The Wall Street Journal reported that the U.S. Treasury and Commerce departments are recently preparing a new program that explores a new regulatory system to address U.S. investments in advanced technologies overseas that could pose a national security risk. The report suggests that the Biden administration may prohibit certain investments and collect information on others to inform future measures. While the report does not specify which areas of technology are deemed risky, areas that involve adversary military capabilities are expected to be its focus.
People familiar with the matter said that the program will cover private equity (PE) and venture capital (VC) investments in advanced semiconductors, quantum computing, and some forms of artificial intelligence. According to the U.S. Treasury Department, the program focuses on preventing U.S. capital and expertise from being used to threaten national security without placing an undue burden on U.S. investors and businesses. The report does not identify which countries fall within the scope of the new rules, but it is generally expected that the new rules will primarily involve U.S. investments in China.
Sequoia Capital, one of the world's largest venture capital firms, has already started screening new investments in Chinese semiconductor or quantum computing companies as it prepares for the new rules to be introduced in the United States, according to the Wall Street Journal.
Researchers at ANBOUND believe that the market ecology of Chinese venture capital, mainly in the technology sector, will change significantly as U.S.-China political and economic relations deteriorate across the board. The "U.S. venture capitalist - Chinese company - U.S. IPO" model that has formed in the past may disintegrate. Under this trend, venture capital and equity investments in China's technology sector will likely no longer be able to rely on U.S. capital and will have to rely on domestic capital, forming an "internal cycle" of "domestic capital - domestic companies - domestic IPO" within China.
