On June 25th the Wall Street Journal article uncovered the U.S. Treasury’s plans to craft new rules that will limit Chinese investments in the U.S. companies involved in “industrially significant technology”. Referring to so-called credible informants, the article stated the United States government plans to prevent firms with 25% and more Chinese ownership from acquiring U.S. tech companies.
The original article that provoked the discussion
This news, though leaked, has not come out of the blue; Donald Trump’s escalating (and already notorious) trade war strategy on China has been going on for a while now and is arguably intended to prevent US’ Asian partner (or better say rival?) from fulfilling its «Made in China 2025» initiative. The latter is aimed at making China a leader in a range of technology areas such as information technology, aerospace, biotech and electric vehicles among others.
The perspectives of this ban have recently become a major focus point of Chinese online media as well. Top local news outlets Sohu and Toutiao stated the high likeliness of these measures to be introduced as an influential way to restrain China from becoming a superpower; FN and Jinniu shared an opinion that this prohibition will negatively affect the progress of Chinese technologies, while some industries (such as biotechnologies, telemedicine, processors) significantly lag behind USA and trying to keep up with this pace on their own would be tough for China.
Earlier in June The Trump administration already announced 25% tariffs on $50 billion worth Chinese imports, entering into force on 6th July and including all the most relevant strategic technology-related industries.
However, later on 25th an update for planned investment restrictions came in, stating that the new legislation will apply not to China only, but for all other countries “trying to steal our technology”, as Treasury Secretary Steven Mnuchin claimed in his tweet.
While it undoubtedly is an alarming sign from international relations perspective, it can also become a bliss.
For whom? For Russian startups!
For a while now Russian tech (mostly blockchain-related) startups have been looking towards Asia — and Asian venture capital in particular. Roadshows around Asia have become a super popular lot offered by ICO marketing agencies, and startupers seem to be willing to pay several (or several dozens) bitcoins to have a chance to be introduced to local investors.
It’s not just a utopian quest for imaginary fundraising: in 2017 China became the leader among countries that invested in Russian projects, with 3,5 times more projects that attracted Chinese investors than in 2016.
On the contrary, Chinese investments into US tech startups have started a gradual slump after reaching its peak in 2015 — and the situation seems to become less and less positive with the tightening of regulations. For example, Chinese tech giant Alibaba invested in only 3 startups in 2017, making it a five-year low for the company. Chinese venture capital in Silicon Valley is being regarded as a threat to US tech advantage by some market players.
Despite these tendencies which have been forming for a while now, the current situation with the new US blocade policy plans still poses major risks for the investments. How to reduce the risks, while keeping the high level of technologies quality and expertise of the scientists?
From our perspective, the answer to this question for Chinese investors is: take a closer look at Russia.
Evercity’s mission is to prepare best, carefully selected Russian startups for investments. Learn more in our Telegram channel: https://t.me/evercity
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