Assessing the Impact and Implications of US Outbound Investment Screening on China: A Korean Perspective

The Biden-Harris Administration issued an Executive Order in August to limit the financing of and investment in advanced technologies in China. Semiconductors, quantum computers, and artificial intelligence (AI) were specifically targeted. Beijing is expected to respond to the White House’s Executive Order by introducing its own financial restrictions targeting American companies, such as delays in the authorization of merger-and-acquisition (M&A) deals, while also taking measures to accelerate the fragmentation of the world economy into blocs by its augmenting technological competitiveness and related ecosystems. The direct recent order and its ramifications on South Korea are likely to be limited because financial linkages between China and Korea in many key technologies are weak. Nevertheless, Korean policymakers need to devise strategies that enhance the competitiveness of Korean certain technologies and attract investments from international investors, while navigating an increase in uncertainties over technology financing and investment stemming from White House action. The Korean strategy ought to (1) prepare for greater uncertainties in the financial markets of certain technologies and for a broadening of scope of certain technologies in the future, and potential calls to cooperate in US-led efforts to contain China, (2) prepare for an escalation of the US-China technology hegemony rivalry across all fronts, now that the US's China policy measures encompass the financial markets, (3) increase support for and technological cooperation with foreign investors, with a view toward attracting friend-shoring investments in Korean technologies, and (4) reinforce financial and investment strategies and loosen regulations to attract cutting-edge technologies through strategic M&A with foreign companies.