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President Joe Biden imposed limits on US investments in China as part of a push to restrict the country’s ability to develop next-generation military and surveillance technologies that might threaten US national security.
Biden administration officials said the order targets those who look to acquire equity interests in restricted Chinese companies via mergers, private equity and private capital, as well as by joint ventures and financing arrangements.
It’s expected to be limited to Chinese startups and larger firms.
The US already limits exports of some sensitive technologies to China, and the order “would prevent U.S. investments from helping accelerate the indigenization of these technologies” in what it called countries of concern, the White House said in a release. The order defined that as China, Hong Kong and Macau.
The order, announced Wednesday, would regulate US investments in some Chinese semiconductor, quantum computing and artificial intelligence firms.
It was signed after almost two years of deliberations that saw China hawks argue for faster, tougher action while others, including the Treasury Department, sought narrower measures that would take longer to go into effect.
While details of the rules still need to be worked out, the language of the order suggested that Treasury and those advocating a more cautious approach won out.
The order, which won’t go into effect until next year, won’t be retroactive and excludes sectors such as biotechnology. It may end up exempting passive investments as well as those in publicly traded securities, index funds and others assets.
“For the business community, this is relatively good news,” said Sarah Bauerle Danzman, a senior fellow at the Atlantic Council and associate professor of international studies at Indiana University. “It’s a relatively narrow notification process and very narrow set of prohibitions.”
China is “very disappointed” in the US decision to go ahead with the restrictions and will safeguard its own interests, Embassy spokesman Liu Pengyu said in a statement.
“China opposes the US overuse of national security to politicize and weaponize trade, scientific and technological issues and deliberately making obstacles to normal economic and trade exchanges and technological cooperation,” Liu said.
The Ministry of Commerce in Beijing later called on Washington to respect market principles and fair play instead of obstructing the global economic recovery.