US Govt Planning To Reduce Investments in China Due to Security Threats

Biden administration officials have stressed for months any restrictions on U.S. investment in China will be narrowly targeted.

Biden's plan for future investment in China:

Joe Biden's plans are aimed at preventing U.S. capital and expertise from helping develop technologies that could support China’s military modernization and threaten U.S. national security. According to undisclosed sources, US President was expected to soon issue a the long-awaited executive order to screen outbound investments in sensitive technologies to China this week. The senior government source said that order is expected on Wednesday.

The administration is expected to target active investment such as U.S. private equity, venture capital and joint venture investments in China in semiconductors, quantum computing and artificial intelligence.

The New York Times reported on Tuesday that the Biden plans to require firms making investments in a broader range of Chinese industries to report that activity, which will give the U.S. government great visibility into financial transactions between the United States and China.

Biden’s order is expected to direct publication of a notice of proposed rule-making. It is not expected to take effect immediately and to provide for a comment period to consider industry feedback before being finalized.

It was previously reported that investments in semiconductors that will be restricted are expected to track export control rules for China issued by the U.S. Department of Commerce in October.

If the restriction comes into effect, then it would be one of the first significant steps by the United States amid an economic clash with China to clamp down on outgoing financial flows.

Words from higher US officials:

"These are tailored measures," National Security Adviser Jake Sullivan said in April. "They are not, as Beijing says, a technology blockade."

U.S. Commerce Secretary Gina Raimondo said in March the administration did not "want to be overly broad. Anything that’s overly broad hurts American workers and the economy."

Emily Benson, of the Center for Strategic and International Studies (CSIS), a bipartisan policy research organization, said she "expects investments in artificial intelligence to be prohibited to military users and uses, and that other investments in the sector will only require notification to the government."

Benson further said "the burden will fall on the administration to determine what AI falls into the military category. They will have to draw a line of what constitutes a military application of AI, and to define AI."

Meanwhile, the Chinese government has long restricted certain foreign investments by individuals and firms. Other governments, such as those of Taiwan and South Korea, also have restrictions on outgoing investments.