deputy Governor of the People's Bank of China Zhu Min stated that China may completely stop investing in Silicon Valley.
According to Zhu Min, the desire of Americans to squeeze Huawei out of the market, as well as new legislative initiatives to control investments in the technology sector, will reduce to zero the presence of Chinese venture capital in the United States.
In recent years, the United States has become a point of attraction for Chinese investment. The fastest growing investments were in high-tech sectors like IT, robotics, biotechnology, electronics, aviation, and automotive engineering.
According to the Rhodium Group, China's venture capital investments in the US technology sector grew from $376 million in 2013 to $3.1 billion in 2018. The largest Chinese technology companies created research laboratories in the United States. Thus, several years ago, Baidu opened a research centre for artificial intelligence in Silicon Valley (Silicon Valley Artificial Intelligence Lab). In 2017, the company opened a second centre for research and development of self-driving cars within the framework of its Apollo project. Soon after, a third company laboratory opened in the US — the Business Intelligence Lab — on research and processing of Big Data.
Another technology giant, Tencent, has opened an artificial intelligence research centre in Seattle. Alibaba also settled there with a laboratory for the study of machine learning, quantum computing, and natural language processing. Huawei has also opened its own Futurewei research laboratory in California.
However, now the US is continually accusing China of stealing intellectual property and forcing the transfer of technology. Actually, these accusations are the basis of the trade conflict between China and the United States. The US Department of Commerce has put forward a proposal to introduce export licensing for artificial intelligence technologies and related software products that can be used in key technology industries, such as robotics, biotechnology, self-driving cars, etc. The Committee on Foreign Investmnt in the United States (CFIUS), for its part, has promised to carefully consider each transaction involving investment by the PRC in the US technology sector.
All this has led to both American and Chinese business beginning to abandon investment transactions. During the World Economic Forum in Davos, Chairman of the Chinese Sinochem Group Ning Gaoning noted that Chinese investors were confused. For a long time, they believed that their capital was welcomed in other countries, but now it has suddenly turned out that Chinese money is completely undesirable. Even American startups prefer not to work with Chinese capital.
Earlier, Reuters reported that at least ten investment transactions had fallen apart at the last moment because going through the CFIUS approval procedure is a long process with uncertain outcome. For technology companies, the competition among which is very high, it is important to get funds quickly so as not to miss the moment of entering the market with a new product or technology.
The former deputy governor of the People's Bank of China, Zhu Min, said that now the supply and demand of Chinese capital in Silicon Valley tends to zero. This will not help the US protect itself. Rather, it will slow down the development of their technologies, as in this area nothing can be achieved alone for a long time, Bian Yongzu, an expert at the Chongyang Institute of Financial Studies at the Renmin University of China, said in an interview with Sputnik.
"If the US simply holds back the technological development of China, this will obviously go against the current trends. Americans probably believe that as long as they are ahead of China in technology, in the short-term they can hold back the development of the PRC. But they are not aware of the fact that China, in fact, can already develop many high technologies by itself. Therefore, the containment of China is no longer in the interests of America itself. China can cut US technology investments. In recent years, in accordance with the "exit to the outside world" strategy, China has intensified its investment activities. For example, Huawei has established many research laboratories around the world. And this technological investment is not only in the interests of China, but also in the interests of the recipient country. For example, companies in which China invests in Silicon Valley are American companies. Therefore, it benefits American technological development. If the United States closes this investment channel, it will, first of all, cause backlash for them. And Chinese companies will be able to focus on the domestic market and invest in innovations within the country".
Interestingly, American intellectual circles do not support US technological protectionism. According to Martin Chorzempa, a research fellow at the Peterson Institute for International Economics, the proposal to introduce technology export licensing could backfire on America itself. Because high technology has an extremely wide scope, many of them are double-purpose. It is very difficult to determine which of them could really pose a threat to national security if they fall into the wrong hands. And broad prohibitive measures can only lead to the isolation of the United States. Since many of these technologies are available in other countries, China has much to do with cooperation proposals if access to the necessary technologies is closed in the United States.
Bian Yongzu is a research fellow at the Chongyang Institute for Financial Studies at the Renmin University of China.