President Joe Biden signed an executive order on Wednesday that will limit new U.S. investment in China in certain sensitive technologies. The order requires government notification in various tech sectors. The sectors include semiconductors and microelectronics, quantum information technologies, and specific artificial intelligence systems.
The order aims to prevent American capital and expertise from aiding China in developing technologies that could undermine U.S. national security and support its military modernization. It applies to private equity, venture capital, joint ventures, and greenfield investments. The proposal is open for public input.
China expressed “grave concern” about the order, stating that it reserves the right to take measures. The Chinese Commerce Ministry criticized the order for affecting the normal operation and decision-making of enterprises and undermining the international economic and trade order. It called on the U.S. to respect the laws of the market economy, fair competition, and refrain from hindering global economic and trade exchanges.
The proposal primarily focuses on investments in Chinese companies involved in designing computer chips and manufacturing tools. The U.S., Japan, and the Netherlands dominate these fields, and China has been working on building domestic alternatives.
The Treasury specified that the regulations will only apply to future investments, not existing ones. However, it may request disclosure of prior transactions. The order could further escalate tensions between the world’s two largest economies.
The order is expected to be implemented next year after multiple rounds of public comment. Critics, including Republican Senator Marco Rubio, believe the plan has significant loopholes and does not go far enough in addressing national security risks. The Chinese embassy in Washington expressed disappointment and stated that the restrictions would hurt both Chinese and American businesses.
The Semiconductor Industry Association hopes that the order will enable U.S. chip firms to compete on a level playing field and access key global markets, including China. The impact on U.S. allies and China’s response to the order remain significant questions.
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