In a move to curtail Chinese access to sensitive technology, the Biden administration’s forthcoming executive order to restrict investment in China is likely to have a specific focus. According to sources familiar with the matter, the proposed restrictions are anticipated to apply primarily to Chinese firms that derive at least 50% of their revenue from advanced sectors, including quantum computing and artificial intelligence (AI).
This revenue provision is strategically designed to narrow the scope of the executive order, allowing US private equity and venture capital firms to invest in larger Chinese conglomerates with AI divisions that still generate the majority of their revenue from other sources. This approach seeks to balance national security concerns while permitting strategic investments that support innovation and growth.
Although the final version of the order has not been released, insiders suggest that it may require US investors to notify authorities about investments in certain AI activities, excluding those catering to military end users. Notably, the order is expected to prohibit investments in specific areas of quantum computing, including key encryption and sensing, as well as advanced semiconductors.
The White House, Commerce Department, and Treasury Department have yet to formally comment on these details. However, it’s reported that the order is in the final stages of preparation and may take approximately a year to come into effect, allowing for industry feedback and rule-making processes.
The order’s implementation is geared towards preventing US investors from engaging in advanced semiconductor investment, specific quantum computing domains, and AI activity intended for military applications. For other AI activities, notification to authorities may be required, but outright prohibition is not anticipated.
The Biden administration’s approach reflects a cautious stance, aiming to restrict investment and limit China’s access to American technology without compromising diplomatic relations. Despite the administration’s efforts to communicate the order’s narrow scope, China has expressed concerns over the proposed investment curbs, labeling them as the politicization of trade and tech issues.
This order, which has been under development for more than a year, exemplifies the US government’s multifaceted strategy to mitigate national-security risks associated with Chinese technological advancements. The directive’s careful calibration underscores President Joe Biden’s dual objective of safeguarding national interests while fostering improved relations with China. The final version of the order is anticipated to be less extensive than initial drafts and likely to impact only new investments.
