CHINA WATCHPresident Biden Has Banned Some U.S. Investment in China. Here’s What to Know.
A new executive order restricts U.S. investments in sensitive technologies that Washington fears could help Beijing increase its military power. It is the latest in a raft of policies erecting barriers between the world’s two largest economies, and U.S. allies could soon adopt similar measures. The Biden administration says the restrictions are directed at protecting national security, not stifling economic competition.
A new executive order restricts U.S. investments in sensitive technologies that Washington fears could help Beijing increase its military power. It is the latest in a raft of policies erecting barriers between the world’s two largest economies, and U.S. allies could soon adopt similar measures.Amid China’s economic downturn and mounting U.S. concern over protecting these technologies, Commerce Secretary Gina Raimondo went to Beijing in August to seek a path forward.
What Are the New Restrictions?
The executive order, signed by President Joe Biden earlier in August, restricts outbound investment to China, Hong Kong, and Macau in areas deemed critical to U.S. national security. These include three main industries: advanced computing chips and microelectronics, quantum technology, and artificial intelligence (AI). In some cases, especially regarding technology destined for military or surveillance purposes, investment is prohibited outright, while for less sensitive products, it is permitted with government notification.
The order specifically targets investments that risk transferring “intangible benefits” such as managerial expertise, talent networks, and market access. It does not target less involved investment in publicly traded securities such as stocks or bonds. The Treasury Department, which will implement the restrictions, said they are intended to apply only to transactions made after the order goes into effect in 2024.
Why is the United States Targeting Outbound Investment into China?
The new restrictions come after years of growing concern over China’s acquisition of advanced technologies. The Donald Trump administration introduced an unprecedented $360 billion in tariffs on Chinese products, and Biden followed up with export controls that experts said were aimed at “strangling” the Chinese technology industry. The Biden administration has also discouraged allies from selling chips to China. In March 2023, the Netherlands, home to the technology used to make the most advanced chips, announced its own export control regime; Japan, which supplies half of global semiconductor materials, followed suit weeks later.
