Biden Orders Limit on US Investment in Chinese Tech

Summary:

• U.S. President Joe Biden has signed an executive order to limit American investments in sensitive Chinese technology sectors, risking tensions between the two nations.
• The ban targets critical areas like semiconductors, quantum tech, and AI, aiming to safeguard economic interests and protect against potential military modernization.
• Supply chain vulnerabilities, especially in the semiconductor industry, have prompted the need for securing crucial supply chains, as highlighted by the pandemic.
• Collaboration with allies, including consultation with the group of seven nations, has shaped the order's formulation, aiming to balance economic concerns and national security.
• The U.S. Treasury's advance notice emphasizes that specific deals will be prohibited once the regulations are in effect, and investors must notify the government about their investment plans.
• China's response to the order has been one of grave concern, with accusations that the U.S. is hindering global economic exchanges and obstructing trade cooperation.

U.S. President Joe Biden signed an executive order banning certain U.S. investments in sensitive technology in China on Wednesday, risking tensions between the two largest economies. The ban targets semiconductors, quantum tech, and AI.

Investment Ban Targets Key Technology Sectors

U.S. President Joe Biden's executive order aims to limit American investments in critical technology sectors in China, potentially straining relations between the two economic giants. The targeted areas include semiconductors, quantum technology, and artificial intelligence. These fields have seen dominance from the U.S., Japan, and the Netherlands, while China has been actively developing its domestic alternatives.

Objective of the Ban

The primary objective of this investment ban is to curb the outflow of U.S. capital into Chinese technology sectors that are crucial for both economic growth and military modernization. Biden's administration has declared a national emergency on this issue, emphasizing the need to protect sensitive technology from falling into the hands of potential adversaries.

Impact on Supply Chain

The pandemic highlighted vulnerabilities in global supply chains, particularly in the semiconductor industry. The executive order acknowledges the importance of securing crucial supply chains, especially in times of crisis. Semiconductors, the building blocks of modern electronics, have faced supply disruptions due to overseas factory closures.

Timeline and Allies' Consultation

Although Biden's order is a significant step, its implementation might take time. The ban could potentially be enacted well into 2024, coinciding with a presidential election year. The White House has collaborated with allies, including the group of seven nations, to formulate the plan. Feedback from these allies has been incorporated into the order's design.

Regulations and Controls

The investment restrictions are not retroactive and will apply to specific subsets of the targeted technology sectors. The U.S. Treasury has issued advance notice on the upcoming rules, highlighting that certain deals will be prohibited once the regulations take effect. Investors are required to notify the government about their investment plans in the affected sectors.

Global Response and China's Reaction

China has expressed serious concern over the executive order. The Chinese Commerce Ministry criticized the U.S. for obstructing global economic and trade exchanges. The Foreign Ministry strongly opposed the U.S.'s insistence on imposing investment restrictions on China. The restrictions will extend to Hong Kong and Macau, separate customs territories.

The executive order signed by President Biden has ignited concerns and conversations about the future of technological collaboration and economic relations between the U.S. and China.