In a significant move with far-reaching implications, US President Joe Biden has signed an executive order that restricts new US investments in China’s technology sectors. The order, which addresses national security concerns, seeks to prevent American capital and expertise from inadvertently bolstering China’s military modernization efforts.
This long-awaited executive order introduces limitations on US investments in Chinese entities operating in three specific tech sectors: semiconductors and microelectronics, quantum information technologies, and select artificial intelligence systems. The intention behind this order is to hinder the development of technologies that could potentially be used to support China’s military advancements, undermining US national security interests.
The scope of the order is expansive, affecting various investment forms such as private equity, venture capital, joint ventures, and new greenfield investments. While it pertains to a diverse range of investments, its primary aim is to curtail American involvement in Chinese tech endeavors that could inadvertently contribute to the country’s military capabilities.
The executive order was accompanied by a letter to Congress in which President Biden declared a national emergency to address the potential threats posed by countries like China in terms of “sensitive technologies and products critical to the military, intelligence, surveillance or cyber-enabled capabilities.”
China, in response, has expressed its “grave concern” about the order and has affirmed its right to take necessary measures. The Chinese Commerce Ministry has asserted that the order disrupts the regular operations and decision-making processes of enterprises. Furthermore, it is perceived as a destabilizing force in the international economic and trade order. The ministry called upon the US to uphold principles of fair competition and refrain from hindering global economic exchanges and cooperation, which are vital for the world economy’s recovery.
The executive order is not just a unilateral decision; President Biden ensured consultation with allies and integration of feedback from the Group of Seven (G7) nations. This collaborative approach underscores the international implications of the order and its alignment with the shared security interests of these nations.
Crucially, these regulations will primarily impact future investments rather than existing ones. However, the US Treasury might seek disclosure of prior transactions. This strategic move holds the potential to intensify tensions between the two largest economies globally. The Chinese embassy in Washington expressed deep disappointment with the measure, indicating the potential for diplomatic and economic consequences in the ongoing relationship between the United States and China.