Of course. Here is the provided text converted to Markdown.
As the competition of trade between China and the U.S. grows more intense, the U.S. government has adopted more targeted policy measures in the fields of information and communications technology, infrastructure and scientific research in order to further protect its national security interests. Chinese companies and individuals will face a more challenging environment subject to highly uncertain political risks.
I. Information and Communications Technology
On May 10, 2019, the US Federal Communications Commission (FCC) rejected China Mobile’s application to provide services in the U.S. due to national security risks amid an escalation in tensions between the two countries. The committee may also review other Chinese telecommunications companies operating in the U.S., such as China Unicom and China Telecom. On May 15, 2019, President Donald Trump signed an executive order (“ Order”) entitled “Securing the Information and Communications Technology and Services Supply Chain”, which prohibits transactions and use of foreign information technology and services that may pose a particular threat to U.S. national security, foreign policy, and the economy. The Order prohibits U.S. companies from buying, using, and transacting communications equipment products and services that may involve theft of U.S. intelligence, espionage, or national security, because they fear that foreign competitors will use the supply chain to build critical infrastructure that poses a threat to national security. This has a particularly significant impact on China's information and communications technology (ICT) companies such as Huawei. The next day, the Department of Commerce, Bureau of Industry and Security (BIS) added Huawei and its 68 subsidiaries to its list of export-controlled entities, ordering that US companies not to sell products and technologies to Huawei and its subsidiaries without approval.
On May 20, Google announced that it would suspend its Android cooperation with Huawei. Microsoft also quietly withdrew Huawei laptops from its online store. On May 22, ARM instructed employees to halt "all active contracts, support entitlements, and any pending engagements” with Huawei. The ripple effect of the Order has affected Huawei's entry into the U.S. and overseas markets, which has brought layers of obstacles to Huawei's development. In addition, Chinese computer vision companies such as Hikvision, Dahua, YITU, SenseTime and Beijing Megvii are at risk of being added to the Entity List. The list names foreign and U.S. companies that must be approved by the U.S. government before a deal can be made. Then measures against companies such as Hikvision will be similar to those for Huawei.
Undoubtedly, this Order is a wake-up call for Chinese ICT entities, especially those invested, controlled and supported by the government. At present, the negotiations between China and the U.S. are deadlocked. The U.S. government can impose sanctions and restrictions on ICT enterprises based on the concerns of “national security”. Chinese ICT entities should prepare for the market environment and policy risks they will face. In the cold war of technology and trade, the U.S. regards the international market as bargaining for a higher value. Other countries will impose sanctions policies to varying degrees by under the pressure, which may strengthen restrictions and challenges on ICT enterprises.
II. Infrastructure
In addition to the information and communications technology enterprises, Chinese transportation infrastructure companies are also restricted by the U.S. On May 15, the U.S. House of Representatives introduced the Transportation Infrastructure Vehicle Security Act to prevent federal transit money from being granted to local transit agencies to procure rail rolling stock made by manufacturers owned, controlled, or subsidized by China. Though the bill did not name any specific company, such a description would clearly apply to CRRC Corporation Limited (CRRC).
A day after the House bill was introduced, the House Committee on Transportation and Infrastructure held a hearing about the impact of “state-owned enterprises”—with particular close scrutiny on CRRC and BYD—on the U.S. public transit and freight rail sectors. At the hearing, the committee expressed concerns about the video surveillance, monitoring and diagnostic system, data interface and automatic train control system in the CRRC’s Washington bidding contract. They said that Chinese latest advances in Artificial Intelligence and facial recognition technology would enable China on intelligence gathering, and thus threaten the U.S. network infrastructure security. On May 19, Senator Chuck Schumer called on the U.S. Department of Commerce to investigate whether CRRC’s proposal to design new subway cars for the Metropolitan Transportation Authority's (MTA) could pose a threat to national security.
On May 23, Virginia and Maryland Senators enacted the Metro Safety, Accountability, and Investment Act of 2019, Section 9 of which prohibited Washington Metropolitan Area Transit Authority (WMATA) from using federal funds “on a contract for rolling stock from any country that meets certain criteria related to illegal subsidies for state-owned enterprises.”
Last year, U.S. Congress passed the Foreign Investment Risk Review Modernization Act (FIRRMA) to strengthen the review processes of the foreign investment in the U.S. for national security threats. If the investment in U.S. businesses involving sensitive personal data, critical infrastructure, or critical technology is not non-passive or non-controlling, it will be subject to the Committee on Foreign Investment in the United States (CFIUS) review. Chinese infrastructure companies will face a more challenging market environment in the U.S.
