Biden administration restricts American investments in high-tech sectors in China

(WASHINGTON) — President Joe Biden has signed an executive order Wednesday that will restrict American investments in certain high-tech sectors in China, including artificial intelligence, semiconductors, and quantum computing, citing national security concerns, according to senior Biden administration officials.

The officials said the “narrow and targeted” restrictions were necessary to protect U.S. national security, by blocking China from using sensitive technologies to strengthen its military, develop weapons, and bolster its intelligence and surveillance capabilities.

The move, which will likely garner pushback from Beijing, marks a major step by the Biden administration to restrict the flow of technology to China. The administration — as well as lawmakers on both sides of the aisle — have voiced concerns China could use American expertise to modernize its military and weaponry.

But it also comes as the White House has sought to improve relations and increase communications with China, including with recent high-profile visits by Treasury Secretary Janet Yellen and Secretary of State Antony Blinken.

“This is a national security action, not an economic one,” an official told reporters Wednesday. “We recognize the important role that cross-border investment flows play in U.S. economic vitality, and this executive order is aimed at narrowly protecting our national security interests while maintaining that longstanding commitment to open investment.”

As part of Biden’s order, the Treasury Department plans to completely prohibit private equity firms, venture capital funds, and other U.S.-based entities from making certain investments, while requiring investors notify it in advance of other transactions, according to the administration officials.

The Treasury Department will soon start a rule-making process to better define the scope of the restrictions, according to the officials, who also noted the administration had engaged with over 175 stakeholders before moving forward. That process will include a period allowing the public, including lawmakers and the impacted industries, to comment.

The rule is not expected to come into force until next year, an official said.

“What we’re talking about is a narrow and thoughtful approach, as we seek to prevent the PRC from obtaining and using the most advanced technologies to promote military modernization and undermining U.S. national security,” an official said, using the acronym for China’s official name.