Introduction

The White House is set to unveil its plans to limit certain U.S. investments in sensitive technology in China, as well as require government notification for other investments. These measures aim to prevent American capital and expertise from contributing to the development of technologies that could support China’s military advancements and pose a threat to U.S. national security.

President Joe Biden is expected to issue an executive order this week to screen outbound investments in sensitive technologies to China.

Narrowly Targeted Restrictions

The Biden administration has emphasized that any restrictions on U.S. investment in China will be tailored and focused. National Security Adviser Jake Sullivan stated that these measures are not intended to be a “technology blockade,” as suggested by Beijing. Commerce Secretary Gina Raimondo has also expressed the administration’s goal of avoiding overly broad restrictions that could harm American workers and the economy.

Specific Investment Targets

The forthcoming executive order is expected to target active investments in China’s semiconductor, quantum computing, and artificial intelligence sectors, including those made by U.S. private equity, venture capital, and joint venture firms. Most of these investments will require government notification, while some transactions will be prohibited.

The New York Times reported that the Biden administration plans to expand the reporting requirements for investments in a wider range of Chinese industries. This move will provide the U.S. government with increased visibility into financial transactions between the two countries.

Investments in semiconductors are likely to align with export control rules for China issued by the U.S. Department of Commerce in October.

Expert Perspectives

Emily Benson, director of the Center for Strategic and International Studies (CSIS)’s project on trade and technology, anticipates that investments in artificial intelligence will be prohibited for military users and uses. Other investments in the sector will only require government notification. The administration will need to define what constitutes a military application of AI.

The executive order is expected to initiate a notice of proposed rule-making, which will undergo a comment period for industry feedback before being finalized. It will not take immediate effect.