Biden Signs Executive Order Restricting US Investments in Chinese Tech
In a significant move aimed at addressing national security concerns, President Joe Biden has signed an executive order that restricts certain US investments in Chinese technology. The order focuses on three sectors: semiconductors and microelectronics, quantum information technologies, and artificial intelligence (AI) systems.
The executive order grants the US treasury secretary the authority to prohibit or restrict investments in Chinese entities operating in these sensitive technology sectors. By declaring a national emergency, Biden seeks to counter the advancement of countries like China in technologies critical to military capabilities, intelligence, surveillance, and cybersecurity.
Notably, the order primarily targets investments in Chinese companies involved in software development for chip design and manufacturing tools. Currently, major players in these fields are the US, Japan, and the Netherlands, while China has been actively building alternatives within its borders.
While tensions between the US and China could potentially escalate as a result of this move, American officials insist that the restrictions are primarily focused on addressing the most significant national security risks and are not designed to sever the deeply interconnected economies of both nations.
Senate Democratic leader Chuck Schumer praised Biden’s order, expressing concerns that American investments have inadvertently contributed to the rise of the Chinese military. He emphasized the importance of enshrining these restrictions in law and refining them further.
However, Republicans have criticized the executive order for not going far enough. Representative Michael McCaul welcomed the restrictions on new outbound investments in China but raised concerns about the omission of existing technology investments, biotechnology, and energy sectors.
The executive order aims to prevent American capital and expertise from being utilized in the development of technologies that could bolster China’s military modernization efforts and undermine US national security. It will largely impact private equity, venture capital, joint ventures, and greenfield investments.
Under the executive order, most investments will require government notification, while some transactions will be prohibited. The US Treasury has signaled that certain transactions, such as those involving publicly traded instruments and intra-company transfers from US parents to subsidiaries, may be exempt.
China expressed disappointment with the move, with the Chinese embassy in Washington stating that the restrictions would harm the interests of both Chinese and American companies and investors. China’s commerce ministry accused the US of disrupting global industry and supply chains, arguing that the restrictions deviate from the principles of fair competition.
Implementation of the executive order is expected next year, following several rounds of public comment and feedback. Regulators plan to issue an advance notice of proposed rule-making to define the program’s scope further and gather public input.
Emily Benson of the Center for Strategic and International Studies (CSIS) anticipates that the executive order will primarily prohibit AI investments related to military applications, while other investments in the sector will only require government notification. The burden will lie with the administration to determine the military designation of AI applications.
It should be noted that regulations regarding AI and quantum computing are still under development. However, specific items related to quantum computing, such as sensors, are expected to be prohibited. Certain exemptions related to universities and research may also be considered.
In summary, Joe Biden’s executive order restricting US investments in Chinese tech reflects the administration’s focus on safeguarding national security interests. While the move may escalate tensions between the two nations, proponents believe it will prevent American capital and expertise from inadvertently supporting China’s military advancements. However, critics argue that the order falls short and should include additional sectors of concern. The implementation of the order is scheduled for next year, allowing for public feedback and comment. These restrictions mark a significant step in the US government’s efforts to protect its technological edge and preserve national security.
