Washington is planning to yet again dip into its vast toolbox of anti-China measures, according to a US media report. The Biden administration is reportedly set to slap American investments in certain sensitive technologies in China deemed a “security risk” with new restrictions, according to sources cited by the outlet.
The executive order that the Democratic POTUS intends to release Wednesday will purportedly target American private-equity and venture-capital investments in Chinese technology companies spanning three high-tech sectors: semiconductors, quantum computing and artificial intelligence (AI).
What this means is that investments in some forms of the above-cited technologies would be banned, while US oversight to screen American transactions in China in the three sectors would be boosted.
Any Americans doing business in China that fail to comply with these proposed rules and stop short of informing the US government about such investments may face fines, stated the insiders, adding that the violators could be forced to divest themselves of their stakes. It should be noted that the new rules would ostensibly cover only future transactions, and not applying to portfolio investments in Chinese stocks and bonds.
The effort is purportedly aimed at stopping American dollars and expertise from flowing to China, which could then allegedly use them to develop cutting-edge technology to advance its military capabilities.
Before entering into force, the measures would be put up for “feedback” from businesses and other organizations. Pending that, the rules would be finalized in several months' time. The report added that technically, the bans would also apply to investments into other “adversaries.” However, practically, they would be targeting only US investments into Chinese companies. The report underscored that the measures might be followed up with more restrictions on investments between the two countries in subsequent years.
There has not yet been any official comment from the White House.
US-China Trade Tussle
The executive order cited above is believed to have been around two years in the making. When US Treasury Secretary Janet Yellen was readying for her July visit to Beijing for high-level economic talks with her counterpart, billed as part of Biden’s directive to "deepen communication between the United States and China on a range of issues," these investment curbs were already reportedly being hammered out. It is noteworthy how this differs from the rhetoric coming from Washington about trying to "salvage relations" with the Asian powerhouse.
After China’s envoy to the US Xie Feng warned earlier this month that Beijing would retaliate if Washington went ahead with the restrictive measures, Yellen responded by assuring that the curbs would be narrowly tailored.
“These would not be broad controls that would affect US investment broadly in China, or in my opinion, have a fundamental impact on affecting the investment climate for China,” Yellen told an American broadcaster.
The mulled investment clampdown comes on the heels of the spiraling US-China chip rivalry, with Washington slapping restrictions and expanding investments in the domestic chip industry in a bid to get ahead in the race. In response, China’s Ministry of Commerce recently announced that it would restrict exports to the US of rare earth metals, such as gallium and germanium, which are used to manufacture semiconductors. Beijing said it needed to protect its “national security and interests.”
“This is just the beginning,” former Chinese Vice Commerce Minister Wei Jianguo said last month, warning that “China’s tool box has many more types of measures available” should Washington try to retaliate against the rare earths semi-ban.