The U.S. government's attempts to crack down on China's high-tech sector are intensifying in scope and frequency, as the Biden Administration banned eight Chinese tech companies from receiving U.S. capital and supplies, after Chinese artificial intelligence (AI) firm SenseTime was put on a U.S. investment blacklist on December, leading the company to postpone its IPO in Hong Kong. Chinese experts said that as a result U.S. investors will be forced to give up many chances to reap profits in China's rapidly developing high-tech sectors. The eight firms include China's drone manufacturer DJI, facial recognition software company CloudWalk Technology and AI company Yitu Technology. The U.S. government blacklisted those companies from U.S. investment on the allegations that they are involved in the surveillance of Uyghur muslims in Xinjiang. The eight firms had already been placed on the Commerce Department's entity list, which restricts U.S. companies supplying products or technologies to the Chinese companies.
Leon Technology said that its business does not involve U.S. markets, and the investment blacklist would not have a major impact on the company's operation, products and services or its business performance. DJI declined to comment when contacted by the Global Times. The Financial Times reported that the U.S. Commerce Department plans to place more than two dozen Chinese companies on the entity list to restrict U.S. companies' exports to them, including some involved in biotechnology. The U.S. government is expanding its crackdown from upstream products, such as chips, to the entire high-tech industry chain. “Since the U.S. cannot afford to decouple with China in trade ties, it will do everything to suppress Chinese companies in the field of science and technology,” Cui Hongjian, Director of the Department of European Studies at the China Institute of International Studies, told the Global Times. According to Cui, the U.S. government sees competition in science and technology as key to maintain its position of global dominance. In areas where they think China has a chance of surpassing the U.S., such as drones and AI technologies, the U.S. will launch crackdown measures, whether those companies have business in the U.S. or not. “The U.S. logic is that it will cooperate with China in areas like climate change, but in the technology sector, they will only view China as a competitor,” Cui said.
According to experts, such investment bans will restrict capital from flowing to China's tech companies, one of the favorite investment targets for U.S. venture capital institutions in recent years. As a result, domestic tech startups going through initial rounds of financing will be impacted to some extent. However, this impact will be limited as there are alternative financing channels, including investors from countries other than the U.S. and increasingly mature domestic venture capital investors, analysts said.
None of the eight tech companies will suffer major impacts as none of them is listed in the U.S., and they are capable of attracting domestic venture capital. China's AI industry will also manage to grow independently despite U.S. sanctions, as it does not rely on U.S. supplies as much as other industries, such as mobile phones. “AI products usually don't need chips like mobile phones do, and therefore companies don't have to import U.S. chips in large quantities,” Dong Shaopeng, Senior Research Fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times. The analysts also stressed that the U.S. will only hurt itself by stemming capital flow to China's tech companies, as such actions would not only deprive U.S. companies from sharing the gains made by Chinese tech firms, but also ruin the reputation of the U.S. “free” market, the Global Times reports.
