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Content source: EMBA at the National University of Singapore. Sharing Guest: Ma Jianxin, Alumni of Class 29 of Chinese EMBA, Outstanding Academic Silver Award Winner, and Head of Dow Jones Risk Compliance in China. Editor in Chief | Ruofeng Typesetting | May 7791 Deep Good Article: 8131 words | 15 minutes to read

Business Thinking
In the context of globalization, the game and competition between major powers have become increasingly complex, which is not only reflected on the international political stage, but also profoundly affects the strategic decision-making and compliance practices of enterprises.
Especially the US foreign investment review mechanism, how it affects venture capital has become a topic of great concern. At the same time, enterprises also need to face the challenges of "long arm governance" and "high walls in small courtyards".
So, in this unpredictable environment, how should companies effectively "look at the weather, set strategies, and make decisions" to ensure compliance with international operations without losing competitiveness?
Mr. Ma Jianxin shared his personal insights and practical experience with us, revealing how companies can find successful compliance paths in the context of the big country game.
Currently, in the context of the strengthening of the US foreign investment review mechanism and the expansion of "long arm jurisdiction" and "high walls in small courtyards", enterprises from various countries are facing great risks and compliance challenges. I would like to share three core viewpoints with you today:
1. Develop a sense of overall situation and cultivate an international perspective
When our company "goes to sea", we cannot just focus on a certain rule or regulation, but "from seeing only trees to seeing forests", "jumping out of compliance to see compliance", and seeing the broader world with a larger perspective, so that we will not be influenced by a certain event or fragmented information.
2. Risk oriented, abandoning rule-based approach
Laws, regulations, and international conventions are undoubtedly important, but nowadays the regulations are too complex to handle, and there are even conflicts between national regulations. So whose rules should we comply with? We need to make decisions based on risk scenarios, rather than blindly following rules.
3. Do the right thing and do it right
Execution is important, but direction selection is more crucial. If the direction is wrong, no effort will be in vain.
As Professor Fu Qiang mentioned in his speech at the 2023 opening ceremony of the Chinese EMBA program at the National University of China, "Doing the right thing... perceiving human difficulties firsthand and finding solutions to the problem in one's own way is the true value creation and an indispensable foundation for career growth
In recent years, the global economic and trade order has experienced multiple risks and challenges, from the trade war between China and the United States, to the supply chain disruption caused by the COVID-19 epidemic, as well as economic sanctions and export controls after the Russia-Ukraine conflict... As these risks continue to overlap, governments of various countries have taken different measures to deal with them.
China advocates a new development pattern of "dual circulation" to enhance economic resilience and supply chain elasticity; Singapore promotes the regionalization of high-tech industries through "near shore outsourcing" (production in countries close to product consumption or final assembly sites); The EU emphasizes "technological sovereignty, digital sovereignty, and economic sovereignty" to address supply chain and industrial chain pressures; The United States proposes the concept of "friend shoring" and advocates for supply chain cooperation and trade relations between trustworthy ally countries.
Under the international situation of the great power game, the once super globalized economic and trade order has begun to evolve towards limited globalization or regionalization. Therefore, as entrepreneurs and managers, we need to have a clear strategic positioning and business strategy in order to ensure the sustainable development of the enterprise in this complex situation.
Below are some personal opinions on the recent US foreign investment review mechanism, as well as "long arm jurisdiction" and "small courtyard high wall", for your reference.
1、 The US Foreign Investment Review Mechanism and Its Impact
Since World War II, the United States has taken at least two measures to strengthen its national security defense and maintain its comprehensive global competitive advantage:
One is to strengthen the Inbound Investment Review of foreign capital in the United States, and the other is to strengthen the export control review of key technologies in the United States.
However, since Biden took office, the US government has believed that there are "loopholes" or "gaps" in both aspects. For example, the investment of US capital in foreign competitors, especially in key areas, has actually helped them improve competitiveness and also harmed US national interests. In this regard, the US has almost no relevant review mechanism.
Therefore, the Biden administration is working to develop new laws to strengthen so-called national key capabilities and design a "trinity" review mechanism, which includes the Foreign Investment Review mechanism and the Export Controls of controlled items in the United States, as well as the addition of an Outbound Investment Review mechanism to address loopholes and enhance the long-term competitive advantage of the United States.
As is well known, capital is profit oriented (mobile). Therefore, the investment review mechanism in the United States has gradually shifted from reviewing foreign investors to examining the output of US capital and technology exports, from a single "economic and trade friction" to a multidimensional "competitive strategy", which integrates a series of competition and defense involving key capabilities such as "trade war", "technology war", "financial war", "legal war", and "talent war", In fact, a new model of major country competition has been launched.
However, there is no need to panic, as the US foreign investment review mechanism has boundaries, not all investments are restricted, and not everyone must follow these rules.
