The Biden administration has announced a proposed executive order involving outbound investment screening that could potentially affect APAC businesses and investors. This plan imposes notification requirements for certain transactions on United States (U.S.) persons and outright prohibits U.S. persons from partaking in other transactions. Notably, these measures are directly linked to specific Chinese parties operating within three advanced technology domains.
The report from Hogan Lovells suggests that the far-reaching potential of this proposed outbound investment program could carry significant implications for particular businesses and investors in the APAC region.
The outbound investment screening order proposes restrictions on U.S. persons from engaging with certain Chinese parties involved in advanced technology sectors, including but not limited to artificial intelligence, biotechnology, and high-end equipment manufacturing. This spells a distinct shift in economic policy that may pose challenges, particularly to U.S. businesses with operations or interests in China and similarly, APAC businesses and investors that have stakes in the United States.
Additionally, U.S. persons involved in certain types of transactions will be expected to provide notification to governing authorities. While the focus appears to be on transactions involving technological developments, the order extends beyond this sector, potentially affecting a wide variety of industries. Therefore, a comprehensive understanding of these regulatory changes will be crucial for businesses navigating this new landscape.
This newly-proposed policy underscores the need for companies, especially those doing business in the APAC region and those invested in advanced technology sectors, to keep abreast of the changes in foreign investment screenings. If approved, it will require U.S persons and companies to reassess their partnerships and business relationships, particularly with Chinese entities engaged in the designated technology sectors.