The President of the United States, Joe Biden, has signed an executive order restricting his country’s investment in strategic technology areas in China, from artificial intelligence to quantum computing, to prevent the Asian country’s defense sector from being overwhelmed by technology and U.S. Geldern benefits for its development. The measure will come into force next year.
Venture capital companies and US investors in joint ventures with Chinese companies are particularly affected by the arrangement, which also includes the field of high-performance semiconductors. Companies must inform the government about their investments in the three sectors concerned. Some transactions will be banned, but the government is making sure there are “clear guidelines” for operations that are banned and that simply need to be reported.
The order is aimed at protecting US national security and is not economically motivated, according to the White House, which insists it will continue to allow investment in other areas in favor of its major rival. A senior official, who wished to remain anonymous, stressed that the move was aimed at “very specific targets”: “It is a very measured and very considered move to prevent the People’s Republic of China from obtaining and using advanced technology for modernization .” to undermine its military and national security.”
In a letter to Congress, Biden specifies that he is declaring a national emergency to deal with advances by countries like China “on sensitive technologies and products essential to their military, intelligence, surveillance or cyber capabilities.” .
According to the White House, the initiative complements others already taken by the Biden administration to limit Beijing’s access to US technology, in a strategy that US National Security Adviser Jake Sullivan called “a very high bar for a… very small thing” piece of land.” Last October, the US President issued an executive order imposing controls on exports of advanced semiconductor technology to the Asian giant and is preparing to update that forecast. Other measures are preventing Chinese investment in strategic US -sectors.
Before the regulation goes into effect, the US government will initiate rounds of talks with affected sectors to gather their views, including a 45-day period for public comments on the regulation.
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A “very limited” measure
The measure announced on Wednesday had been expected for a long time. Treasury Secretary Janet Yellen had already noted her guidance during her trip to Beijing in the summer, where she briefed Chinese authorities on Washington’s plans and insisted the message was a very limited measure aimed at protecting the people should serve national security. The United States, the senior official assured, remains keen to continue and expand its rich economic ties with China.
But despite all expectations, the new arrangement could trigger a new wave of tensions between Washington and Beijing. The two governments have just embarked on a tentative phase of thawing their relations after the flyby and launch of a Chinese hot air balloon over US territory in February canceled a trip to the country by Secretary of State Antony Blinken Asia and soured relations that were turning deteriorating for years.
US Secretary of State Antonio Blinken with Chinese President Xi Jinping during his visit to Beijing June 19. LEAH MILLIS (AP)
A meeting between Sullivan and his Chinese counterpart Wang Yi – now also foreign minister – in Vienna marked the first step towards normalizing relations. The process was cemented with the closing ceremony of Blinken’s visit to Beijing and Yellen’s trip.
Bring bilateral relations back to life
But as the two governments seek to implement the promise Biden and Chinese President Xi Jinping made to each other in Bali last November — to get the bilateral relationship back on track to prevent the rivalry escalating into conflict — , Washington maintains contacts with its Western allies to present a unified front of technological restrictions on China. This issue was one of the issues raised at the meeting of the G7, the most industrialized countries, in Hiroshima (Japan) in May. So far with mixed results.
Last Friday, the Chinese embassy in Washington said the United States “regularly politicizes technological and commercial issues and uses them as a weapon and tool in the name of national security.”
In a statement, Senate Chairman Democrat Chuck Schumer congratulated the initiative. “For too long, American money has helped fuel China’s military advancement. Today, the United States is taking a first strategic step to ensure that US investments are not used to fund China’s military advances.
However, according to Emily Kilcrease of the Center for a New American Security (CNAS), she believes the executive order “is likely to leave many stakeholders dissatisfied.” China hardliners, both in Congress and among former Trump-era officials, wanted greater decoupling of investment relations.” On the other hand, companies in the industry “will protest at the added barriers to investment in an increasingly complicated marketplace.” Mainstream economists will argue that China already has ample access to capital from sources outside the United States.”
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