In order for everyone to better understand, we will abandon cumbersome legal terminology and briefly analyze what is the US foreign investment review? What impact does it have on us?
According to Executive Order No. 14105 signed by US President Biden on August 9, 2023, the US outward investment review mainly focuses on investment transactions in specific technologies and products that Americans conduct in countries of concern.
There are several key points in this sentence:
What is "American"?
According to Executive Order 14105, a US person refers to any US citizen, legal permanent resident, entity established under US law (including its overseas branches), and any person located within the United States.
This is a commonly used expression in American law, and its coverage is quite extensive. Therefore, those venture capital funds established in the United States, individuals with US green cards or US citizenship, and individuals residing within the United States all fall under the category of Americans. If they conduct activities in fields such as advanced semiconductors, artificial intelligence (AI), and quantum computing in China, they may be subject to restrictions from US foreign investment reviews.
In addition, foreign entities owned or controlled by Americans (entities that directly or indirectly hold more than 50% of the equity), as well as restricted transactions guided by Americans under known circumstances, will also be subject to restrictions. This also indicates that investors located outside the United States (such as subsidiaries established in China) will also be restricted as long as their ultimate beneficiaries are Americans.
Of course, as these rules may not take effect until 2024, it is not ruled out that the US government will also modify the rules. We still need to continue to pay attention.
2. Who is the country of concern? Who is the entity of the country of concern?
According to Executive Order No. 14105, And the Advance Notice of Proposed Rulemaking (ANPRM) issued by the Investment Security Office of the United States Department of the Treasury regarding Provisions Persisting to U.S. Investments in National Security Technologies and Products in Countries of Concern, Currently, the only countries of concern are China (including Hong Kong and Macau).
The entities of the country of concern will include: citizens or permanent residents of the country of concern, who are not Americans; And entities established or having their principal place of business in the country of concern in accordance with the laws of the country of concern; It also includes the government of the country of concern and any entity owned, controlled, guided by, or acting on its behalf; This also includes any entities held by the above entities.
3. What are regulated investment transactions?
According to the ANPRM public documents, the so-called "Covered Transactions" by the US Treasury mainly refer to the types of transactions subject to US foreign investment review, such as prohibited and notifiable transactions.
Specifically, for example, acquiring equity or ownership of entities in countries of concern; Alternatively, providing debt financing to entities in the country of concern, which can be converted into equity; Furthermore, it may lead to the establishment of green space investments in national entities of concern; And establishing joint ventures related to entities in countries of concern.
But these regulated investment transactions have a prerequisite that involves specific technologies and products related to national security.
4. What are the specific technologies and products included?
At present, the specific technology and product range are limited to the three fields of "semiconductor and microelectronics, quantum computing and artificial intelligence", such as advanced integrated circuits (EDA tools and production equipment, etc.), supercomputers, and so on.
This scope is clearly significantly smaller than previously mentioned, such as the National Strategy for Critical and Emerging Technologies released by the Biden administration in February 2022, which includes more than 20 high-tech fields.
Although the US Treasury claims that the scope of these specific technologies and products needs to be negotiated with the US Department of Commerce, this also indicates that the US outward investment review has stirred up the cheese of many investors, due to the active lobbying of US investment and business leaders, as well as the balanced approach taken by the Biden administration for the interests of the US and its presidential election next year.
In fact, the 2018 Foreign Investment Risk Review Modernization Act (FIRRMA) already mentioned the "foreign investment review mechanism", but due to the successful lobbying of opponents and political gaming among stakeholders, the relevant content was removed from the final version of the FIRRMA Act. The restart now may indicate that the 'big country game' has entered a new stage.
In summary, the US foreign investment review mechanism currently only restricts Americans, targeting specific areas of concern to countries, and clearly defines the types of investment transactions subject to jurisdiction to avoid duplication with existing investment review tools. In the future, it may be jointly reviewed with ally countries.
2、 How can enterprises effectively cope with "long arm jurisdiction" and "high walls in small courtyards"?
Generally speaking, "long arm jurisdiction" mainly refers to the act of the United States relying on its strong economic strength and financial hegemony as a backing, applying its domestic laws to extraterritorial jurisdiction over entities and individuals in other countries.
According to the 2021 Sanctions Review released by the United States in 2021, the number of sanctions implemented by the US government increased by more than 10 times from 2000 to 2021. For example, in 2021, the cumulative number of sanctions implemented by the US reached 9421, an increase of 933% compared to 2000.
During Trump's presidency (2017-2021), a total of 3900 sanctions were implemented, which is equivalent to waving an average of 3 "sanctions batons" per day. After Biden took office in 2021, he continued to strengthen the "long arm jurisdiction" policy and signed a large number of administrative sanctions orders. For example, after the Russia-Ukraine conflict in February 2022, the United States and Western allies' sanctions against Russia have grown exponentially, unprecedented.
