Aug 9, 2023 - Economy

Companies rethinking China as Biden limits investments

Illustration of a briefcase lined with the Chinese flag

Illustration: Annelise Capossela/Axios

Major companies are restructuring their operations in China in response to growing scrutiny from both Beijing and Washington.

Driving the news: Dentons, the biggest law firm in the world by employee size, is splitting off its Chinese division to comply with new Chinese data privacy and transfer laws, the company recently told clients.

  • Last month, Morgan Stanley reportedly moved some of its mainland China-based tech staff out of the country, while starting to build new digital infrastructure to conform to local data restrictions.
  • In a unanimous decision by senior partners, venture giant Sequoia said in June that it will separate its China and India/Southeast Asian businesses into two independent firms by March next year. The firm was seemingly under pressure from Washington to stop U.S. investments in Chinese tech that could threaten national security.

The big picture: The Biden administration issued new restrictions today on U.S. investments in certain advanced sectors in China.

  • Officials have emphasized that outright restrictions would be narrowly targeted to areas that could boost the Chinese military's capabilities, but not disrupt legitimate business with China, the New York Times notes.

What they're saying: "We will see more companies separate out their operations — maybe break partnerships — because of [data security related regulations]," Tom Nunlist, a Shanghai-based tech policy analyst, tells Bloomberg.

  • "It just became clear to us that the cost of holding it all together ... wasn't worth it," Sequoia managing partner Roelof Botha told the New York Times earlier this year.

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