Page 12 - ISO April 2023
P. 12


               “  China-related legislation has picked up in activity in recent months, serving as

                    one of the few areas of bipartisan compromise in the new Congress...          ”

        Priorities for the Biden administration in its “competition, not   Regulating outbound investment in this manner is uncharted
        conflict” agenda have included export control agreements,   waters for the US and would introduce a level of uncertainty to
        industrial policy, and an upcoming screening mechanism for US   cross-border capital flows; Congress is working on parallel
        investments in China. International coordination has been a   legislation to clarify the details of the review.
        major theme of the administration’s strategy, with the US
        striking agreements with the Netherlands and Japan respectively   In Congress, China-related legislation has picked up in activity in
        for a multilateral export control regime targeting China’s access   recent months, serving as one of the few areas of bipartisan
        to advanced semiconductor manufacturing technology as a key   compromise in the new Congress; however, differences in
        milestone—which could limit the addressable market and lower   priorities and implementation may slow the progress of bills.
        revenues for global equipment providers. During the release of   TikTok has been in the spotlight as a core focus for China-related
        the first round of applications for $39 billion in semiconductor   legislation, with a flurry of bills being filed since the new Congress
        manufacturing incentives, the administration further stressed   began in January—including a House Foreign Affairs bill that
        the importance of cooperating with allies as part of a broader   passed out of committee on party lines and newly-introduced
        vision to make the US into a global leader in semiconductor   Senate legislation with backing from the White House. Impacts
        production and innovation. Recipients of the funding will have   are likelier to be seen in the longer term rather than immediately,
        to comply with new rules that prevent most forms of investment   but the momentum highlights the increasingly critical stance that
        in China-based semiconductor manufacturing capacity.   Capitol Hill is taking on Chinese tech—and the potential secondary
                                                            impacts for the technology sector at large.
        On a broader level, a long-awaited outbound investment screening
        mechanism is expected to be released in the coming months,
        which would regulate certain outflows of US investment into

             KEY TAKEAWAYS:
             •  Geopolitical risks are on the rise and becoming a more prominent part of the macro investment decision-making process.
             •  Oil, natural gas, and energy infrastructure are likely to see persistent policy impacts as the availability and expansion of
               these economic inputs is more acutely seen as a core national security interest.
             •  A lesson learned from Russia’s invasion of Ukraine is that the threat of severe economic sanctions is not sufficient as a
               means of deterrence, which will place renewed emphasis on military power as a critical national security consideration.
             •  Economic competition between the US and China is here to stay.

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