And "small yard, high fence" is the competitive strategy adopted by the Biden administration against China.
The term 'small courtyard' refers to specific technical fields related to US national security, such as choke point technology, technical fields with significant competitive moats, etc; High walls "refer to appropriate strategic boundaries, such as investment reviews, research restrictions, etc. The United States adopts stricter regulatory measures in areas such as "small courtyards" and "high walls", while in other areas, cooperation with China can be carried out.
For example, Biden signed a series of bills such as the Chip and Science Act of 2022 (CSA) and the Inflation Reduction Act (IRA) to promote chip technology development and strengthen tax support for "advanced manufacturing" industries, including supply chain backflow in key mineral and battery manufacturing industries.
At the same time, the US Congress has also introduced multiple bills to strengthen competitiveness in key technologies, resources, capabilities, and investments, aiming to become the "World Leader of Critical and Emerging Technologies":
Key technologies:
The technological fields crucial for maintaining the United States' position as the world's major superpower include but are not limited to: semiconductors, large capacity batteries, biotechnology, artificial intelligence, quantum computing, hypersonics, financial technology, and autonomous systems such as robots and underwater drones. (Reference: The National Critical Capabilities Defense Act (NCCDA) of the United States)
Key Resources:
To produce critical products, raw materials, or mineral resources in the US supply chain, avoiding supply chain disruptions caused by non ally countries refusing to provide services, such as rare earth, magnets, and other key products that can be used for military purposes; And key raw materials (such as crude oil, food, and fertilizers); In some fields such as solar panels, the United States hopes to achieve resource diversification among friendly countries. (Reference: U.S. Innovation and Competition Act, USICA, S.1260)
Key Capabilities:
The systems and assets that are crucial to the United States, whether physical or virtual, if they cannot be developed or destroyed, it will have a destructive impact on national security or crisis prevention.
For example: medical supplies, drugs, and personal protective equipment; Items necessary for the operation, manufacturing, supply, service, or maintenance of critical infrastructure; Items that are crucial for infrastructure construction after natural and man-made disasters; Items that are essential components of the operation of weapon systems and intelligence collection systems, or items that are crucial for military or intelligence operations; Supply chain and services related to any of the aforementioned systems and assets. (Reference: COMPETES ACT of the United States House of Representatives)
Key investments:
One is overseas investment activities that harm the competitive advantage of the United States, such as green space investments such as new factory construction, joint ventures involving the transfer of knowledge or intellectual property rights, and capital contributions including venture capital and private equity transactions;
The second is whether foreign investment in the United States poses a threat to the resilience of the supply chain of key minerals and services in the United States, as well as transactions related to ownership or control of manufacturing capabilities, services, key mineral resources or technologies that are crucial to national security. (Reference: Biden signed Executive Order No. 14083 on September 15, 2022)
From this perspective, "long arm jurisdiction" and "high walls in small courtyards" are no longer just compliance issues. Under the influence of geopolitics, geoeconomy, geointerests, and geosecurity, compliance has gradually been "weaponized". For example, the investment restrictions imposed by the United States on the field of artificial intelligence are actually a means of great power game, and the fundamental reason may be the "Thucydides trap" in mischief, or the geopolitical competition game of politicians.
Anyway, if we do not fully recognize the game rules, establish an effective compliance management framework, and lack the corporate governance ability of "forging iron requires our own hard work", we may become cannon fodder.
Faced with these risks, we should not only "pick up the telescope" to improve our thinking and cognition, but also to enhance our political stance; Also, pick up a microscope or magnifying glass to strengthen the identification of these risks.
Overall, in the face of complex policies and regulations, both entrepreneurs and investors need to have clear strategies and forward-looking thinking, not only focusing on current rules, but also continuously and dynamically responding to risks.
3、 The Way to Compliance under the Game of Great Powers
1. From enterprise compliance to value chain compliance
In recent years, most enterprises have strengthened their compliance management capabilities and achieved various aspects of enterprise compliance construction, such as "compliance systematization, system flowability, process informatization, information digitization, data intelligence, and intelligent and effective".
However, from the recent international economic and trade conflicts and corporate violation cases, many problems are not entirely due to the compliance ability of the enterprise itself, but rather from the risk transmission of the supply chain.
The upstream and downstream industrial chains, supply chains, and value chains of enterprises are both a "community of interests" and a "community of risks" among themselves.
The interruption of the supply chain will have a chain reaction, and the decoupling of any link from designers, suppliers, manufacturers, to distributors will cause a fault in the supply chain, thereby affecting the network of the value chain.
The compliance of the supply chain will promote product and business compliance, thereby achieving overall compliance of the enterprise. If there is a risk of non-compliance in the supply chain, it will also be transmitted to downstream products, bringing corresponding risks to the enterprise.
Even if all 'hard technology'
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