Washington's tech policies will help China claim innovation high ground

SOME US MEDIA report that China has suspended its investing in Silicon Valley under mounting pressure from the US government investigation. Some worry that China will withdraw all its investment from the tech valley. Li Zheng, a researcher in US studies with the China Institutes of Contemporary International Relations, comments in an article for Outlook, a think tank owned by Xinhua News Agency:

The retreat of Chinese capital from Silicon Valley fits in exactly with the US government's wishes. The US Congress passed the Foreign Investment Risk Review Modernization Act in August last year, which entitles the Committee on Foreign Investment in the United States to extend its tentacles to venture capital and nonholding strategic investment, and the committee can now also customize its treatment to different countries. The US has also passed its Export Control Reform Act, which includes advanced technology in its export controls.

All these moves affect China. Apparently, investing in Silicon Valley is no longer a wise choice for Chinese investors. The problem for the US is that the capital from the other countries might not be able to fill in the vacuum left by China. Imposing restrictions on Chinese investment will backfire.

The US government's protectionist actions, which put politics above innovation and business, will fundamentally change Silicon Valley's innovative ecology by shaking the pillars of the global innovation center－its inclusiveness to talent, openness to capital and efficient commercialization of technologies.

With the disappearing of Chinese capital and talent－which will worsen the investment and business environment and probably trigger a chain reaction in Silicon Valley－it will only be a matter of time before the innovation powerhouse loses its Chinese market. Since it is almost impossible to export advanced technology to China from the US, many technology companies serving the Chinese market as their main customer will leave the US, and relocate to countries where it is easier to transfer technology and obtain investment.

In the first 10 months of 2018, the total volume of venture capital in China has reached a record $93.8 billion, surpassing that in the US. It is predictable, with the improvement of intellectual property rights protection and its domestic business environment, that China will become a new highland for global innovation, which is exactly what the US does not want to see.