U.S. ban on tech investments in China not likely to affect Korea: Gov.t

U.S. President Joe Biden delivers his remarks at Arcosa in Belen, New Mexico on Wednesday. [REUTERS/YONHAP]

Washington’s latest decision to regulate U.S. investments in Chinese high-tech companies is not likely to impact Korean businesses, the government said Thursday.

However, as long-term risks from the continuing tensions between the world’s two superpowers remain, Korea should be ready to address possible fallouts in case of political pressure from the U.S. to get on board with the restriction, experts warned.

U.S. President Joe Biden on Wednesday signed an executive order to ban or restrict new investments in “countries of concern,” namely China, by prohibiting or requiring government notification on new investments going toward Chinese companies in chips, microelectronics, quantum information technologies and artificial intelligence.

The measure, aimed at preventing the use of U.S.-based venture capital to further advance China’s capabilities in sensitive technologies, is likely to take effect in 2024. The executive order will now proceed with a 45-day public comment process.

In response to the presidential order, China said that it is “gravely concerned” about the measures, accusing the U.S. of hindering fair competition and disrupting the supply chain stability in the global market.

Korea’s Ministry of Trade, Industry and Energy issued a public release Thursday, saying that “the U.S. regulation on foreign investments will be applied only to future investments and targets individuals or entities based in the country, therefore its impact on Korea’s businesses is expected to be limited.”

However, the ministry added that it will thoroughly analyze possible implications of the upcoming restrictive measures, and communicate its stance with the U.S. government if necessary.

Concerns also remain as the political pressures on U.S. allies such as Korea could grow amid the intensifying tech race.

“Korea, or any other countries aside from the United States, are not required to abide by the newly-announced order, so its immediate impact will be limited,” Yeon Won-ho, head of the economic security team and research fellow at the Korea Institute for International Economic Policy, told the Korea JoongAng Daily.

“Nonetheless, as the U.S. government’s intention is clearly to prevent funneling investments to the Chinese high-tech sector, it is necessary to be prepared in case political pressures are extended to other major economies such as Japan or Korea.”

Yeon also added that Korea-based companies with Chinese parent entities could be subject to the upcoming measure, and therefore need to monitor the situation closely.

Na Jeong-hwan, an analyst at NH Investment & Securities, also said that while the order will not have an immediate impact, “if China comes up with responding measures against the United States and the rivalry further intensifies, it could negatively impact Korea’s investor sentiment in the chip sector.”

The share price of Samsung Electronics, the world’s largest memory chip supplier, dipped 1.31 percent in the Kospi market on Thursday to close at 68,000 won ($51.70).

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]