Summary 
On Monday, June 25, a Wall Street Journal report indicated that additional Chinese tech investment barriers severely impacted global investors’ confidence. Some restrictions being considered include limiting high-tech exports to China, tightening Chinese investment restrictions on U.S. tech companies, and prohibiting Chinese companies – defined as 25% or more Chinese ownership – from buying American companies involved in industrially significant technology. On the day of this announcement, the United States’ technology and energy sectors’ S&P 500 fell more than 2.8% due to fears of potential tech export restrictions curbing confidence in the tech industries. Chinese investors are also concerned as even low valuation IPO’s from Chinese tech companies – which almost guarantee higher yields because the stocks are under priced – are not enough to attract investors given the current climate. In other words, Chinese tech investors’ confidence in its own tech industry is waning as US investor confidence weakens as well. This is likely due to the US push-back against China’s increasing restrictions, making it more difficult for tech-related developments and potentially hurting both the US and China.
FAO Global Assessment
Declining investor confidence may indicate trouble for American businesses in two ways: exports and financing. High-tech manufacturing companies could lose a lot of their business if restrictions are put in place as officials highlight the interdependence of the US-China tech supply chain. Investors are growing wary of the potential impacts from said restrictions on the supply chain, putting American tech companies at risk for suffering financially. This means less opportunity from investors to raise capital for innovation, which hurts smaller publicly traded tech companies as their investments decline. These companies may have to seek loans from investment banks to compensate for losses that would come as a result of pulled investments. One aspect that is often overlooked is the multitude of other ways tech companies and investors from both countries can still work together. Although Chinese companies may face more scrutiny buying companies as a whole, there are still opportunities to do partnerships, joint ventures, and many other sectors not deemed national security interests.
Related Links
- Ars Technica – Report: Trump officials planning escalation of US-China tech trade war
- The Washington Post – U.S stocks sag as U.S.-China trade war talk heats up
- South China Morning Post – Hong Kong retail investors give Xiaomi’s IPO the cold shoulder, put off by high financing cost and valuation
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