China’s securities regulator has given the greenlight to the country’s first mutual fund targeting top Chinese and South Korean chipmakers, an official at Huatai-PineBridge Fund Management Co said, amid an escalating Sino-U.S. tech war, Reuters has reported.
The China Securities Regulatory Commission’s approval comes amid heightened geopolitical tensions between the world’s two largest economies. The Biden administration published a sweeping set of export controls on Friday, seeking to hobble China’s chip industry. Huatai-PineBridge made the application for regulatory approval on Aug. 9.
The exchange-traded fund (ETF) will invest in top Korean semiconductor firms including Samsung Electronics Co and SK Hynix Inc, as well as Chinese chipmaking giants such as Semiconductor Manufacturing International Corp and Montage Technology Co.
“The Chinese and Korean semiconductor industries are expected to be closely integrated,” creating synergies, Huatai-PineBridge said in prepared marketing material for the ETF, whose launch date has not yet been determined.
The fund will also benefit from China’s accelerated pace towards tech self-sufficiency amid U.S. sanctions, according to the marketing material, which mentioned the U.S. blacklisting of China’s Huawei Technologies Co Ltd, and the recently enacted CHIPS and Science Act.
In 2021, South Korea was China’s second-biggest exporting country in equipments, including chipmaking tools, and Chinese exports to South Korea have also been rising, the fund manager said.
South Korea said on Saturday there would be no significant disruption to equipment supply for Samsung and SK Hynix’s existing chip production in China from the U.S. move.
The new U.S. export controls are an abuse of trade measures, China’s foreign ministry spokesperson Mao Ning said on Saturday.
The newly approved ETF will track the CSI KRX China-Korea Semiconductor Index.
The index was launched as part of a broader cooperation agreement signed last year between the Shanghai Stock Exchange and the Korean Exchange (KRX) to promote cross-border investment between the two markets.
This is coming even as the Biden administration published a sweeping set of export controls on Friday, including a measure to cut China off from certain semiconductor chips made anywhere in the world with U.S. equipment, vastly expanding its reach in its bid to slow Beijing’s technological and military advances.
The rules, some of which take immediate effect, build on restrictions sent in letters this year to top toolmakers KLA Corp, Lam Research Corp and Applied Materials Inc, effectively requiring them to halt shipments of equipment to wholly Chinese-owned factories producing advanced logic chips.
The raft of measures could amount to the biggest shift in U.S. policy toward shipping technology to China since the 1990s. If effective, they could hobble China’s chip manufacturing industry by forcing American and foreign companies that use U.S. technology to cut off support for some of China’s leading factories and chip designers.