Accordingly, the Chinese infrastructure enterprises represented by CRRC have also become the key targets restricted by the U.S. on the grounds of national security. The review processes and restriction measures are becoming more stringent. Once the relevant bills proposed by the Senate and the House of Representatives are passed, the federal funds will be banned from the railway projects related to Chinese state-owned enterprises. The potential contracts between CRRC and transportation authority of New York and Washington will be directly affected. At the same time, the blocked rail transit project will further influence its upstream and downstream supply chain. Related Chinese cooperative enterprises, such as the developers, contractors, material suppliers, and manufacturers, may be adversely affected.
III. Scientific Research
The dilemma of negotiations between China and the U.S. has impacts on academic research. The U.S. believes that the open cooperation environment of its academic institutions may be targets of Chinese spies trying to steal and exploit information of advanced technology and cutting-edge research from laboratories.
On November 1, 2018, Attorney General Jeff Sessions announced “China Initiatives”, which reflects the Department’s strategic priority of countering Chinese national security threats and reinforces the President’s overall national security strategy. This new Initiative aims to combat Chinese economic espionage. The Department has set the goal for the Initiative to develop an enforcement strategy concerning non-traditional collectors (e.g., researchers in labs, universities, and the defense industrial base) that are being coopted into transferring technology contrary to U.S. interests. The U.S. government has strengthened the security review procedures for researchers and universities, not only restricted visa application from Chinese students who studied in the high-tech fields, but also issued guidelines on "academic espionage technology” to the college. Once the suspicious actions are discovered, such as transferring of technology, stealing scientific research or intellectual property, the FBI will investigate directly.
Two years ago, the National Institute of Health (NIH) began investigating scholars in Thousand Talents Program at Emory University. Francis Collins, the NIH's director, reiterated that American research was suffering from "foreign influence" and intellectual property rights were being lost. Therefore, it is recommended that American universities “fire some people” and point to those who accept foreign Thousand Talent Program. On April 19th, it is reported that MD Anderson Cancer Center in Houston has ousted three of five scientists federal authorities identified as being involved in Chinese efforts to steal American research. On May 16, Emory University closed the laboratory of Chinese biologist Xiaojiang Li without any notice or statement. On May 23rd. Emory claims that Mr. Li and his wife, Shihua Li, were fired for not adequately disclosing funds from abroad and the scope of their work at Chinese institutions and universities.
Obviously, these initiatives are made by schools and institutions in response to the NIH policy, and there may be more such events in the future. It is reported that the NIH has identified at least 190 funded projects from NIH that are problematic and has initiated investigations in 55 research institutions. Recently, the U.S. Department of Homeland Security announced that it will significantly increase the Student and Exchange Scholar Information System (SEVIS) fees and visitor visa fees, and that some Chinese visas to the U.S. are restricted, such as extending the period of case review in visa application, shortening the validity period, and increasing the refusal rate. This adjustment may lead to a decline in the number of students studying and communicating in the U.S.
The impacts on Chinese companies and individuals are not limited to the ICT, infrastructure and scientific research fields. With the escalation of trade conflicts between the U.S. and China, the U.S. restrictions have become multifaceted. According to the “China Initiative”, the U.S. will put more efforts to conduct in-depth investigations and file lawsuits against Chinese companies suspected of violating The Foreign Corrupt Practice Act (FCPA), FIRRMA, and other related laws and regulations. Recently, the U.S. Department of Justice announced the release of an updated version of the “Evaluation of Corporate Compliance Programs” guidance to assist prosecutors in assessing the effectiveness of the company’s compliance program in the context of a criminal investigation.
Obviously, for Chinese companies planning to enter the U.S. market, the market environment has become more complicated and challenging, so they should fully prepare themselves to deal with such risks in advance. For Chinese companies already doing business in the U.S., they should face the challenges and have the courage to file the lawsuits against the unreasonable restrictions imposed by the U.S. The enterprises should also strictly regulate their business behaviors in accordance with relevant U.S. laws and regulations and design a comprehensive and effective compliance system based on the company’s actual condition. Moreover, Chinese companies should adhere to independent research and development, improve the ability of scientific and technological innovation, prevent excessive dependence on foreign suppliers, ensure the operation of the supply chain, and prepare the backup in advance to improve their market competitiveness.
