High-tech threat, low-impact result

Will, as speculated, US President Joe Biden declare as soon as today his candidacy for the 2024 presidential election?

If he does declare his candidacy, the financial world is monitoring whether he will also use the occasion to announce a rumored executive order to impose a blanket ban on new American capital investments in Chinese high-tech sectors.

It was four years ago today that Biden launched his election campaign that led him to defeat Donald Trump to make him the US president.

Coupling the anniversary with an announcement of an aggressive executive order would allow him to kick off his re-election campaign on a more powerful note at home at a time when Trump is leading in most Republican primary polls.

Although the news of an imminent ban on all high-tech sectors was reported by Bloomberg recently, such a prospect has been brought up for months.

Prior to the Bloomberg report was a similar article carried by Politico in January, with a follow-up report by Reuters in February.

The fact that the likelihood of an aggressive ban on Americans investing in Chinese high-tech sectors - including artificial intelligence, quantum, cyber, 5G and advanced semiconductors - has been reported repeatedly by various mainstream media outlets could have been deliberate with a view to giving investors advance notice.

If investors were not totally convinced that the Biden administration would go so far after reading the first Politico report, they may have paused to rethink after seeing the Reuters despatch. The Bloomberg report may have come as a final warning.

Could the notice period be a window for US investors to adjust their portfolios to avoid a stampede?

By coincidence or not, Tencent's largest shareholder, South Africa's Prosus NV, has intensified efforts to sell its stakes in the internet giant. Japan's Softbank has also moved to sell almost all its stakes in Alibaba and US billionaire Warren Buffett has cut stakes in EV maker BYD.

Washington's multiple sanctions have definitely restricted China's access to foreign technology - but Beijing officials may see that as opportunities in a crisis.

Restriction on China's access to foreign technology is also making the nation more determined than ever to achieve technological breakthroughs on its own or with the assistance of friendly countries, including Russia.

It is likely that, by the moment the Biden administration announces the reportedly rigorous ban on American capital investment in Chinese tech firms, the news would have already been digested by the market.

Then, Chinese stocks may surprise the market with a rebound rather than a crash.

For one thing, years of geopolitical confrontation between China and the US have not only led to less US investment in Chinese stocks but has also reduced these companies' exposure to the effects of foreign capital movement.

Wall Street was reluctant to decouple from the mainland when Trump brought up the prospect of decoupling. Nonetheless, as less is invested by Americans in Chinese stocks, their influence wanes at the same time.

China is investing heavily in its high-tech sectors in order to be self-dependent and it can be expected that the impact will also diminish each time new sanctions are announced.