According to a report by Bloomberg News, Biden plans to sign an administrative order before and after the G20 Leaders' Hiroshima Summit from the 19th to the 21st, strictly restricting American companies from investing in some high-tech industries in China; Among them, the fields of artificial intelligence, semiconductors, and quantum technology may face a comprehensive investment ban. In fact, as early as April 20th, similar news came out. On April 20th local time, Bloomberg quoted sources as saying that the Biden administration plans to issue an administrative order next month to restrict US companies' investment in China, involving key economic sectors such as chips, artificial intelligence (AI), and quantum investment.

        According to reports, the restricted areas for US companies to invest in key areas of the Chinese economy will include venture capital, private equity, and certain forms of technology transfer and joint ventures, and certain types of investment will be completely prohibited.

        Based on the macro analysis of the monarch, we believe that the launch of the US Foreign Investment Review Mechanism has limited short-term impact on China. However, due to scope expansion, alliance with allies, and continuous review, we anticipate that the long-term impact on China may be significant.

        The stock of US investment in China has fluctuated in recent years, and the incremental scale has significantly decreased. Its investment in China is mainly in the traditional part of the manufacturing industry, with a relatively low proportion in the new economy. Currently, the main content of the foreign investment review mechanism is in emerging fields such as advanced semiconductors, artificial intelligence, and quantum computing, which are already not heavily invested, so the review will not bring too much impact in the short term.

        However, the long-term impact may be significant. Firstly, there is a possibility of expanding the scope of the review in the future, further expanding into the list of key and emerging technologies, thereby increasing the scope of restrictions; The second is to attract allies, the first batch of G7 countries. If the alliance solidifies, it will be more unfavorable for China to attract foreign capital in emerging fields; The third is continuous review, which has a significant impact on emotional effects and loses the imagination space for subsequent investment cooperation. China may face a shift in cooperation.

        However, the US foreign investment review mechanism also further catalyzes China's industrial policies to be further strengthened, including technology innovation refinancing and improving the convenience of listing and financing. The logic of domestic substitution in corresponding fields will be further strengthened.

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