The China Question

www.worldecr.com 4 ThE ChInAquESTIOn CHINA blocking the country from accessing US technology and innovation that could help Beijing get ahead in security, defence, and economic standing. With space and cyberspace seen as the modern battlefields where the fight for global supremacy will be won or lost, the United States has built a wall of sanctions and regulations to stop China from gobbling-up its technology. is has thrust technology and hi-tech companies everywhere – especially in the United States – into the front lines of the US-China battlefield. It’s a shiing area whose rules and boundaries are not always clearly defined. Start-ups and shut-downs Brian Egan, a partner at law firm Steptoe & Johnson LLP in Washington, DC, says that while many global giants and other large companies have the in-house expertise to understand how they are impacted by the wave of new regulations, others oen do not. ‘You have some smaller tech start-up companies that might be in what I call “the clueless phase,” or the “ignorance is bliss phase”, where they have some sense that they may face some obstacles, but they don’t necessarily realise how a partnership with a Chinese company could lead to regulatory complications,’ Egan says. ‘en you have some tech companies that see dark clouds on the horizon and want to do something but they’re not sure what to do.’ Largely, these businesses are le in limbo because the Biden administration has taken no steps to suspend or roll back some very important Trump-era regulations relating to China trade that have a very broad impact, but are very unclear. Egan says that one example is the Information and Communications Technology Services (‘ICTS’) rule, which, by the Commerce Department’s own estimate, potentially affects up to 4.5 million US businesses. ‘e regulation has been put in place on the information and communications technology supply chain, where the US essentially has said, “We reserve the right to prohibit any transactions involving the US telecommunication supply chain and China,”’ Egan explains. ‘But the US government hasn’t told anybody which transactions they will prohibit, there’s no mechanism for seeking approval or clearance, and the US government has given itself the right to retroactively prohibit transactions that have already been consummated. at’s kind of like saying, “We’ll let you know if we see a transaction that’s problematic,” but by the time a company hears from the US government it may be too late – the transaction may have already taken place. So, even if a company wants to comply with this and be consistent with US policy, it’s very difficult for companies to figure out what to do.’ en-President Trump declared an ICTS threat emergency when, in May 2019, he signed an executive order (‘EO’) that effectively banned Chinese telecoms giant Huawei from receiving semiconductors made with US technology. Later, in August 2020, he banned the popular Chinese- owned apps TikTok and WeChat in the United States, citing concerns over the swaths of personal data of Americans that would be in the hands of Chinese companies, including location data and internet search histories. Trump said that was a national security risk – companies would have no choice but to hand their data over to the Chinese government if asked. But the bans on TikTok and WeChat never took effect because they were blocked ‘The US government has given itself the right to retroactively prohibit transactions that have already been consummated.’ Brian Egan, Steptoe Made In China 2025 The Made in China 2025 plan was released in 2015. It put into writing the Chinese government’s ambition to move the country from low-value manufacturing, reliant on cheap labour, by becoming a leader in higher technology and, with that, the world’s leading manufacturer of semiconductors. Ten sectors were identified as key to realising the ambition: 1. New generation information technology 2. Advanced numerical control machine tools and robotics 3. Aerospace technology, including aircraft engines and airborne equipment 4. Biopharmaceuticals 5. High-performance medical equipment 6. Electrical equipment 7. Farming machines 8. Railway equipment 9. Energy-saving and new energy vehicles 10. Ocean engineering