Square Pegs in Round Holes: U.S. Investment and Technology Restrictions on Chinese Interests

Summary

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• In 2023, the United States continued to impose new investment and technology restrictions on Chinese interests
• Key legislative changes last year included the proposed reverse CFIUS mechanism, continued implementation of the Holding Foreign Companies Accountable Act, new risk factor disclosure requirements for prospective listed companies, enhanced and extraterritorial export controls on semiconductors and semiconductor equipment, and an explicit secondary sanctions regime for non-U.S. financial institutions
• In 2024, the market can expect a further continuation of U.S. restrictions on Chinese interests
• This will pave the way for non-U.S. investors to capitalize on the PRC market

Against the uncertain macroeconomic and geopolitical backdrop in 2023, one constant was the continuation by the United States of investment and technology restrictions on Chinese interests. 2023 saw new mechanisms, such as the much anticipated reverse CFIUS (Committee on Foreign Investment in the United States) proposed rules restricting U.S. investment in specified sectors of the PRC economy, and an explicit secondary sanctions regime for non-U.S. financial institutions. 2023 also saw the continuation and expansion of existing regimes involving capital markets restrictions and export controls.

The chilling effect has already led some U.S. investors to preemptively decide to spin-off their PRC operations